The Commercial Real Estate Market Surrounding the Cracker
As mentioned before, Shell’s Ethane Cracker Plant in Beaver County has the potential to greatly impact the area. As we discussed with employment, the ripple effect from the plant will help lead to an uptick in manufacturers, industrial companies, oil and gas, logistics and supply chain. General businesses that serve those industries will also see an increase in business. These industries include law firms, financial companies, hospitality companies and many more that will benefit from increased employment and money in the local economy. Saving projections for another time, here are some of the numbers associated with the real estate market that surrounds the site where the cracker plant will be located.
Within a 5-mile radius, there is an overall 4.4% vacancy rate, 455,404 square feet of vacant space and an overall average asking price of $7.39 per square foot per year. Industrial space, is currently averaging $3.23 with 92,800 sf vacant, which is an 3.3% vacancy rate. Office space is averaging $13.94, 90,090 sf and 4.8%. Retail space is $11.06, 272,514 sf and 5%. In terms of how long a space is lasting on the market, it is 1.8 months for industrial, 7.2 for office and 46.5 for retail. A previous version of this post cited availability rates, which were 8.7% for industrial, 8.5% for office and 11.5% for retail, equating to an overall rate of 10%. Availability rates include all spaces that are presently marketed for lease. That can include subleases, vacant spaces and spaces that are currently occupied but being marketed for lease (i.e. they still have a tenant for a short term, but the property is being marketed for future tenants). Things to note: This is a small sample size, so averages can easily be skewed by outliers. This is a relatively cheap area compared to the Pittsburgh market in general.
Within a 10-mile radius, the numbers are as follows: 4.9 % overall vacancy rate, 1,805,548 sf of vacant space and an average asking price of $8.79. Industrial space is $5.30, 842,748 sf vacant and has a 5.8% vacancy rate. Office is $20.12, 340,564 sf vacant and has a 5.8% vacancy rate. Retail is going for $10.14, with 421,666 sf and 3.7% vacant. Average time on the market is 6.7 months for industrial space, 9.7 for office and 33.7 for retail. Things to note: these numbers are closer to the overall market numbers with the spaces between 5-10 miles away greatly outnumbering those within the 5-mile radius.
Within a 25-mile radius, we’re looking at $14.61 average asking price, 5% vacancy rate and 12,051,031 sf of vacant space. Industrial spaces are averaging $5.37, 3.2% and 2,442,729 sf of vacant space. Office numbers are $21.50, 7.7%, 6,915,034 sf. Finally, retail is $14.05, 3% and 1,949,549 sf. Average market times are 14.5 months for industrial, 25.5 months for office space and 19.1 months for retail. Things to note: This space includes parts of the Parkway West, West, Greater Downtown and Central Business District submarkets. While it does not cover a majority of the market geographically, it covers some of the densest areas and therefore covers a very significant amount of the commercial real estate within the market.
Since the plant will not be up and running until at least 2020 and likely later than that, the market will feel the impact from expanded construction operations first. While industrial, supply chain and manufacturing companies will have a significant impact later when they can take advantage of the polyethylene that is put out by the plant, those facilities won’t be in full swing any time soon. If companies are moving here to take part in the construction boom, they’ll likely want to avoid a long term lease since the peak of construct is temporary.
Here are some key subleases available in the West and Parkway West submarkets, which are where the largest uptick in office activity is expected.
1550 Coraopolis Heights Road has spaces of 25,742 and 26,362 sf available for sublease.
400 Lydia Street has 4 floors, each of around 8,930 sf available for 35,715 sf total available.
125 Enterprise Drive has 10,249 sf available.
Foster Plaza V will sublease any size from 100 to 5,000 sf.
1000 Omega will sublease from 5,330-31,122 sf.
500 Cherrington Parkway has 2,008 and 3,868 sf suites available.
Chris Harkins is a Senior Commercial Real Estate Energy Sector Expert at Found Advisors with a legal background in real estate, energy, oil and gas based in Pittsburgh, PA. He can be reached by email at firstname.lastname@example.org or by phone at 412-356-3543.