Source: Pittsburgh Post-Gazette
By Mark Belko / Pittsburgh Post-Gazette
When two local developers reached a deal last year to build five to eight office buildings on 40 acres of land near Pittsburgh International Airport, they had roughly 12 years to deliver.
But they may have the entire development wrapped up in a couple of years — given the fast track they’ve been on so far.
By late May, Continental Real Estate Cos. and Chaska Property Advisors of Cranberry are planning to break ground on their third office building in less than a year in Moon, adjacent to Cherrington business park.
That’s significantly ahead of the pace of starting one building every 18 months set for them by the Allegheny County Airport Authority, which controls the property, under an agreement approved in January 2012 for the development, with an estimated cost of $50 million.
“Agreeing to start a building every 18 months is a pretty aggressive schedule. I can’t explain it. The market has been amazingly robust out at the airport,” said Richard Donley, Chaska president.
On Thursday, Continental/Chaska LLC won approval from Moon on a revised master plan that paves the way for the construction of the third office building at the site, known as the Pittsburgh International Business Park.
The developers plan to have the 53,000-square-foot, single-story Class A office building under construction by late May and finished by the year’s end.
Under the agreement with the airport authority, Continental and Chaska were obligated to have only one office building under construction now. The authority is leasing the land to the joint venture for 18 cents to 40 cents a square foot.
The schedule accelerated dramatically when the developers cut a deal with ServiceLink, a mortgage services company with offices in Moon and Hopewell, to occupy two 53,000-square-foot buildings at the site. Both are under construction.
The newest office building will be built on speculation, meaning that Continental and Chaska don’t have a tenant signed to take the space. But Mr. Donley said he would not be surprised if that changed before the end of May.
“We feel that strongly about the market,” he said. “I would be very surprised if something didn’t happen before then, just because we’ve been getting a lot of calls.”
Mr. Donley said he always likes to have some inventory in the pipeline to accommodate a tenant on short notice. He said the strategy paid off at Chaska’s Cranberry Business Park, where it has built six buildings on speculation since 2002. The park is virtually full now.
“Things have gone so quickly at the airport that we’ve built two buildings and have no inventory,” he said.
It wasn’t that long ago that the Parkway West corridor lagged behind areas like Cranberry, Oakland, Southpointe and Downtown in terms of office occupancy.
But demand has picked up over the last year or so, driven in part by the search for space by companies involved in Marcellus Shale drilling in the region. In addition, as other markets have tightened, it has forced businesses to go west in search of accommodations.
In fact, the overall office vacancy rate in the corridor dropped from 18 percent at the end of 2011 to 14.3 percent at the end of last year.
“It’s always been a good market. The other markets have been so tight that people have had to look to the next market, and the next market is the Parkway West,” said Gerry McLaughlin, executive managing director of Newmark Grubb Knight Frank in Pittsburgh.
Even that market may be getting even tighter, with reports that Chevron is considering a 43-acre tract in Moon for a new headquarters.
“The Parkway West market right now is maybe one of the most active suburban submarkets in the region,” said Jason Stewart, the Jones Lang LaSalle executive vice president who is helping to market the Pittsburgh International Business Park. “We’re seeing strong activity right now.”
Mr. Donley said the increasing demand probably had a lot to do with Continental/Chaska’s ability to build so quickly at the Moon site. “It was just the right product at the right time,” he said.
And given the heightened interest, Mr. Donley knows exactly what he will do if he happens to secure a tenant before or soon after he breaks ground on the third building at Pittsburgh International Business Park.
Start on a fourth.