INDUSTRIAL
INDUSTRIAL Page 30
Pittsburgh Industrial Market Timeline 2015, 2016, 2017 2014 EXPANSION 2012, 2013 RECOVERY HYPERSUPPLY RECESSION
Industrial Class A Local Markets by Vacancy TOP THREE BOTTOM THREE Los Angeles, CA 2.0% Naples, FL 2.2% Boise, ID 2.5% Pittsburgh, PA 3.5% Raleigh, NC 13.3% Phoenix, AZ 13.8% Washington, DC 15.7% Local Market Class A 3.5% (9 th out of 62)
Industrial Cap Rate Trends East Region SOURCE: Real Estate Research Corporation Real Estate Report, 3Q, 2011-2017
General Industrial Market Distribution / Warehouse Market U.S. Industrial Market vacancy currently stands at an all time low of 5.8%. National industrial rental rates have increased 4.9% per year for the past five years. Net absorption for industrial space has increased for 24 consecutive quarters.
General Industrial Market Distribution / Warehouse Market JLL s Q3 Industrial Investment Outlook cites the Pittsburgh industrial market as a rising market. The Southwestern Pennsylvania Commission projects a 40 % increase in regional freight trafficking by 2040. E commerce and traditional regional transport are currently the primary drivers for distribution/ warehouse space. Amazon in Findlay Township? Where Amazon goes, others follow.
General Industrial Market Distribution / Warehouse Market The planned Shell Cracker Plant could have a substantial impact on the market. There is a lack of large, modern distribution/ warehouse space (and pad sites) in the market. Several large tenants (over 300k SF) were lost to the market, due to the lack of suitable existing space or pad sites.
RETAIL
RETAIL Page 26
Pittsburgh Retail Market Timeline 2015, 2016, 2017 EXPANSION 2012, 2013, 2014 RECOVERY HYPERSUPPLY RECESSION
Retail Local Markets by Vacancy TOP THREE BOTTOM THREE Denver, CO 2.5% Dallas, TX 3.0% Washington, DC 3.6% Pittsburgh, PA 4.75% Syracuse, NY 13.75% Tulsa, OK 14.5% Birmingham, AL 18.2% Local Market 4.75% (11 th out of 62)
Class A Community Center Cap Rate Trends National Pittsburgh 2016 6.9% 7.25% 2017 6.77% 7.25% National Average Pittsburgh Average SOURCE: Integra Realty Resources Pittsburgh, 2017
Major Ongoing Projects McCandless South Strabane Upper St. Clair Proposed Market South Fayette Ross Township
HOSPITALITY Integra Realty Resources, Inc. irr.com 39
HOSPITALITY Page 34
Comparative Regional Hospitality Trends Occupancy Average Daily Rate Segment 2016 2015 2014 2016 2015 2014 Pittsburgh, PA 59.0% 65.0% 67.4% $118.71 $119.18 $116.21 Charlotte, NC SC 72.2% 70.7% 70.2% $105.53 $100.96 $93.31 Cincinnati, OH KY IN 64.5% 63.3% 62.2% $101.34 $98.63 $93.11 Columbus, OH 66.0% 64.9% 64.7% $101.34 $99.25 $94.48 Indianapolis, IN 66.1% 65.4% 65.2% $106.80 $100.80 $94.37 Kansas City, MO KS 64.8% 65.2% 64.3% $99.54 $95.21 $90.52 Raleigh Durham Chapel Hill, NC 61.3% 63.0% 62.1% $109.24 $102.37 $99.00 Source: Hotel Review, Smith Travel Research, Integra Realty Resources Pittsburgh In 2015 and 2016, occupancy rates in the Pittsburgh regional hospitality market declined; most metro areas saw increased occupancy. ADR is substantially higher than peer cities. Gas drilling and extraction activity caused a surge in the regional supply between 2012 2016. Sharp decline in gas related activity and increase in hotel room supply resulted in a decline occupancy over the last two years.
Western Pennsylvania Rig Count vs. Hotel Occupancy Hotel Occupancy Rig Count 2011 68.20% 24 2012 67.60% 21 2013 66.10% 22 2014 67.40% 23 2015 65.00% 27 2016 59.00% 8 Source: Hotel Review, Smith Travel Research, Integra Realty Resources Pittsburgh, Baker Hughes
Hospitality Market Pittsburgh CBD Year RNA RNS Occupancy ADR RevPar 2011 1,481,215 953,053 64.3% $141.04 $93.29 2012 1,489,811 992,734 66.6% $145.10 $99.44 2013 1,491,390 987,261 66.2% $147.59 $100.55 2014 1,491,390 1,020,921 68.5% $150.21 $105.36 2015 1,500,540 1,037,710 69.2% $155.04 $110.58 2016 1,681,572 1,105,210 65.7% $153.00 $100.50 Source: Hotel Review, Smith Travel Research, Integra Realty Resources Pittsburgh Hotel Monaco and Homewood Suites opened in 2015. Hilton Garden and Embassy Suites opened in 2016. Room nights sold (RNS) has continued to increase with a new high of 1.105 million RNS sold in 2016. However, the occupancy rate slid measurably for the first time since the recession, falling in 2016 to 65.7%. RevPar, which had been growing since the recession, fell by 10% between 2015 2016.
Future Supply Urban Pittsburgh 2017 3 New Hotels (467 rooms) 2016 2017 10.1% increase in RNA
Future Supply Urban Pittsburgh 2018 CBD, Strip, North Side (722 rooms) 2017 2018 14.2% Increase in RNA THE ANDREW
Hospitality Capitalization Rate Trends IRR research reveals that cap rate compression has leveled off during 2016. 71% of markets expect to see hospitality cap rates remain steady through 2017, while only 15% of markets are forecasting a further decrease.