2020 Q3 Retail Report

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The Pittsburgh retail market closed the third quarter of 2020 with a vacancy rate of 4.4%. This is up from 4.1% last quarter. Net absorption was negative 521,411 square
feet. The negative absorption and rise in vacancy can be primarily attributed to the pandemic. Rental rates may be seeing signs of stabilizing, as they are slightly up over last quarter, going from $12.09 to $12.20.

There were only five deliveries in the third quarter. This is down considerably, as over the past year, the average number of deliveries per quarter was thirteen. Notable new properties include the 12,000 SF Fox Chapel Village in the Northeast Pittsburgh submarket and the 10,000 SF Lincoln Corner Plaza in Westmoreland County.

The issues plaguing enclosed malls have continued. Much of this is due to apparel stores grappling with declining sales and bankruptcies. Traditional department
stores were struggling prior to the pandemic and their situation has only worsened. To combat this, many malls in tertiary markets are exploring unconventional uses, such as office space, churches, warehousing, and even residential conversions.

Several industries are going to find it harder to survive as we continue with restrictions due to the pandemic. As the weather gets colder, restaurants who have been able to utilize outdoor areas for social distancing will struggle to accommodate a limited number of diners indoors. Movie theaters will have to deal with delayed movie releases and much lower capacity to make sure customers are properly social distanced while fewer people are willing to attend gyms.

There are several tenants in the market looking for space. These include BJ’s Wholesale, Menards home improvement stores, and Rose’s discount store. Discount-related operators are seeing a large amount of foot traffic, due in part to the lagging economy, people are less willing to spend on premium merchandise. Multiple car wash operations are searching for sites in the market. While the restaurant industry may be struggling, those who offer drive-thru, takeout and delivery services have been able to survive the best.

Going forward, rental rates should stay relatively flat, as vacancy rises. Even though there are less projects under construction, absorption is expected to remain negative. Urban areas may be impacted the most since they deal with limited space and parking issues. Less foot traffic and the upsurge in e-commerce has made brickand-mortar stores less popular. It is difficult to predict the future, but as long as there is a pandemic, the traditional retail industry will struggle.


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2020 Q3 Retail Report

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