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(The Center Square) – The effects of the pandemic, high inflation, and higher interest rates have made it harder for Pittsburgh’s office space market to recover.

A new policy brief from the Allegheny Institute for Public Policy noted that the national office-leasing market has yet to recover from its pandemic decline. 

“In 2019, the total vacancy rate nationwide for all classes of property stood at 14.3%,” Allegheny Institute Executive Director Frank Gamrat wrote. “By 2021’s second quarter, it had risen almost five points, to 19.1%, and, a year later, it has only marginally improved, to 18.9%.”

Those figures may be an underestimate, too, as it does not take into account leased office space that isn’t used by employees who work remotely.

Pittsburgh’s market “has been steady” in its office space market, Gamrat noted, over the last three years. While that may sound good, it obscures the city’s higher vacancy rate and slower pace of construction. A stagnant-at-best population in recent years has not helped spur economic growth.

“The national vacancy rate in 2019 was 14.3%,” Gamrat noted. “The Pittsburgh area was more than three percentage points higher, at 17.6%. This trend continues as the local vacancy rate remained above the national in the second quarter of 2021 (21% vs. 19.1%) and again, a year later, in the second quarter of 2022 (20.9% vs. 18.9%).”

Pittsburgh’s amount of space under construction has also declined since the pandemic – by 23%, compared to an 11% decline nationally.

Gamrat blamed the labor and business climate for the city’s struggles.

“High tax rates, onerous regulations and poor schools in several municipalities ... have and will continue to dissuade businesses from moving into the city and region,” he wrote. “Until these issues are addressed and see radical improvement, the economic torpor of the city and region will continue.”

Pittsburgh’s predicament is not mirrored in Philadelphia. Economic and population growth have favored the southeastern part of the commonwealth, as The Center Square previously reported. While much of the gains have gone to Philadelphia’s suburbs rather than the city proper, the smaller population base in and around Pittsburgh can present bigger challenges. 

Staff Reporter

Anthony Hennen is a reporter for The Center Square. Previously, he worked for Philadelphia Weekly and the James G. Martin Center for Academic Renewal. He is managing editor of Expatalachians, a journalism project focused on the Appalachian region.