3 min read January 2023 — In an interview with Invest:, Newmark Executive Managing Director Gerry McLaughlin reflected on the firm’s 2022 milestones and achievements in the Greater Pittsburgh region. McLaughlin also spoke to the performance of key asset classes, including the continued demand for industrial and the ongoing evolution of the office market, attributed to the prevalence of hybrid working models and the uncertainty employers are facing. Despite current market conditions, McLaughlin remained optimistic about the future, “We’ve had to recalibrate our expectations about the next 12- to 24-month period, the market isn’t going to bounce back overnight, but come 2024, we can reasonably expect to see some good growth.”
What have been some of the major highlights and milestones for Newmark in Greater Pittsburgh over the last year?
Our Greater Pittsburgh office has experienced several major highlights over the last year, successfully navigating unprecedented market conditions to reach milestones. One of the largest achievements has been our industrial team completing one million square feet in transactions this year. Industrial has continued to be one of the most, if not the most, in-demand market this year, and we are extremely proud of what our regional team was able to accomplish.
We also welcomed a highly respected broker in the Pittsburgh market, David Koch, serving as an Executive Managing Director and focused on office tenant rep. He is a valuable addition to our Pittsburgh team.
Considering the wide swath of industries & specialties covered by Newmark, which sectors seem to have grown the most or are experiencing surging demand?
We’ve seen tremendous success in the industrial market and are also seeing a return in retail activity. Historically speaking, the office market has been strong in Pittsburgh, though activity has slowed.
How have you seen the office landscape shift over the past year?
We have seen the hybrid model catch on in Pittsburgh, especially downtown, where we’re seeing the bulk of employees in-office Tuesday through Thursday. From an office standpoint, we recognize the hybrid model will continue to be an option for companies and while we’re not expecting to see an immediate return to five days in office, more people returning to the office – so, we’re cautiously optimistic.
On the amenity side, there is a flight to quality, with tenants seeking out their must-have amenities, including fitness centers, conference centers, tenant lounges and technology packages, which haven’t historically existed in these spaces but now owners want to be able to offer them. Tenants are putting more pressure on owners to offer amenities to draw employees back to work, even if it’s for two or three days per week. The hybrid model has become increasingly desirable, so employers have shifted their approach to amenitize the office as a way to incentivize their workforce.
For the most part, we are not seeing clients expanding or taking on additional space We are in a period of flux, where tenants are facing uncertainty — they’re not sure of where to go, if they should keep the same space they had pre-pandemic on the assumption that employees will return to office or if they should downsize. We’ve seen more of the latter; many clients are transitioning to touch-down locations where employees don’t have a desk but can come in and leverage the technology of the space as needed. I’m interested to see how these trends evolves, the environment is unlike anything I’ve ever seen before.
Are there any particular trends or developments that you’ve noticed in the retail space as well?
We are seeing the restaurant market re-open as well as seeing new ones come into our fringe market, which is the area around downtown. The restaurant industry seems to be recovering and it has been extremely positive for the region.
In terms of large retailers, we haven’t seen much of a presence in the downtown market and those immediately around the city.
What are some of the areas that are experiencing the most growth for CRE?
Overall, the fringe market l is doing well, whilethe east side, where Google is located, continues to demonstrate tremendous growth. We’re also seeing positive activity in the Strip District. Those have been our hottest markets, especially from a technology standpoint given the large presence of tech companies in the region. It has been spectacular seeing those markets take off.
How would you describe the role of technology in the commercial real estate market and how is Newmark incorporating it?
Technology in commercial real estate is extremely important and we work to offer our clients the best innovations we can. Newmark puts a lot of resources into elevating technology on behalf of our clients — through lease administration, project management and other tools. We are in a great place to offer our clients what they need going forward.
What are some of the opportunities or challenges the real estate industry is facing under the current economic landscape and how are you working to capitalize on or work around these developments?
The biggest challenge on the capital markets side is interest rates, which obviously have a major impact on the market. Right now, we are seeing fewer buyers than before and, for the most part, more conservative buyers due to interest rates and the overall slowdown in the marketplace. On the positive side, there are opportunities — in terms of pricing and rates — for buyers willing to take on a little bit more risk on a building that has some vacancy.
What is your outlook for Newmark and the real estate market for the next two to three years?
Our top priority is to continue to grow our presence in Pittsburgh and provide our clients with the best information, resources and services to help them make real estate decisions. We pride ourselves on our research group and the technology services that we are able to offer clients.
In terms of the market, we are coming out of the pandemic and are now heading into an economic downturn. With that in mind, I’m expecting 2023 to be a slow year across all asset types, even industrial. We’ve had to recalibrate our expectations about the next 12- to 24-month period, the market isn’t going to bounce back overnight, but come 2024, we can reasonably expect to see some good growth.
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