3 min read March 2023 — Greater Pittsburgh is seeing multiple multifamily developments and new, attractive office spaces that answer to the needs of the everywhere workforce so they stay in the area. Jim Scalo, president and CEO of Burns Scalo Real Estate, spoke with Invest: and discussed the landscape for real estate development and construction in the area.
What differentiates Burns Scalo from other players in the greater Pittsburgh region?
We are very unique from our peers. We are fully integrated via three operating companies: One is marketing and brokerage, second is facility and financial management and our biggest group is the development group, which includes construction. That is one of our X factors: we perform all of our own general construction. Our investment real estate is the biggest part of our budget. We thought that it was critical to control the largest number in the budget. It has worked beautifully for us. Also in that group is our debt and equity group, insurance group and our legal firm. In addition to that, we perform advisory services for clients that are not in projects that we have equity in. That side of the business is really growing. Now that we are into a market downturn, an increasing number of people have a need for help, and with our understanding of the asset class, we can provide those advisory services.
How would you describe the current demand for your services?
Brokerage services have been very robust. Everyone is trying to figure out their space needs. What we are seeing in commercial real estate as a result of the downturn is a massive bifurcation occurring between older real estate and newer real estate. What people are doing today is moving to upgrade their space. It’s a flight to quality and generally taking less space and saving money, getting better space but less of it. Amenities are the key today. It is not about the box. When you get it right, you are talking about lifestyle, the vibe, the experience and the amenities, such as food and beverage, fitness centers, dry cleaning services, concierge services and outdoor space as well as indoor spaces. Business owners now understand they have to earn the commute. The other thing is everyone wants to hire the best talent but they understand that the best talent has choices of where to work. Smart employers understand that they need to offer a great experience, great real estate, to attract and retain the best talent.
What are some of the unique opportunities that you see in the Greater Pittsburgh region for your overall services?
I do think there is an ongoing transformation in the workplace. Everyone is trying to redefine the new world of work. It is driven by one word: productivity. This is why it’s taking a longer time to define itself, and there is not one global answer. So much depends on the industry, the position that person holds and what that person wants. There are a lot of people who do not want to work, so it is not like you can say as an employer that we are going to be all remote or we are going to be all back five days a week. I do think hybrid is here to stay but it will be customized around productivity.
What challenges do you see in the market and how are you working to tackle them?
There are two businesses: The B2B business and the C2B business. The consumer-based businesses have done well, generally, and e-commerce has done well but B2B has struggled. The biggest issue is the rise in pricing and the supply chain issues that prevail. Rising interest rates — it is unheard of that interest rates have doubled in the last 10 months — are going to put a big stop on the economy. There is also inflation and all the job cuts that you are beginning to hear about. Amazon cut 11,000 jobs recently. You are seeing this decline in employment while you have inflation and rising interest rates. You have all the headwinds for the consumer and for the business, and it is going to slow down spending and then that will slow down demand and allow supply to catch up. The sentiment is that in a year from now, we will see interest rates start to pull back, supply will be fixed and we will find some normalcy.
What areas within the region are getting the most traction?
In the Strip District, we are sitting on a brand new 265,000-square-foot building, which is retail, food and beverage and office. It is today’s hottest submarket. What is interesting about that paradigm is that 10 to 30 years ago, you would have laughed at the idea of the transformations occurring in the Strip. This is society changing how people want to live, how they want to work. Corporate America is in trouble right now across the nation. It is these fringe markets, these Soho-type markets like the Strip that are very eclectic, cool and hip and provide a lot of walkability. When we look at investments, we have a walk score, including amenities outside the buildings as well as inside. The urban markets are doing well in their fringes, more than in their core and that is true in Pittsburgh. Now, the suburban markets are doing well, too. We are doing a $250 million investment in Moon Township, which is the Parkway West Airport Corridor in Pittsburgh. That is a large mixed-use project. We believe that the future of great real estate is mixed use that has scale and a programmatic nature. We are bringing it in for rental housing and for-sale housing. You bring people first, then you bring the office and then you bring the retail. Retail today has been redefined as a lot of food and beverage and staple necessities that people need. Retail is a really hot sector right now. What is interesting is that a year ago, two years ago, everybody thought it was over for retail. That’s not true. It’s just like what people are thinking today for offices. Office is the next new pretty girl in investment real estate. But again, it’s about nuance. We have an acronym, NOW, that stands for “New Office Wins.” Old office is in trouble. Office space is no longer a commodity, which is a good thing, and it is drastically changing.
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