Downtown Pittsburgh lags behind other areas in returning workers to the office, study finds
By Mark Belko / Pittsburgh Post-Gazette
Maybe Pittsburghers are just homebodies.
On average, office attendance nationwide hit 70.6% of pre-COVID-19 levels in June, the highest rate since the pandemic started in March 2020, according to a study by the Jones Lang LaSalle real estate firm.
But in Downtown Pittsburgh, more employees are still staying away from the office.
Officials at the Pittsburgh Downtown Partnership estimated that the office workforce in June returned to 60% of pre-pandemic 2019. That’s lower than it was in July 2023 when it reached 63%, the highest level since the pandemic.
The data represents another troubling sign for the Golden Triangle, where high office vacancy rates have helped to fuel hundreds of millions of dollars in property assessment reductions and spawned tax abatements and other programs to convert faltering office buildings to apartments.
It comes as the Downtown office vacancy rate, at 15.1% in the second quarter, hit its highest level in four years, according to Hanna Commercial Real Estate.
That firm predicted the rate will climb even higher as companies continue to cut their office footprints in response to hybrid work policies and other factors.
Dan Adamski, JLL executive managing director in Pittsburgh, said one reason the return-to-work rate in Downtown lags behind the national average is that the overall market has a higher-than-average percentage of office space concentrated in the Golden Triangle.
That’s at a time when suburban markets nationally are outperforming downtowns as a whole, he said. He noted that the JLL data included both downtown and suburban markets, while the PDP count involves only Downtown, making for an inexact comparison.
But Mr. Adamski maintained that Pittsburgh is also trailing the national average “due to the absence of in-office mandates, or the lack of enforcement where they do exist, from many of our largest employers.”
“Work-from-home flexibility within the banking and health care sectors has an outsized impact on office attendance for our central business district,” he said. “Fortunately, Downtown has a significant law firm presence, and the legal sector is leading the way in returning to the office.”
Some Downtown employers, including PNC Financial Services Group and insurer and health care provider Highmark, have pressed their workers to be in the office more frequently. PNC has even been offering employees discounted parking on the North Shore to entice them back.
On the national level, the JLL study found that employers are continuing to make adjustments in terms of return-to-work policies and that those changes “overwhelmingly favor increased office attendance.”
It stated that Amazon recently announced that it will begin enforcing a minimum hours requirement for attendance. Software company Salesforce also has boosted its three-day-a-week office requirement for most employees to four or five days.
In addition, public sector employers are mandating more in-office appearances, the study found. Most federal agencies, it stated, now require workers to be in the office two to three days a week.
The city of Philadelphia, meanwhile, has gone a step further, forcing all employees to return to the office full time.
John Valentine, executive director of the Downtown Neighbors Alliance, believes getting more office workers back to the Golden Triangle is a “very important component” of making it healthy and vibrant again.
While much of the recent focus has been on finding ways to convert office buildings to residential, Mr. Valentine said steps also must be taken to try to win more workers back to the office.
“I think we have to be proactive to address the glut of office space that’s open. I’m concerned about that,” he said.
Before the pandemic, more than 100,000 people worked in Downtown. Even half that amount, Mr. Valentine said, is still much larger than the Downtown residential population, which totals about 7,000 people.
To have true vitality in Downtown, both segments must be strong, he said.
“More needs to be done to attract more office,” he said.
While tax abatement programs and loan funds have been created to convert office buildings to residential, Michael Connor, market leader for Hanna Commercial Real Estate, wondered why more dollars haven’t been targeted to “empower people to get back” to the office.
He noted that the region and its transportation infrastructure are still centered on Downtown and the 9-to-5 office work culture.
Without a resurgence in office workers, Downtown could be facing “a severe threat,” he said.
“We do need the office work population to come back,” he said, adding that it would be the quickest way to fix some of the issues plaguing the city’s center.
Another way to address the issue is to reduce the office inventory, either through conversions or other means. That is happening, Mr. Connor said, with the proposed conversion of the 44-story Gulf Tower into apartments and a luxury hotel.
Owner Rugby Realty has not been signing new tenants or renewing leases in anticipation of that project.
In addition, Hertz Investment Group emptied out Three Gateway Center while mulling a residential conversion, but is now putting the building up for sale.
The Gulf Tower and Three Gateway Center moves have taken more than 800,000 square feet of office space off the market, Hanna Commercial Real Estate stated in its second quarter office report.
“The correction is going to come by taking product off line,” Mr. Connor said. “As vacancy ticks down and occupancy goes up, rates will stay steady.”
But until that happens, the Downtown office market will continue to struggle, he said.
In its report, Hanna Commercial Real Estate stated that “a bright spot in an otherwise challenging office market” is the FNB Financial Center at the former Civic Arena site in the lower Hill District.
First National Bank, which is moving its headquarters to the office tower from the North Side, recently committed to taking three more floors. It will now occupy half of the 460,000-square-foot building. The Post-Gazette reported in January that it was eyeing more space in the structure.
The 26-story tower — the highest-priced office building in the submarket, according to Hanna Commercial Real Estate — is now 70% pre-leased as it nears its completion.
Mark Belko: [email protected]
This story was updated at 8:45 a.m.