'It's happening:' Southpointe office deal could help revive Washington County business park

By Mark Belko / Pittsburgh Post-Gazette

If any developer and building have a history together, it’s NAI Burns Scalo and the Fountainhead in Southpointe.

Together, they have survived 9/11, the Great Recession and the COVID-19 pandemic. The developer built the four-story structure at the entrance to Southpointe, eventually sold it and then bought it again in 2018 for about $18 million.

Then the pandemic hit. Since then, the 90,000-square-foot building has gone from fully occupied to half empty. Now NAI Burns Scalo appears to be on the cusp of making it whole once again.

The firm is close to a deal with a tenant to take all of the space in the building at the entrance to Southpointe in Washington County. Jim Scalo, CEO of NAI Burns Scalo, declined to name the new occupant.

“It shows that great real estate, well located, always survives well,” he said. “It’s a good story of perseverance, of patience, of resilience.”

To accommodate the new tenant, Mr. Scalo said his firm plans to relocate Ayco, an affiliate of Goldman Sachs, to another NAI Burns Scalo property within Southpointe.

If NAI Burns Scalo is able to complete its deal to lease Fountainhead, it could be a boost for the office park as a whole, which has been hit hard by the pandemic and the slowdown in the oil and gas industry.

According to the CBRE real estate firm, Southpointe has a 19.5% vacancy rate, the highest of all the submarkets in the region in the third quarter.

But Mr. Scalo sees better days ahead, particularly as more employees return to the office. He noted that his firm has signed more leases in the past three months than it did in the past three years. It also is seeing demand for better quality buildings.

“The return to office has happened. Four-and-a-half years [after COVID’s start], the trend line is more and more people are returning. As they return, they want that flight to quality. It’s been a long time coming, but it’s happening,” he said.

Southpointe, he added, “is going through some pain but it is really a quality park.”

“It is absolutely recovering. There’s a good deal of supply in Southpointe. It’s a beautiful development and it will do well,” he said.

Landing a tenant to take all of the Fountainhead building “is great news,” said David Koch, a Newmark executive managing director.

“Any time an office user takes a large amount of space, it is a sign that people are coming back to the office. Following the lead of Amazon with their return-to-the-office culture, the tenant for the Southpointe market is communicating that a back-to-work philosophy remains critical for a successful organization,” he said.

“Whether it is a hybrid model or a full-time return, being in the office matters.”

NAI Burns Scalo also owns the 116,000-square-foot Stealth Technology Center at Southpointe. It’s another building it constructed and owned, sold, and then bought back again. It also owns the three-building Zenith Ridge complex within the development.

“We know the park well. We’re very bullish on it,” Mr. Scalo said.