Pittsburgh's apartment market No. 1

By Sam Spatter, FOR THE PITTSBURGH TRIBUNE-REVIEW
Saturday, March 6, 2010

Apartment buildings are hot properties in the Pittsburgh market, and at least five major projects are in the works to satisfy demand from renters and investors, local real estate experts said.

One of the projects is a proposal for 220 apartments in the former State Office Building, Downtown, according to experts and the developer.

Millcraft Industries Inc. completed the purchase of the 16-story building on Monday, paying $4.6 million. Millcraft officials had delayed announcing how they would use the building, saying only that they would begin work by late summer on anything from residential condos to apartments to retail space.

The state moved 800 employees out of the building over the past few months into other Downtown buildings.

"We are considering the 220 apartments for the building, but we also would consider an office tenant who offers to occupy the entire building," said Lucas Piatt, Millcraft Industries' executive vice president. He said there are no plans to convert the building into a hotel.

Other projects under development include the conversion of the former Goodwill Industries headquarters building into 64 apartments in the South Side; the former South Side Vo-Tech School into 71 units; 100 units in an apartment in the Oakland Portal project in Oakland; and 112 units in the Highland Building in East Liberty.

Apartment buildings are holding their value during difficult economic times, said Paul D. Griffith, managing director for Integra Realty Resources in Pittsburgh.

"What's driving the demand for apartments is the low vacancy rates, with Pittsburgh having among the lowest in the nation," said Griffith, who spoke this week at a meeting of the local chapter of the National Association of Industrial and Office Properties.

Pittsburgh's apartment occupancy rate of 96.6 percent is ranked No. 1 in the nation, according to a mid-year 2009 survey by M/PF Research, a Texas firm that tracks rental markets.

The occupancy rate is the best in the nation by a fairly sizable margin, said Greg Willett, M/PF vice president, research and analysis.

Federal aid is available to help finance apartment projects. All of the projects mentioned are considering using the Department of Housing and Urban Development's 221(d)4 mortgage insurance program, said Cheryl Campbell, field office director of the Pittsburgh office.

"The South Side Vo-Tech project has received a firm commitment, and the other four have expressed interest but not submitted an application," she said. The program offers longer financing and lower-interest rates, she said.

Two area apartment complexes -- the Morrowfield in Squirrel Hill with 156 units and the Waterford in Collier with 315 units -- are on the market and have attracted interest from investors, said Cynthia Kamin, senior vice president, CB Richard Ellis.

"About 70 percent of the inquiries, including some offers, have come from out-of-town investors," she said. Recently, out-of-town buyers are getting more competition from local buyers, she said.

In the past, 70 percent of the buyers were from out of town. Recently, they consist of 50 percent, she said.

Out-of-town buyers bought three major apartment complexes within the past 12 months.
Brookview Associates, an affiliate of St. Louis-based developer Brookview Group Ltd., paid $10.2 million for the 241-unit Penn Towers in Wilkins; Morgan Management LLC of Pittsford, N.Y., paid $11.6 million for the 291-unit Westpointe Apartments in Robinson; and Morgan Communities of Pittsford purchased the 232-unit Lincoln at North Shore. No sales price was released.

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