Official says 800,000 square feet of Downtown space will sell

Blame it on the recession, but there is about 800,000 square feet of sublease office space available in Downtown office buildings.

That's equivalent to both Gateway Three and Gateway Four buildings being completely empty.

One Downtown commercial real estate executive, however, doesn't expect that space to stay vacant for long. Jeffrey Ackerman, president of brokerage services for CB Richard Ellis, said Tuesday that leasing activity has picked up, and he expects much of the sublease space to be filled by the third quarter.

Sublease space is under lease to a company but is vacant, either because the tenant moved out or went out of business.

Examples of recent activity include Citizens Bank's sublease of nine floors in 525 William Penn Place (formerly Three Mellon Center) from Mellon Bank, and Merrill Lynch's recent placement of 8,900 square feet of space in U.S. Steel Tower for sublease.

Ackerman said despite the lack of recent leasing activity, Pittsburgh's rate of gaining new tenants, called the absorption rate, was down only slightly from a "good year" in 2000. The absorption rate last year in the Downtown offices and in fringe areas such as the Strip District, South Side and the North Shore, was 310,881 square feet, while suburban absorption was 474,250 square feet, he said.

Pittsburgh's Central Business District faired a better than downtown areas in Boston, which had 1.8 million square feet of space, open up for sublease and Detroit, where 361,000 square feet of space became available. Although Pittsburgh's Downtown absorption number in 2001 was down from previously years, it still was the best of cities of comparable size, such as Charlotte, Minneapolis, Indianapolis, Columbus, Kansas City, Cleveland, St. Louis, Cincinnati, Tampa and Nashville.

Downtown's office vacancy rate was approximately 14.6 percent, but jumped to 17.3 percent when sublease space was included. Class A space, the highest, quality space usually found in newer buildings, had a 8.9 percent vacancy, or 11 percent when sublease space is included. Rental rates remained relatively unchanged at $22.63 per square foot for Class A space, Ackerman said.

The suburban market also has a large block of sublease space available. The majority of the 775,500 square feet is found along the Parkway West where 430,900 square feet is vacant. Currently, the Parkway West has overall a 20.3 percent vacancy rate.