What Downtown Pittsburgh used to be like and rebounding from booms and busts
Gerard McLaughlin is considered a dean in the local real estate industry.
He has spent spent 45 years in the real estate business and brokered numerous deals over the years, including the Blue Cross deal for Fifth Avenue in Place in 1986, the Free Markets deal for One Oliver Plaza, and the relocation of the Buchanan Ingersoll
& Rooney law firm to the Union Trust Building a few years ago. Mr. McLaughlin started in 1977 as a leasing manager with
Oliver Realty, which later became part of Newmark, where he is executive managing director of the Pittsburgh office.
In late ‘70s, Downtown was a lot different. It was still “a big time corporate city,” he noted, with companies like Gulf Oil, Rockwell, Mellon Bank, Dravo Corporation, Gulf Oil, US Steel, National Steel and J&L Steel based here. It also was the home of destination shopping at historic department stores — Gimbels, Horne’s, Kaufmann’s. Times have changed, but the city has shown resilience as the landscape has shifted.
This interview has been edited for space and clarity.
PG: What do you think have been the biggest changes to Downtown in the 40+ years that you’ve worked there?
A. I think the first change was the corporations leaving Pittsburgh for one reason or another. And corporations actually getting smaller. The service industry was — it was nothing for an accounting firm to have 100,000 square feet of space. Today, there aren’t many (now) that have that amount. That obviously had an effect. I would say those two things have the biggest impact.
PG: Beyond Pittsburgh, what do you think have have been the biggest changes to the office market in the region as a whole over the years?
A. Obviously, tech gotten a lot bigger. Oil and gas, when it was at its peak, had a major impact on Pittsburgh. I think what we saw happen to Pittsburgh as our industrial base eroded, we began to look at different ways to expand our economy. Today, we’ve got education, eds and meds. You’ve got oil and gas. You still have finance, which was Federated and PNC, still have somewhat of an industrial base, and tech and bio-tech, which is beginning to emerge in our market.
We were really dependent on our industrial base. As that went away, we were fortunate enough to have the CMUs of this world, the Universities of Pittsburgh this world, UPMC, the AGHs, the Highmarks.
PG: There’s been a lot of talk within the last couple of years about the future of the office market, given the pandemic. Where do you see it headed?
A. The office market overall is in transition. We’re not really going to see where this is going for a while. The biggest issue that we have right now is getting people back to work. I don’t believe until we see people back in their offices —whether it’s a hybrid for three days a week, or four days a week, or whether it’s full-blown five days a week — until we see that, people are not going to make decisions. When people aren’t making office decisions, that means there’s not a lot of absorption going on in the marketplace. So, for the next 18 to 24 months, we’re going to have fairly slow markets. Hopefully, as people get back to work, that will pick up.
Our economy is interesting. We go through cycles all the time. In the early ‘80s, we went through the cycle of losing our corporate base. In ‘87, they changed the tax laws, and that affected the development of office buildings. You had the dot.com bust. In ‘08, you had the financial bust. We had COVID. On the heels of COVID, it seems that we’ve got inflation out there. Hopefully, it doesn’t turn into recession, as many people are predicting.
At the end of the day, we’ve been very resilient and have been able to bounce back from each of those. And I see that happening. I think that a market that will be hit the hardest will be the central business district, Downtown. Suburban markets like the Parkway West, the northern market, Cranberry and that area, and Southpointe even will continue to grow. The East has been a problem since Westinghouse went away but even that market will see some growth.
PG: A lot of the city office development in recent years has moved to the Strip District, Oakland and other parts of the East End. What does the Downtown market have to do to sort of regain its mojo?
A. That’s a great question. I think it’s a combination of things. Our city fathers have to do a better job of trying to attract tech firms Downtown. I think everybody is excited about the Strip. They’re excited about East Side. They’ve kind of forgotten that Downtown is the heart and soul of this region.
We have to come up with ways to attract companies who are looking at the Strip and other areas to say, “Hey, maybe we ought to look Downtown,” because, right now, the rental rates Downtown versus the Strip and East Side and those areas — it’s a lot less expensive. Plus, it’s the only place in the region where you have transportation service from the north, east, south and west. You look at East Side, the Strip — you’re going to drive there. It’s not as easy to get to those areas. At the end of the day, we need a joint venture between the government and our corporations to help attract companies to the Downtown area.
PG: There’s been a big move recently to convert some of older Downtown office buildings into residential. How sustainable do you think that is long term?
A. There seems to be a demand for it. My understanding of that market is that occupancy levels are in the 95% range, which is great. We’ve had announcements for a lot of additional apartments and condos to be added to Downtown. I’m just not sure of the depth of the market yet. I’m not sure that we won’t outstrip demand with the amount we’re putting in. Hopefully, they take their time in developing so that we can find an equilibrium.