PITTSBURGH | Development Rundown II

[daviderik]

Originally Posted by Austinlee

The strip has ridiculous potential.

If the Four Seasons comes to Pgh. I vote the locate to the strip.

[Austinlee]

Originally Posted by daviderik

If the Four Seasons comes to Pgh. I vote the locate to the strip.

I would be surprised if they picked anywhere other than downtown.

[Private Dick]

Originally Posted by Austinlee

Agreed. The strip has ridiculous potential.

Potential is inherent to, what is in large part, a blank slate. Pittsburgh can't squander the opportunity.

[BrianTH]

A little bit late to the party, but here is a relatively recent article on hotel development in Pittsburgh:

http://lodgingmagazine.com/the-developing-story-pittsburgh/

It is the accompanying graphic I find most interesting:

http://lodgingmagazine.com/wp-content/uploads/2015/03/Pittsburgh.pdf

Assuming this is representative of industry thinking on the Pittsburgh market, it explains a lot. Among other things, they are predicting continued strong employment and income growth in coming years. Hotel demand change has been strong in general, and particularly strong in upper-priced hotels. They are predicting some convergence going forward, but still somewhat higher demand growth in the upper end.

Hence, the Four Seasons scouting for locations.

By the way, the article attributes a lot of this demand growth to the energy industry. While it is certainly contributing, I think it is a mistake to place so much weight on it in analysis like this--there is actually a lot of different stuff doing well locally, and it probably is mostly not energy stuff driving the market in places like the East End or even Downtown. But that is rarely a battle worth fighting with people who believe that story.

[daviderik]

Monterey Bay reopens after $3M renovation
http://triblive.com/mobile/8062667-96/bay-monterey-sakari

I know great views from restaurants atop Mt. Washington are a dime a dozen. But Monterey Bay may have the best.

[daviderik]

Originally Posted by BrianTH

By the way, the article attributes a lot of this demand growth to the energy industry. While it is certainly contributing, I think it is a mistake to place so much weight on it in analysis like this--there is actually a lot of different stuff doing well locally, and it probably is mostly not energy stuff driving the market in places like the East End or even Downtown. But that is rarely a battle worth fighting with people who believe that story.

I agree with that statement in general, but could you please elaborate on "a lot of different stuff doing well locally" means? Do you mean local business or general tourism? According to the article Hotel rooms will increase over 25% in the next few years. I have often wondered if this hotel boom could burst at some point. I love it, but if they keep building will they keep coming?

[BrianTH]

Originally Posted by daviderik

I agree with that statement in general, but could you please elaborate on "a lot of different stuff doing well locally" means?

Sure. One proxy I like to look at is just employment counts by industry sector. Mining and Logging has in fact been doing quite well for the region in percentage terms, but over the last five years (when it really started taking off), it has still only added around 6500 jobs.

In the same timeframe, Professional and Business Services (which includes all sorts of things like a lot of sci/tech stuff, legal, management, and so on) has actually added about 20500 jobs. Good old Eds and Meds has added about 11500. And Leisure and Hospitality itself has added about 10900.

It certainly isn't all good news--other sectors are down or flat. But when you are looking at the growth areas, it turns out Mining and Logging isn't in fact the biggest growth sector in total (rather than percentage) terms. And when you look at those other big growth sectors--Professional and Business Services, Eds and Meds, and Leisure and Hospitality--it is not exactly a surprise there are strong residential, office, and hotel markets in Downtown and the East End.

Now some will say that the impact of Big Energy economics isn't limited to Mining and Logging, which is true: it should in fact have growth benefits in other sectors as well, including some on that list. Still, you can't plausibly attribute more than a fraction of that other stuff to just energy. And really, I don't think it is any one thing in particular--just a bunch of individual stories in a variety of different industries that add up to good overall numbers.

According to the article Hotel rooms will increase over 25% in the next few years. I have often wondered if this hotel boom could burst at some point. I love it, but if they keep building will they keep coming?

At some point the rate of increase will have to converge on demand growth. However, I think part of the point they are making is there is likely a lot of pent-up potential demand that could be exhausted first. In fact, if I understand it correctly, it seems one of their charts is indicating that Pittsburgh was still in hotel contraction mode at least as late as 2009. So, what we are seeing at the moment might fairly be called something like "catch up growth".

That said, my understanding is usually these things do end with a bit of overshooting and some excess supply, which can cause a brief period of stagnation in new development. But as long as demand growth remains chugging along, eventually that excess capacity can be absorbed, development will pick back up again, and you might in fact reach a steady state where supply and demand growth are more or less in synch.

[glowrock]

Originally Posted by BrianTH

Sure. One proxy I like to look at is just employment counts by industry sector. Mining and Logging has in fact been doing quite well for the region in percentage terms, but over the last five years (when it really started taking off), it has still only added around 6500 jobs.

In the same timeframe, Professional and Business Services (which includes all sorts of things like a lot of sci/tech stuff, legal, management, and so on) has actually added about 20500 jobs. Good old Eds and Meds has added about 11500. And Leisure and Hospitality itself has added about 10900.

It certainly isn't all good news--other sectors are down or flat. But when you are looking at the growth areas, it turns out Mining and Logging isn't in fact the biggest growth sector in total (rather than percentage) terms. And when you look at those other big growth sectors--Professional and Business Services, Eds and Meds, and Leisure and Hospitality--it is not exactly a surprise there are strong residential, office, and hotel markets in Downtown and the East End.

Now some will say that the impact of Big Energy economics isn't limited to Mining and Logging, which is true: it should in fact have growth benefits in other sectors as well, including some on that list. Still, you can't plausibly attribute more than a fraction of that other stuff to just energy. And really, I don't think it is any one thing in particular--just a bunch of individual stories in a variety of different industries that add up to good overall numbers.



At some point the rate of increase will have to converge on demand growth. However, I think part of the point they are making is there is likely a lot of pent-up potential demand that could be exhausted first. In fact, if I understand it correctly, it seems one of their charts is indicating that Pittsburgh was still in hotel contraction mode at least as late as 2009. So, what we are seeing at the moment might fairly be called something like "catch up growth".

That said, my understanding is usually these things do end with a bit of overshooting and some excess supply, which can cause a brief period of stagnation in new development. But as long as demand growth remains chugging along, eventually that excess capacity can be absorbed, development will pick back up again, and you might in fact reach a steady state where supply and demand growth are more or less in synch.

Keep in mind that most jobs in the energy sector (oil & gas, petrochemicals, etc...) pay far higher than the median or even mean wages in the region, BrianTH. While the overall numbers may not be even close to the highest in terms of overall employment growth, the total wages earned by those added positions probably come pretty close to the top.

Aaron (Glowrock)

[BrianTH]

Originally Posted by glowrock

Keep in mind that most jobs in the energy sector (oil & gas, petrochemicals, etc...) pay far higher than the median or even mean wages in the region, BrianTH. While the overall numbers may not be even close to the highest in terms of overall employment growth, the total wages earned by those added positions probably come pretty close to the top.

So there is tons of wage data available too. Those extraction jobs do pay pretty well as far as blue-collar jobs are concerned, but most white-collar jobs still average between more and a lot more:

http://www.bls.gov/regions/mid-atlantic/news-release/occupationalemploymentandwages_pittsburgh.htm

Again, there are undoubtedly some energy-related white collar jobs in the mix, but most of the white collar jobs are going to be something else.

So at a guess, Energy might have Leisure and Hospitality beat in terms of total contribution to wage growth. But I'd be pretty surprised if Eds and Meds and (non-Energy) Professional and Business Services were not in turn contributing a lot more.

[glowrock]

Originally Posted by BrianTH

So there is tons of wage data available too. Those extraction jobs do pay pretty well as far as blue-collar jobs are concerned, but most white-collar jobs still average between more and a lot more:

http://www.bls.gov/regions/mid-atlantic/news-release/occupationalemploymentandwages_pittsburgh.htm

Again, there are undoubtedly some energy-related white collar jobs in the mix, but most of the white collar jobs are going to be something else.

So at a guess, Energy might have Leisure and Hospitality beat in terms of total contribution to wage growth. But I'd be pretty surprised if Eds and Meds and (non-Energy) Professional and Business Services were not in turn contributing a lot more.

BrianTH, the problem with the BLS numbers is that energy sector jobs fall into construction/extraction, physical sciences and a number of other overall employment sectors. I can tell you right now that there are VERY few people working for any of the main or field offices for the energy companies in and around SW PA that earn anywhere near as low as $23/hour. Most people in the industry with any experience whatsoever are making more in the $60-90k/year range, many of them quite a bit higher than that.

I know it's really difficult to pigeonhole an industry that's got positions in a wide ranging overall economic sectors, no doubt about it. But I'd say that the overall wages are much closer to the $30-40/hour range overall than the mid $20/hour range as is listed for simply construction/extraction.

Just like when it comes to leisure/hospitality, the median wages are probably much lower than $18-20/hour like the BLS has listed, because the relatively few shift leaders, assistant managers, managers, etc., earn much, much more than the run of the mill server, housekeeper, etc...

Eds and Meds definitely means more for Pittsburgh overall, I don't deny that whatsoever. Wages in the medical field are generally pretty good, especially for nurses on up.

Only making the point that BLS numbers based upon general employment sectors are probably not the best way to figure out overall average wages in the energy sector.

Oddly enough, I'd say SW PA (along with SE OH and N/NW WV) are some of the few places right now in the U.S. where energy sector growth is still pretty good. Texas, Oklahoma, Louisiana, Colorado, Wyoming, North Dakota are all hurting pretty badly from the oil price downturn right now. But it's cheap enough to extract gas (and some oil) from the Marcellus and Utica Shales that the Pittsburgh area is still going pretty strong. Good for Pittsburgh, good for places like Youngstown, Canton/Massillon, Morgantown down through Charleston, etc... etc...

Aaron (Glowrock)

[BrianTH]

Originally Posted by glowrock

BrianTH, the problem with the BLS numbers is that energy sector jobs fall into construction/extraction, physical sciences and a number of other overall employment sectors. I can tell you right now that there are VERY few people working for any of the main or field offices for the energy companies in and around SW PA that earn anywhere near as low as $23/hour.

Sure, as I acknowledged before, there are undoubtedly some higher-paying white collar jobs associated with the Energy industry growth in the area. But there are a LOT of new white collar jobs in the region in general. So the issue is when people start implicitly or explicitly attributing most of the growth in those other areas to the Energy industry, which is implausible.

In fact, one good reality check of that proposition is to look at when Professional and Business Services started growing in the region. It turns out it really started at least as far back as 1994 or so:

http://data.bls.gov/pdq/SurveyOutputServlet



There was a dot-com effect, but then it really started taking off even more around 2004. Again, there was a Great Recession effect, but then it restarted. None of this really correlates with Energy specifically:



That is just Mining and Logging, and only goes back to 2005. But I believe Chris Briem has charts going farther back showing a general downward trend for quite a while leading up to 2007 or so, and I believe that the associated positions charts would look very similar.

What that shows is that the boom in Energy employment is too recent to be the main driver of Professional and Business Services growth in the region. Specifically, it cannot explain the mid-late 90s growth, or the 2004-2008 growth period, and for that matter can't explain the Great Recession effect circa 2008/2009 (Energy was starting to grow then, but there was a general contraction in Professional and Business Services, again indicating that a lot of what was happening in those sectors was unrelated to Energy). There is a co-incidence of sorts starting in 2010, but it is not clear the trend starting in 2010 was really much different from the mid 2000s trend, such that most of that could just be bounce-back and a return to the pre-existing trend. So again, I have no doubt Energy is contributing something, but there is very little reason to believe it is the main driver in these sectors. And that is a lot of often high-paying jobs being added.

This is good news, of course--there is a lot of stuff going on here beside Energy, and it has been happening for a lot longer than many people realize. But it is sort of like Eds and Meds in the mid-2000s: back then, everyone attributed economic and higher-wage growth to those sectors. Ed and Meds, by the way, and as you noted, is probably still a thing. There was a slowdown 2012/2013, which was probably a combination of Obamacare stuff and the general economic slowdown here in 2013, but it looks to be growing again:



But anyway, back in the mid-2000s it was tough to convince people there was also robust growth in other professional fields. I think that is in part because people are always looking for a relatively simple story about the One Big Thing happening, and often there are politics involved as well. So it is tough to compete with those narratives if all you have is some charts and graphs, and nothing in particular you are trying to sell.

Just like when it comes to leisure/hospitality, the median wages are probably much lower than $18-20/hour like the BLS has listed, because the relatively few shift leaders, assistant managers, managers, etc., earn much, much more than the run of the mill server, housekeeper, etc...

You can get detailed median and mean statistic here:

http://www.bls.gov/oes/current/oes_38300.htm

It is indeed true that in most fields the mean is higher than the median, although the difference varies a lot, depending on how the given industry is structured. For extraction workers, it is not a huge difference, but it is there. To choose a couple random examples, for food prep/service, there is also not a huge difference. But there is a much bigger difference in sales. A lot of that comes down to how big a gap there is between line and supervisory pay, and similar sorts of factors.

Oddly enough, I'd say SW PA (along with SE OH and N/NW WV) are some of the few places right now in the U.S. where energy sector growth is still pretty good. Texas, Oklahoma, Louisiana, Colorado, Wyoming, North Dakota are all hurting pretty badly from the oil price downturn right now. But it's cheap enough to extract gas (and some oil) from the Marcellus and Utica Shales that the Pittsburgh area is still going pretty strong. Good for Pittsburgh, good for places like Youngstown, Canton/Massillon, Morgantown down through Charleston, etc... etc...

Sort of predictable, though, as you note, once you take a look at costs of production. But you do have to keep this sort of stuff in mind when you think about how to structure extraction taxes, leases, and such.

[daviderik]

Upgrades at Pittsburgh International Airport aimed at providing comfort
Free water bottle filling stations available at some fountains in the terminal are just one of a slew of upgrades the Allegheny County Airport Authority has been making.
Some of the enhancements are the first since the midfield terminal opened in October 1992. The ceiling tile being replaced throughout the complex, for instance, is 23 years old.
The restrooms are receiving new tile, countertops, automatic fixtures and baby changing stations. Another change was made at the request of customers — doors to the stalls will open out, the better to maneuver luggage.

In addition, a $10 million rehab of the airport’s people mover system that whisks travelers between landside and airside buildings started last September and will continue until next spring.
Another major project started last June and continuing through October involves removing old tile in the airside core and replacing it with “The Sky Beneath Our Feet,” a 69,000-square-foot terrazzo floor by artist Clayton Merrell that will feature murals of Pittsburgh neighborhoods and landmarks such as PNC Park, Heinz Field and the Cathedral of Learning.

About 60 percent of the $4 million project has been completed, including a finely polished section showing the silhouette of the Carrie Furnace against a blue sky and tan and light purple clouds.

Some of the improvements are essential upgrades like new charging stations.
The article provides an image of the new flooring. It appears to be carpeting, but on a close viewing it is in fact unpolished terrazzo.
http://www.post-gazette.com/business/dev...t-providing-comfort/stories/201504050115

[TBone7281]

Originally Posted by BrianTH

So there is tons of wage data available too. Those extraction jobs do pay pretty well as far as blue-collar jobs are concerned, but most white-collar jobs still average between more and a lot more:

http://www.bls.gov/regions/mid-atlantic/news-release/occupationalemploymentandwages_pittsburgh.htm

Based on my limited personal experience with people in the industry, the numbers supplied do seem pretty low, even if they are the "mean".

Even at $22/hr, they would only have to work 40 hours a week to hit their "annual salary" listed in the document. (Perhaps that was the point.) But, from what I've seen, these guys tend to work a lot more than that. One of my brother's friends joined the industry a few months ago. He gets up at 4:30 AM so that he can get from New Stanton to Eighty Four by 6 AM each morning and doesn't get home until 9 PM. (So say, ~14 hr/day) And this is sometimes 7 days a week. Probably not sustainable in the long run without experiencing some level of burn out, but I think a lot of these guys are doing similar things... lots of hours to rack up the overtime when it's there.

Let's say my brother's friend puts in an 80 hour week for half the year and a 40 hour week the rest. Plus two weeks of unpaid vacation. We'll assume he only makes $20/hr with 1 1/2 for overtime hours.
$20/hr X 40 hr x 25 weeks = $20,000
$20/hr x 40 hr x 25 weeks = $20,000
$30/hr x 40 hr x 25 weeks = $30,000

Total: $70,000

This seems to be more in line with what these guys are pulling in, and I do believe this is on the lower end based on actual pay rates and hours worked.

[BrianTH]

So that hourly wage data is derived from the OES, which is a large sampling survey of non-farm establishments. The mean annual wage is in fact typically derived from the hourly wage data by multiplying it out by 2080 hours--see Note 2 here (this is for Derrick Operators, but typical):

http://www.bls.gov/oes/current/oes475011.htm

So I think it is correct those annual figures should not be taken as strictly authoritative. Quickly looking around, I haven't found any reliable statistics on annual hours actually worked. I have heard, however, that the work is not necessarily steady year-round, meaning you may have periods where you are working extra hours, and other periods where you are idle or nearly idle. Just a guess, but I would imagine the details would depend on exactly where you worked and what has been happening in the relevant commodity markets, because the actual rate of extraction activity, and thus the amount of work available, can depend heavily on all that. See, for example, here:

http://www.bizjournals.com/pittsburgh/bl...rig-count-slides-to-lowest-point-in.html

By the way, random aside, but there has been a systemic problem in the Oil and Gas industry with employees being illegally denied overtime pay, often by underreporting base pay or misclassifying them as independent contractors. Again, see, for example, here:

http://www.dol.gov/opa/media/press/whd/WHD20141883.htm

[JVC]

Originally Posted by daviderik

I agree with that statement in general, but could you please elaborate on "a lot of different stuff doing well locally" means? Do you mean local business or general tourism? According to the article Hotel rooms will increase over 25% in the next few years. I have often wondered if this hotel boom could burst at some point. I love it, but if they keep building will they keep coming?

that's what booms or bubbles do - they burst
what is there to wonder about?

this one will be no different down to the fact that during the height of the boom
people delude themselves into believing that it is going to last forever

[BrianTH]

Here we go. This is national, but beggars can't be choosers. As expected, hours are in fact pretty volatile:



Interestingly, so are hourly earnings to some degree:



So nationally, at least, total earnings per week per employee is down from recent peaks due to a combination of both lower hours and lower hourly wages. But again, it is all very volatile.

Note that is just production/non-supervisory, so doesn't include supervisors, management, scientists, engineers, and so on. Those people average higher hourly wages but lower weekly hours, which you can figure out from the totals reported here:

http://www.bls.gov/iag/tgs/iag211.htm

Note also that a lot of those people are in fact included in the Mining and Logging totals. So that reported +6500 in Mining and Logging in the region since 2010 does include such supervisors, scientists, and engineers. That doesn't mean it includes quite everyone--for example, I know a lawyer who is now almost exclusively doing gas leases, and I don't think that would be included. But it looks to me like a Petroleum Engineer, say, would be in the Mining and Logging total, not hidden in the Professional and Business Services total.

Finally, a little crude analysis. Per the link above, nationally for Oil and Gas you get an average of $42.35 for hourly wages and 41.8 for weekly hours (this is for February 2015), which totals to $1770.23. Again, this includes production/non-supervisory, but also various supervisory, scientists, engineers, and so on.

Professional and Business services (again nationally, February 2015) is at $29.80 and 36.2, so $1078.76.

However, 6500 times $1770.23 is $11,506,495, and 20500 times $1078.76 is $22,114,580. So even accounting for the far higher wages/hours, the sheer number of Professional and Business Services additions works out to about twice the increase in total wages per week.

Now this again is imperfect--I'm using a mix of national hours/wages and local employment counts, and there are probably some directly Energy-related jobs in the Professional and Business Services count. Conversely, Mining and Logging is not all Oil and Gas, and I'm not sure who is actually employed here in the Pittsburgh region versus being employed back in HQs and labs elsewhere (I'd guess the mix here is more weighted to production than down in Texas, for example). Generally, I am looking at industry-wide or sector-wide wage averages, but really we want to know the net marginal wage effect, meaning the wages of the new ones added, then minus any lost.

Still, bottomline--I remain comfortable guessing that the total addition of wages from local growth in non-Energy Professional and Business Services is higher than the total addition from local growth in Energy. There are just too many new employees in the former category to make it likely that Energy can catch up.

[Captain Crash]

Nice round up of some renovations in the Allentown neighborhood, with hope for a resurgence of Warrington Ave as a commercial corridor. The article makes a good point that being between Mt. Washington and the South Side Slopes it's pretty much inevitable that development will move into Allentown.

http://www.post-gazette.com/local/city/2...ised-for-a-makeover/stories/201504060015

[BrianTH]

The ill-fated Lawrence County casino project may finally be dead for good, in part because competition from Ohio has killed its market potential:

http://triblive.com/news/allegheny/8098242-74/national-penn-county#axzz3WXjfkqbE

I'm not sure that is great news for the region, but it is probably good for Rivers Casino specifically.

[BrianTH]

It would be great to see Allentown in a sustained upswing.

Of course something like this could potentially help . . .

https://www.google.com/maps/d/viewer?mid=ze0rDctypi6g.kFBJd_Lqp1xQ&ie=UTF8&hl=en&msa=0&z=13

Even if you didn't want to use that technology, there are lots of options to at least connect Allentown and the South Side Slopes better to the South Side Flats--inclines, for example, or public escalators. Here is one in Toledo, Spain:



There actually used to be an incline to the intersection of Warrington and Allentown, which ran up from Bradish between 11th and 12th:

http://en.wikipedia.org/wiki/Knoxville_Incline

http://images.library.pitt.edu/cgi-bin/i/image/image-idx?view=entry;cc=maps;entryid=x-003e1932

http://images.library.pitt.edu/cgi-bin/i/image/image-idx?view=entry;cc=maps;entryid=x-014e1934

Some sort of reliable, motorized conveyance like that for pedestrians and bikes could really do wonders.

Edit: looks like the space for the lower landing of the Knoxville Incline is still there. Compare:

https://www.google.com/maps/@40.427173,-...3m4!1e1!3m2!1s2dBgBnzWIBYfL-wvSxULYw!2e0

With:



Bring back the Knoxville Incline!

[GeneW]

Originally Posted by Captain Crash

Nice round up of some renovations in the Allentown neighborhood, with hope for a resurgence of Warrington Ave as a commercial corridor. The article makes a good point that being between Mt. Washington and the South Side Slopes it's pretty much inevitable that development will move into Allentown.

http://www.post-gazette.com/local/city/2...ised-for-a-makeover/stories/201504060015

Nice. I walked around Allentown last year and was impressed with the possibilities. (Oy, the comments after that article though).