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Developers Work to ‘Future Proof’ Their Projects for A Very Different World After Covid-19

Dec 05, 2020 | Ethan Lott, Pittsburgh Business Times

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The conversations about all the details and design decisions that go into developing a building can all be remembered a little differently now.

As his family’s company now pushes forward with restarting construction on its $100 million Liberty East project slated for the Penn Plaza site in the heart of East Liberty, Zach Gumberg remembers being pressed to cut out one of the five elevators designed for the nine-story project and perhaps takes a little satisfaction at refusing to cut back.

“We probably have more elevators in our building per occupant than other equivalent buildings,” said Gumberg.

It’s a selling point with new salience now.

With construction soon to get started again after a month and half total shutdown due to the Covid-19 global pandemic, the building to include a new Whole Foods Market and upwards of 250,000 square feet of office space is projected to open late in 2021.

When it does, its future tenants will likely have had their expectations for how and where they work dramatically changed by a coronavirus that has taken the lives of more than 60,000 Americans in a little more than a month and a half.

Gumberg notes the new value of employees being able to have their options of different elevators and keep separated from others at a time when social distancing will likely remain a core component of personal hygiene in age of highly contagious disease.

“We’re trying to find other ways where we can make the building more attractive in the new world that we’re all living in,” said Gumberg, “We’re considering upgrades to the mechanicals even though everything will be brand new.”

LG Realty is also building new electrochromic windows into Liberty East, a kind of “smart glass” that can be used to control glare and sunlight, what Gumberg expects will be a new-to-Pittsburgh technology that helps cut energy use for a project gunning for a LEED Silver designation.

Now, Gumberg notes the new type of glass offers the added appeal of allowing there to not be blinds that would need to be touched and cleaned regularly, enabling the building to be kept cleaner and more efficient in avoiding the spread of viruses and germs.

“This is where the world is going to,” he said. “You try your best to future-proof the building.”

For certain, the future looks very different than from a few months ago for some of Pittsburgh’s biggest development projects.

Envisioned and approved in an economic boom, many dating back to last year with the goal of starting construction in earnest this Spring, they face a very different market reality now.

In a recent webinar event for the Pittsburgh market CBRE Senior Economic Advisor Spencer Levy, who researches the commercial real estate market in North America and beyond, described some major challenges for the office market to come with Covid-19.

“The underwriting of office space is the most challenging I’ve ever seen it. The lending community is looking at offices much more cautiously than they have before,” he said.

He said to expect “physical occupancy in most buildings is going to be materially down for the next 12 to 18 months unless and until a vaccine is found.”

Given the higher priority on social distancing, Levy expects a distinct advantage for suburban offices to which employees drive to, noting the challenges of commuting by mass transit right now safely and efficiently, as well as for getting employees up and down in downtown office towers in more crowded elevators.

It’s a new sensibility that Burns Scalo Real Estate is seeking to tap into as it introduced its new 250,000-square-foot, three-building Diamond Ridge office park in Moon Township recently, with company CEO Jim Scalo noting of the plan that “future tenants will all have the coronavirus in mind and new properties will reflect that shift in tenant priorities.”

Along the Allegheny riverfront in the Strip District, Oxford Development Company can now look the crater its construction crews had already prepared for 75 Hopper Place, its next office building for 3 Crossings, as something of a canvas on which to reconsider its plans for a 150,000-square-foot project in the works for the site.

Oxford CEO Steve Guy acknowledged how Covid-19 creates new urgency to tenant priorities while noting the company has already been pursuing projects that make a high priority of health and wellness, with 75 Hopper striving for LEED Silver.

“Our plans are not complete and likely will be (and should be) a work in progress for the foreseeable future,” said Guy in a prepared statement.

Guy added that Oxford has “created a new work team to evaluate how we can advance our practice to accommodate new applications and approaches to building design, construction and operations that will have emerging relevance as we address tenant and client needs in the post COVID environment and beyond.”

Seeking to avoid a “knee jerk reaction to the current pandemic” to instead meet long-term needs, Guy said not to expect any major changes to the basic form of 75 Hopper.

But he added, “mechanical systems, overall enhanced technology, air handling systems, mobility, paths of travel, security, improved operational communication and wellness monitoring are all in varied stages of evaluation.”

New York-based JMC Holdings first introduced its plan to replace the New Federal Cold Storage building in the Strip District with a new 21-story office tower at 1501 Penn Avenue with a brokerage reception in mid-February when Covid-19 was a still distant yet growing concern in China.

Cassin sees reason to suspect his company’s plans for 1501 Penn Avenue could have added relevance for tenants, given its 40,000-square-foot floor plates better encourage spreading out employees.

“There’s definitely a reversion back to wanting to be less dense,” said Cassin.

Where recent office trends put more employees into less space, Cassin sees Covid-19 inspiring a desire to put less people in more space, suggesting a ratio of one employee per 170 square feet expanding to one per 250 square feet.

A project roughly projected to cost between $180 million and $200 million to build, 1501 Penn is already expected to include a chilled beam HVAC system to avoid the kind of recycled air that can encourage illness.

Cassin said JMC is also considering plants for 1501 Penn to a “no-touch office building” that would give tenants access without having to physically touch a door or elevator keypad.

“I view it as a unique opportunity to think about how we can position the building perhaps a little more effectively for what tenants are are going to want,” said Cassin.

After getting a key zoning approval to start April as Pennsylvania’s emergency pandemic shutdown entered into its first full month, Spear Street Capital sees its R&D office redevelopment of the former Sears Outlet building at 27 51st Street on the riverfront in Lawrenceville as already a good match for pandemic-related office needs.

Laura Dunn, who is leading the project for Spear Street, which has offices in New York and San Francisco and owns major properties throughout the country, cited some basic advantages.

“The project is actually a great prototype for what we think people are going to be interested in coming out this,” said Dunn, of a proposal to convert an aging redbrick warehouse into about 250,000 square feet of tech-inspired office space with an interior courtyard. “It’s single story, so no elevators. It’s designed for up to six tenants, and all of them will have controlled access into their space.”

Offering touch-free entry in a project without a common entry and therefore no choke points that force employees to be crowded together, Dunn reports that Spear Street set to ramp up marking the project in the coming weeks with CBRE’s Jeremy Kronman and Andrew Miller representing it for lease.

Delayed by a couple months now by the pandemic, she hopes to present the project before the Pittsburgh Planning Commission this summer and be under construction in the Fall with the goal of completed the plan next year.

Dunn added Spear Street remains fully confident in a strategy to provide upgraded space to Pittsburgh’s growing tech and robotics industries with the project, whatever the pause may be right now from companies that have put off any thoughts of making office moves.

“We’re really trying to move this forward any way we can,” she said.