The industrial real estate market has entered a new phase. After a historic wave of warehouse development fueled by the pandemic, developers, brokers, and investors are now navigating a market defined by higher interest rates, evolving supply chains, power constraints, and renewed interest in domestic manufacturing. Breaking Ground sat down with Lou Oliva, Executive Managing Director at Newmark, to discuss the forces shaping Pittsburgh's industrial market. Drawing on nearly four decades of experience, Oliva shared his perspective on logistics, site selection, infrastructure, manufacturing, and the challenges that will define the region's next generation of industrial development.
Editor's Note: This interview has been edited for length, clarity, and readability. Responses have been lightly condensed while preserving the speaker's intent and meaning.
Thanks for sitting down with us, Lou. Give our readers a real quick intro: How long have you been doing this and how’d you end up in the industrial world?
I started in 1986, when I joined Oliver Realty after graduating from Carnegie Mellon. At the time, they handled the leasing and property management for Oliver Tyrone Corporation, one of Pittsburgh's longtime developers whose roots traced back to steel industrialist Henry W. Oliver.
Shortly after I came aboard, Oliver Realty was acquired by Grubb & Ellis, one of the first commercial real estate firms to build a national platform by acquiring established regional companies. Grubb & Ellis eventually became part of what is now my current firm, Newmark.
When I started, most brokers were focused on office leasing and property management, but I looked around and saw an opportunity in industrial real estate. It wasn't a glamorous side of the business, but many of the brokers specializing in it were nearing retirement.
Even though Pittsburgh was still working through the collapse of the steel industry, I believed there was an opportunity in the sector. Forty years later, that decision has given me the opportunity to work on some incredible projects and watch the market evolve into one of the region's most important sectors.
It’s certainly been an interesting period for the industrial sector. How has it evolved in the years since COVID?
Obviously, the coronavirus was the greatest impetus for warehouse development in a generation. Interest rates dropped and major users like Amazon were expanding aggressively, so development exploded. There was also a huge appetite for investment as cap rates hit record lows while valuations reached historic highs.
The markets are still very healthy, but things have since normalized. Development has slowed in response to the cooling demand and also because construction costs and interest rates remain high. As a result, the lease rates needed to make new construction work are becoming increasingly difficult to justify.
Another potentially interesting byproduct of the pandemic that I’m watching out for is what happens as the pandemic leases roll over and the COVID-builds need to be refinanced. We saw something similar happen in the office sector: buildings were financed in a low-interest-rate environment, then demand softened and lenders couldn't support the same valuations.
And how would you describe the health of the Pittsburgh market?
Things have normalized here, too. Vacancies have ticked up a little but there's a series of buildings that hit the market at roughly the same time, so that’s not too worrisome. The airport market, which has been our hottest area, has softened a little. There’s also a handful of buildings that have been vacant two or three years in other submarkets that make you wonder why they haven’t leased.
But at the same time, we see buildings lease that we thought were, I don't want to say functionally obsolete, but challenging, to say the least. And there's certainly demand for more industrial space. Amazon now has seven or eight facilities here, including two that are more than a million square feet. We've also heard from other large users looking at major sites.
We’re still healthy. I've always said that Pittsburgh is the tortoise, and the big markets like Columbus and Lehigh Valley are the hares. We’re slow but steady and have been that way for a long time.
Where does Pittsburgh fit in with the national logistics market. Are we primarily a pass-through distribution node, or is it more of a last-mile market serving the local region?
Our market is unique. Pittsburgh's geography made it an industrial powerhouse during the era of rivers and railroads, but modern distribution networks are built around interstate highways, truck drive times, and proximity to population centers. Much of the nation's warehouse development is in locations where a single distribution center can reach the most customers in a day's drive. These are places like Columbus, Dallas, Lehigh Valley, et cetera.
We’re what I call a “tweener”, meaning that we’re between Columbus and Lehigh Valley. They can both cover us and can also go in the other direction and hit tens of millions more people.
Consequentially, there’s not going to be many mega-centers built here. But companies have a few different models for large-scale distribution depending on their needs and resources. Some might have five mega centers across the country; others want a more regional footprint. We tend to attract the latter, companies that operate regional networks with 15 to 20 distribution centers.
Our terrain and history create unique challenges, too. Our geography is a bit constricting and finding suitable sites isn't as straightforward as it is in competing markets. Also, our industrial market isn't concentrated in one large region like in many other cities. Instead, it's made up of dozens of smaller industrial pockets spread throughout the area.
Take the Route 28 corridor. Historically it was riverfront industry, and now much of that has disappeared. But there are very few sites where you could build a modern 100,000 square- foot or 200,000-square-foot multi-tenant industrial building along that corridor. The same is true south of the city along the Route 51 corridor.
That’s tied into our manufacturing past, but the larger issue is that Allegheny County has 130 municipalities, each with their own zoning. That can also make the market harder for outside developers and investors to understand, because they expect to find one large industrial corridor, when in reality our market is much more fragmented.
You mentioned being an industrial powerhouse. U.S. Steel seems to be making some big moves, have you seen any other signs of a local push toward more domestic manufacturing?
There are definitely signs of it. The new federal policies are encouraging companies to bring manufacturing back to the U.S., and we're starting to see that reflected in our market. The Nippon Steel situation will take time, but I think it will ultimately be a positive for the region.
What's particularly interesting to me is how much of that investment is tied to energy. Mitsubishi Electric Power Products is expanding transformer manufacturing. ATI continues investing in Brackenridge. GE Verona acquired a large facility along I-70 for future expansion. Lighthouse Electric is growing in Washington; EOS Energy is growing in Cranberry.
These aren't isolated projects—they're all connected to the nation's growing demand for electrical infrastructure and power generation. I think that's the next wave of manufacturing that could shape Pittsburgh's industrial market.
The challenge isn't demand; it's capacity. We're site constrained. Most of the industrial sites we have today can accommodate buildings in the 200,000- to 300,000-square-foot range. We're probably not a million-square-foot market, but if someone came to us tomorrow looking for a site to build a facility that size, we simply wouldn't have one to offer.
Can that change, or is that just the reality of this region because of the topography?
Topography is certainly part of it, but it's not the whole story. There's very little private industrial land development happening in Allegheny County. Other than my client, Imperial Land Corporation, there haven't been many active private developers creating new industrial sites.
Most of the heavy lifting has been done by a few industrial development organizations. Westmoreland County IDC, for example, has developed nearly 20 business parks and has done an outstanding job accommodating both local companies and national users. Butler County has had success as well through its development corporation, with projects like Victory Road Business Park.
Within Allegheny County, though, it's a different story. Outside of airport properties and a handful of isolated sites, I don't know where the next 1,000-acre industrial site is going to come from.
What makes the airport area so appealing to logistics firms?
The reason the airport area has been so desirable is that we created a supply of development-ready sites over the course of decades. We solved an infrastructure problem.
People your age or my son's age have no idea that in the 1990’s if you were heading south on I-79, you couldn't go west of the airport. If you were coming in from the airport, you couldn't go north on I-79.
The airport has really been the focus of my career. When we started Pittsburgh's NAIOP chapter, six of us were looking around after the collapse of the steel industry asking what the next engine of growth would be. We quickly realized Pittsburgh was the only airport without a full interstate connection.
We spent years pushing for improvements to I-376, building coalitions, applying political pressure. We worked with local governments, the school district, and the Turnpike Commission to finance water and sewer improvements through tax increment financing, which solved utility challenges making development possible.
So much had to happen behind the scenes, and places like Findlay Township are great. They were so welcoming for development. It’s a two-meeting process and you’re up and running in 60 days. In a lot of areas, that isn’t the case, which is why there are certain regions that haven't developed because they haven't solved that infrastructure problem.
Will the recent airport expansion have an impact on the industrial market?
I think the airport's done a great job. It's fantastic and important for corporate office users to enable growth. The other day I heard an interesting stat: we now have more origination and destination travelers in Pittsburgh now than we did when it was a US Air hub. That’s truly remarkable.
How can we get industrial development to take advantage of that? The more industrial application would be from air cargo opportunities. We’re still not a huge air cargo player but when you hear about New York or New Jersey being at capacity, we’re an inexpensive alternative. That could be a potential growth opportunity.
And has the Southern Beltway been an economic generator for the industrial sector?
Much of the land along the corridor was acquired years ago with the expectation that it would eventually connect to I-79 and I-376. Now that the extension from Route 22 to I-79 has been open for a couple of years, those plans are beginning to materialize. The Fort Cherry development is one example. Its first phase is underway, Old Dominion Freight Line has committed to a major truck terminal, and other industrial users — including data center developers — have explored the site.
That said, the Southern Beltway is unlikely to become an endless corridor of warehouses. There simply isn't that much land along I-576 that's zoned for industrial development. I think we'll have a couple million square feet at some point in time, but I think my son will probably be taking care of that over the next decade.
If you could solve one problem that would immediately improve the region's industrial competitiveness, what would it be?
It's a tie between electric and permitting.
And the permitting…is that the fragmentation we were talking about earlier, where Findlay Township has one set of development rules and Scott Township has another?
Correct.
Is that just a PA thing?
I think it's very much a Pennsylvania issue. Markets like Phoenix and Columbus are much more organized around regional growth. In many cases, development and zoning decisions are made at a county level rather than by dozens or even hundreds of individual municipalities.
Western Pennsylvania is far more fragmented. Allegheny County alone has 130 municipalities, each with its own zoning and development process, making it much more difficult to coordinate large-scale projects. I've always said that if we simply consolidated those municipalities along the lines of our 42 school districts, we'd probably be better off from an economic development standpoint.
Is that possible or is that just what it is.
It hasn't happened in my career. I hope it might happen during my son’s career.
What about the power situation? Is that fixable?
Unfortunately, I've had to become much more conversant on power because it's the first time in my career that it's become a limiting factor.
What I've learned is that once Duquesne Light got out of the generation business and became strictly a distribution utility, the economics changed. I don't pretend to understand every PUC regulation involved, but the bottom line is that power has become a real issue.
Take Findlay Township. It's been one of the most successful industrial development corridors in Western Pennsylvania over the past 15 years, yet we're effectively out of electrical capacity. We found that out the hard way. We had a project that was ready to close. Early on, we were told power wouldn't be an issue. Six months later, the answer changed. Suddenly, the capacity wasn't there. To me, that's backwards. When a region consistently attracts industrial development, utilities should be planning for that growth instead of reacting after projects are already underway.
You can see the same issue playing out across the region in different ways. Homer City has tremendous transmission infrastructure and electrical capacity, which is why I've always thought it was a natural candidate for a hyperscale data center. Then you have places like Beaver County and Springdale, where developers are increasingly being told they'll need to provide their own on-site power generation for data center projects.
But that's only part of the equation. These companies don't just want on-site generation—they also want a strong utility connection. They want the reliability and redundancy that comes from having both. Building your own power plant may work for a hyperscale data center, but it still doesn't solve the problem for a typical 100,000-square-foot warehouse or manufacturing facility. That’s not a realistic option for them.
That's where I think there needs to be some common sense. I'm hopeful these issues get resolved because they're becoming a real obstacle. Whether it's Westport and Findlay or some of the outlying counties served by FirstEnergy, I'm hearing the same thing: projects are taking longer because nobody has a clear picture of what electrical capacity is actually available.
What we need is better communication on the front end. What's available today? Where are the shortfalls? What upgrades are already planned? Developers need those answers before they're investing millions of dollars into a project. The challenge is that no individual landowner can afford to build a new 20- or 40-megawatt circuit on speculation. They're preparing sites and waiting for end users. Once those users commit, the infrastructure can move forward. But somebody has to identify what's needed before we get to that point. That's the piece we're missing today.
Have power issues hampered development across the country?
Oh, absolutely. To me, that's the biggest issue facing the industry moving forward. How do markets like Columbus, Pittsburgh and others meet the growing demand for power—not just for data centers, but for industrial development as a whole?
My biggest concern in Pittsburgh is that we're already seeing challenges getting electrical service for your bread-and-butter industrial projects. Data centers consume such an enormous amount of electricity that they've changed the conversation. Everyone is asking where that power is going to come from, what it's going to cost and whether it'll even be available.
That's putting pressure on utilities and on local developers who are simply trying to secure enough power for a typical 200,000-square-foot warehouse. In some cases, that capacity just isn't there. It's frustrating, and it's hampering growth—not just for data centers, but for industrial development across the board.
And finally, what would our GCs would find most pertinent about the industrial market now?
What I don't understand is how the pricing for smaller office buildouts and warehouse or manufacturing facilities has escalated to the point where it's impacting deals.
Take a 100,000-square-foot warehouse. It might only have a 5,000-square-foot office component. That's not a huge contract, but the pricing on that work has gone up so much that, in my mind, there's an opportunity for somebody to capture that market. Maybe contractors don't see it that way because they're smaller jobs and they'd rather stay focused on larger projects, but I think there's an opening there.
The same goes for smaller industrial buildings. If somebody can figure out how to build a 20,000- to 30,000-square-foot building economically—one that fits within what those businesses can realistically afford to finance or lease—I think there's a huge opportunity.
Right now, new construction costs for buildings that size have gone up exponentially, and it's created a gap in the market. Instead of building new, we're seeing people buy older buildings and renovate them because it still costs less than starting from scratch.
Developers generally aren't building anything under 100,000 square feet anymore because the economics don't make sense. But when you look at many of the sites that remain in outlying markets, they're only two to five acres. Those sites were never intended for massive distribution centers—they're ideal for the bread-and-butter industrial users. In my mind, that's a market somebody is going to figure out how to serve, and there's a real opportunity for contractors who get there first.
