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Southpointe development acts as region's relief valve

| Saturday, Aug. 9, 2014, 9:00 p.m.

After years of trying to break into the development boom at Southpointe, Marc Kossman established a presence at the sprawling office park in Washington County.

Kossman Development, his family's 60-year-old real estate business in Pittsburgh that developed Parkway Center in Green Tree and Omega Corporate Center in Robinson, bought two Southpointe buildings in March.

“It's competitive, and we feel lucky to have been able to buy in,” Kossman, executive vice president, said of the Cecil complex. “We've been making inquiries for a number of years, and properties there don't come up very often. It's a very in-demand location.”

Kossman's move highlights Southpointe's impact on the regional market for commercial and office space. Since opening in 1993, Southpointe has attracted 300 companies, including headquarters of two on the Fortune 500 list of America's largest corporations. More than 70 buildings house an estimated 11,000 employees on more than 800 acres.

With an 18-hole championship golf course and clubhouse, Class A buildings, townhouses, condos and apartments — plus accessibility to two interstates and Pittsburgh International Airport — Southpointe grew from vacant state land that once housed a mental hospital and gardens that its patients tilled.

‘The No. 1 park'

Growth has accelerated since 2009 when Southpointe II, completed in 2004, drew companies for the Marcellus shale gas rush. Developers have invested $663 million into the two office parks, according to officials in Washington County, which purchased the land for about $800,000 in the late 1980s.

“Companies migrate to Southpointe because opportunity is here,” said Don Hodor, executive director of the Southpointe Marcellus Shale Chamber of Commerce. “The tax base is lower. There's free parking for employees, a golf course, and homes are less expensive because of lower taxes.”

Freedom from the hustle and expense of a big city typically makes a suburban location attractive. But at Southpointe, corporate rents are higher than in Pittsburgh, averaging $22.57 a square foot compared with $21.06 in Downtown, according to CBRE Pittsburgh, the region's largest commercial real estate broker.

“Southpointe is clearly the No. 1 park in the region because of its size and the quality of its buildings,” said Jeffrey Ackerman, managing director of CBRE Pittsburgh. “... We have a dozen companies looking for space there now.”

Southpointe's first company, in 1993, was Accutrex Inc., a manufacturer of steel parts. CEO Martin Beichner Jr. was looking for a place to consolidate plants in Ardon and Chartiers.

He said Southpointe gave the company an image: “When we bring customers into Southpointe, they can see we have a first-class location. It helps.”

Trickle-down growth

Despite traffic backups during rush-hour commutes, the economic benefits from the office parks are many. Southpointe is contributing to mushrooming property taxes as businesses and their employees move there. In Cecil, commercial and industrial property assessments grew 26 percent during the past 7 years to $4.65 million in 2014.

Bill McGowen, executive director of the Redevelopment Authority of Washington County, which administered the sale of Southpointe I land to developers, said the state-surplus land was not on property tax rolls. The county offered a tax abatement program that phased in taxes over five years.

The tax money enabled Canon-McMillan School District, which includes Cecil and two other municipalities, to consider new schools. The district has 5,200 students and “is growing, every year, by leaps and bounds,” said Joani Mansmann, director of business and finance.

“To have that growth is a blessing,” Mansmann said. “But I am cautious, because with growth, you also have more expenses down the road to accommodate it.”

Nearby are other developments — Tanger Outlets, the Meadows Racetrack & Casino, hotels, restaurants and retailers. A 200-unit Ryan Homes development is under construction in Peters.

“I don't think I could have predicted the growth,” said Jason Capps, owner and chef at Bella Sera, an Italian restaurant a few minutes east of Southpointe on Morganza Road. “My business has steadily increased, double-digits each year, as we attracted Southpointe clientele.”

Capps said Bella Sera's revenue will top $2 million this year. He faces competition from Peters restaurants, such as Franco's Trattoria, Anthony's Coal Fired Pizza, Juniper Grill and Atria's.

Region's relief valve

Early on, some worried that Southpointe would steal companies from downtown Pittsburgh. But the city “retained a remarkable amount of jobs,” said Chris Briem, an economist at the University of Pittsburgh's Center for Social and Urban Research.

“It's just under 300,000, remarkably the same as in 1960,” he said. “The general perception is the city has had dramatic population loss. But what Pittsburgh has retained is jobs — different jobs, of course.”

Jeff Burd, president of Tall Timber Group in Ross, sees Southpointe as “a relief valve for job growth that wasn't going to take place in Downtown.”

“In any community, city or small town, there is a constant ebb and flow of jobs,” Burd said. “Southpointe gave emerging businesses who didn't have a pressing need to be Downtown a place with high-quality space.”

Southpointe's low vacancy rate of 4.5 percent is topped only by 3.9 percent in the Oakland section of Pittsburgh, a hotbed of universities and technology startups, CBRE recently found. By comparison, Downtown's business district, with 12 times the leasable space but more than double the vacancies at 10.2 percent, remains the busiest market by virtue of its size, experts say. Downtown has five Fortune 500 company headquarters.

William Sember, director of operations at the Washington County Authority, said the last parcel of 10 acres at Southpointe II sold three weeks ago to Quattro Investments LP, led by Pittsburgh developer Jim Scalo of Burns & Scalo Real Estate Services.

“We intend to begin a new five-story office building later this year, valued at $30 million,” said Scalo, who hasn't signed tenants. “We have more demand than supply.”

John D. Oravecz is a Trib Total Media staff writer. Staff writer Sam Spatter contributed.

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