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New effort begins to sell idea of making downtown home

| Tuesday, Sept. 10, 2002

The Penn Garrison apartments opened early in 2001 carrying a heavy load of expectations. It was billed as the first breakout project in a renaissance for residential development Downtown.

Today, with the building struggling to fill its apartments and attempts to introduce more housing into the Cultural District slow to materialize, new efforts are under way to promote the concept of downtown living to the artists, young professionals and empty-nested baby boomers that experts say are increasingly desiring to live where a car is a secondary thought, a lawn mower is unnecessary and a variety of entertainment, shopping, recreational pursuits and work are within a stroll of the front door.

Building on the success of a few smaller projects in the Cultural District, such as the 22-unit 900 Penn Building, and the smaller Bruno Building on Liberty Avenue, local foundations and the Regional Industrial Development Corp. of Southwestern Pennsylvania cobbled together a financing package to renovate two loft buildings of eight and 10 stories into 117 apartments in the 900 block of Penn Avenue. The project was named Penn Garrison.

From the start, a stumbling block was the building's ground-floor tenant, the Social Security Administration, which was not considered the best tenant for a newly converted residential and commercial corridor.

John McIlwain, a resident fellow with the Urban Land Institute in Washington, D.C., said Social Security's presence is "a serious drain on the marketability of the building."

Now, however, a compromise has been struck with Social Security agreeing to relocate a portion of its offices into the building's mezzanine, freeing up about 6,000 square feet of ground-level space for a potential retail tenant. Bill Widdoes, project manager for Penn Garrison at the RIDC, said he hopes to have the space empty by year's end to show to prospective tenants.

"We would preferably have some type of food use — perhaps a corner market," he said.

As a demonstration project, Penn Garrison wasn't expected to reach full rental capacity for more than two years, said Robert Stephenson, president of the Strategic Investment Fund, a nonprofit economic development fund supported by local foundations, individuals and corporations, which invested in both the Penn Garrison and 900 Penn projects.

Promoters of living Downtown say valuable lessons have been learned in Penn Garrison's first year that can be applied to future efforts.

One is that a range of pricing options must be made available to attract a range of potential tenants. That lesson learned, Penn Garrison recently lowered rents on some of the smaller apartments on the lower floors.

"The units we repriced are targeted toward a segment of the market they were not originally available for," Widdoes said.

The new price and amenity range, Widdoes said, will allow it to provide alternatives for everybody from a 22-year-old graduate student interested in a 600-square-foot studio for $700 per month, down from about $900 per month, to a millionaire in the 2,000-square-foot penthouse at $2,300 per month.

Another thing learned, Stephenson said, is there appears to be low demand for studio apartments. He said that while one- and two-bedroom apartments are more expensive, many residents prefer to have the extra bedroom and an extra bathroom while splitting the apartment, and the rent, with a roommate.

With this in mind, there is talk of reconfiguring some units to convert studio spaces into bedrooms in combined units.

Many residents also prefer to have an apartment already partially furnished.

Occupancy at Penn Garrison has recently nudged up, with 15 units rented in August, Widdoes said. The building now has about 40 of its apartments rented.

McIlwain said a project like the Penn Garrison, and the development of a new urban neighborhood, cannot be judged too quickly.

He said a successful Downtown housing community will begin a "positive feedback loop" only after reaching a critical mass of residents.

"You have a potential market, but left to its own devices, it's not going to start off. You have to change the cost structure to make is worth someone's while to take a bet that in three or four years this will be a great place to live."

Changing "cost structure" is another way of saying subsidizing construction. Because residential developments at current rents don't cover the higher cost of construction compared to office space, residential projects have a hard time getting off the ground.

Stephenson said that once demand for Downtown housing is more firmly established, rents will rise, luring more developers, who will not need tax incentives or foundation grants to consider new projects.

City Lifestyle Tour


The Downtown Neighborhood Association will host its City Lifestyle Tour from 10 a.m. to 2 p.m. Sept. 22. Tours start with registration at Bar Louie in Bessemer Court at Station Square. Cost is $30 per person and includes the tour, transportation and lunch at Bar Louie. To make reservations, call (412) 255-0121, or e-mail karlohrman@aol.com.

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