Thursday, November 1, 2018

How To Spot a Region’s Next Emerging Hot Spot

Before it became one of the hottest neighborhoods in Pittsburgh, Lawrenceville was once a blighted community – “a blue-collar neighborhood more down-and-out than up-and-coming,” according to Pittsburgh Magazine. As blighted, economically depressed communities tend to be, it was overtaken by all the usual markers: overgrown weeds, busted sidewalks, boarded up storefronts, vacant residential properties, poverty, and run-down housing stock. And stretching for blocks, there were abandoned, obsolete steel mills and factories, once hallmarks of the area’s industry and prosperity, turning to rust and decay – a painful reminder of better times.

Now, Lawrenceville is the epicenter of “Robotics Row,” a strip of robotics-focused businesses spanning a stretch of about two miles that is quickly becoming the area’s new economic pillar. Some of these companies, which need large amounts of space and light manufacturing capabilities, have repurposed and reclaimed the vacant industrial facilities of the past to create locations of their own. The demand for such tech-flex industrial space is now so strong that it far outstrips supply. Restaurants and other businesses and support services that want to be in these tech companies’ orbits have also contributed to the influx of jobs and people into the community. This repopulation has naturally been a boon to the housing market, creating demand for both new and rehabbed housing.

Neighborhoods like Lawrenceville and small secondary cities are often overlooked, especially in juxtaposition to nearby hot central city locations. So the story of how Lawrenceville accomplished this transformation is something others should consider – it offers guideposts to real estate investors looking for the next regional hot spot.
What Makes a Location Attractive?
How do we identify these diamonds in the rough? And what steps can be taken to help polish them?

It’s a mix of tangible and intangible assets that makes a location attractive. Tangible attributes might include community “anchors” such as a research university, teaching hospital or major tech or manufacturing company that attracts and trains talent, as well as a legacy workforce with a relevant skillset. There also needs to be some semblance of place – an older downtown or business district that’s walkable, with buildings with good bones and housing stock that can be rehabbed into cooler space.

In the case of Lawrenceville, its proximity to Carnegie Mellon University and other universities gave it a competitive edge. The creation of the Robotics Institute at Carnegie Mellon in the 1980s, and the institute’s subsequent success in creating and locating the National Robotics Engineering Consortium (NREC) in Lawrenceville, played a critical role in putting the community back on the radar. It also translated the academic genius of Carnegie Mellon faculty into commercial applications with corporate partners that eventually resulted in spin-off companies that made their homes in Lawrenceville.

Before the robotics industry gained traction, the presence of design-oriented firms – like antiques shops, studios and galleries – preserved the community’s older buildings and rekindled its spark of life.

RIDC Plays a Role
The Regional Industrial Development Corporation of Southwestern Pennsylvania (RIDC), a unique, private nonprofit with an entrepreneurial vision of economic development, saw that the beginnings of a vibrant industry and community transformation could become stunted by a lack of suitable commercial real estate. That presented an opportunity – to create homes for businesses of the future by redeveloping the obsolete industrial sites of the past, which in turn led to investments in facilities including the Heppenstall Steel Mill and Geoffrey Boehm Chocolates Factory.

Out of those investments has been RIDC’s Tech Forge building, which is now home to Caterpillar’s Pittsburgh Automation Center and Aurora Innovation; RIDC’s Chocolate Factory building – home to HEBI Robotics, RedZone Robotics, nanoGriptech, and Helomics; and the former Heppenstall building, a 30,000 square-foot heavy industrial high-bay facility built out for Carnegie Robotics, a spin-off from NREC.

And then the capstone of the Lawrenceville’s turnaround was the location of UPMC’s Children’s Hospital.

Intangible assets are also crucial and include the facilitation of a certain type of community vibe. While difficult to define – you know it when you see it – it captures the authenticity and sense of place that cannot be manufactured. Lawrenceville’s long history as a walkable industrial/residential neighborhood gave it a feel that can’t be faked. Even its new buildings are not glamour and glitz but rather reflect the industrial history and character of the place. As a case study, Lawrenceville provides an interesting answer to what has become a major debate in real estate today: do people follow jobs, as it has been presumed for decades, or do jobs follow people? Do you invest in hard assets – buildings, infrastructure and land use policies that facilitate development – or do you invest in community amenities – bike lanes, parks and recreation – that the workforce is looking for? The answer, of course, is both.

In the Southwestern PA region, communities like Millvale, Etna and Sharpsburg, small secondary cities located in Pittsburgh’s periphery, are ripe with potential and poised to experience the same kind of explosive growth as Lawrenceville. These communities are surrounded by industrial reuse candidates and already have some amenities brewing – such as brewpubs, bakeries and music venues. Some in-migration of young talent reinforcing the value proposition in place and supporting housing and commercial development. They are also less bogged down by bureaucratic development rules and not all their industrial space has been converted into residential space.

These areas also have a vision or plan for their future and embrace growth and (re) development. Rather than constructing roadblocks to development, they help to remove hurdles. This openness to change is perhaps the key defining feature we look for.

So take a look outside the hot central city locations to secondary neighborhoods or cities. Locations such as these can be well positioned to transform their largely intact commercial districts and amplify some of what’s already located in their communities to create more flexible, less expensive, amenities-rich, walkable neighborhoods in which to live, work and play. Poised for explosive growth, they have the potential to become the next Lawrenceville or even the next Denver, Charlotte or Nashville.
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