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BREAKING THROUGH

Developers overcome topographic barriers to bring retail to Pittsburghers

By Debra Hazel

In Pittsburgh breaking ground on new developments could mean literally moving mountains. Just ask The Mills Corp. and its partners, Zamias Services and Kan Am. They had to move 8 million cubic yards of dirt to level a 200-acre site north of the city for their $280 million Galleria at Pittsburgh Mills, which opened in July.

Little wonder, then, that the city is under-retailed, hemmed in as it is by topographic boundaries. (These consist of the Allegheny and Monongahela rivers, which merge to form the Ohio River, and the Allegheny Mountains.) Making things more complicated, shoppers in Pittsburgh tend not to cross these boundaries, which results in a heavily segmented market, observers say. This is why few developers have braved the physical challenges of building there.

And yet Pittsburgh’s 2.3 million residents have too much income to ignore. The city’s annual spending potential is about $55 billion, says Mills. “There’s a lot of opportunity,” said Larry Costello, vice president and development director at Mills. And that is because the city’s economy, once dominated by steel, has diversified to include biotechnology and banking and has become more stable, observers say. Seven Fortune 500 companies are based there, including Alcoa, H.J. Heinz and U.S. Steel.

As the market has grown, the northeast section and the Interstate 79 corridor west of the city have become hotbeds of development, local figures say.

Pittsburgh Mills, located 22 miles northeast of downtown, is an attempt to capture the locals currently traveling long distances to shop at traditional malls, Costello says. It is also quite a departure from the typical Mills value megamall project. The complex is divided into two components: the 1.1 million-square-foot Galleria at Pittsburgh Mills and the 900,000-square-foot Village at Pittsburgh Mills. The Galleria is an enclosed mall anchored by Kaufmann’s and JCPenney. It is the first Mills project to have traditional department store anchors as well as outlet and off-price stores, says Costello.

Representing the off-price component will be Borders Books, Dick’s Sporting Goods, Linens ’n Things and Sears Grand (the first in Pittsburgh, it opens this fall). A Cinemark theater, Lucky Strike bowling lane and a NASCAR Speedpark will anchor a sports and entertainment wing.

The nearby Village at Pittsburgh Mills will house big-box value and full-price tenants, including a Lowe’s, a Sam’s Club and a Wal-Mart Supercenter. The project will open in phases, with Lowe’s on tap to open this year, Wal-Mart and Sam’s Club next year. There will be two hotels on the site too. Mills says it expects to have the project fully built by next fall.

Two miles from Pittsburgh Mills, the $200 million Deer Creek Crossing will finally have its ground-breaking this month after several years of lawsuits and delays related to environmental concerns. The 1 million-square-foot power center is slated to open in the fall of 2007. A lifestyle component will be built after the first phase is completed. The center’s anchors will include a Giant Eagle, a Home Depot, a Target and two soft-goods anchors yet to be announced. Two 120-room hotels are in the plans, as well as a 150,000-square-foot office building.

Is all this too much for the trade area? Insiders say no. Some 534,000 people live within a 10-mile radius of Deer Creek Crossing, according to its developer, Woodmont Corp. Pittsburgh Mills has 233,775 within a 10-mile radius.

Although the bulk of new retail projects are opening to the north, the western portion of the market is hardly being ignored. Howard Biel, a senior managing director at Charlotte, N.C.-based development firm Faison Enterprises, says he had been eyeing Pittsburgh for a while, in particular a 75-acre site at state Route 60 and Parkway West near Robinson Township. Biel plans to build Settlers Landing, a 500,000-square-foot lifestyle center. But topography has been a problem here, too.

“It was really a terrific piece of property, located between the Pittsburgh Airport and downtown,” Biel said. “But it needed to be strip-mined, graded and have an interchange put in.”

Still, the potential rewards make the effort worth the trouble, Biel says. “As a marketplace, Pittsburgh is coming into its own as a high-quality place to live, work, shop and play,” he said.

His co-developer is Pittsburgh-based Pinpoint Real Estate. Some Main Street retailers and department stores will join a multiplex, and a hotel is also under consideration. The developers plan to open in late 2007.

The I-79 corridor, farther west of the city, is also getting lifestyle centers. Continental Real Estate Cos. is planning The Streets of Cranberry, 100,000 square feet on 10 acres near an intersection with I-76 (the Pennsylvania Turnpike). Continental says it will break ground this fall on the $24 million center for an opening next year.

“The North Hills, which is where Cranberry is, is where there’s growth,” said Jonathan Kass, president of retail at Columbus, Ohio-based Continental. And it is also where there is money — the population within a five-mile radius reports average household income of nearly $96,000 a year.

Also along I-79, Pittsburgh-based Praxis Resources is planning Collier Crossing, a 1.1 million-square-foot open-air center southwest of the city. The first phase of the center will include 650,000 square feet of lifestyle retail. Praxis says it also plans to build Victory Centre, farther to the southwest, in Washington, Pa. That project will contain a 450,000-square-foot Tanger Outlet Center, a 200,000-square-foot Bass Pro Shops, and between 1.5 million square feet and 2 million square feet of retail and hotel space. The developer says it anticipates opening in either late 2007 or 2008.

Another urban rehab project is Continental Real Estate’s $200 million North Shore project, located on the site of the now demolished Three Rivers Stadium, at the confluence of the three rivers. The mixed-use development will include 70,000 square feet of retail space as well as offices and homes.

Eventually, the project will total 2 million square feet, including 200,000 square feet of retail. Ground was broken on the first office building in the fall of 2003, and the development could take as long as nine years for full build-out. “We’re ahead of that schedule now,” said Kass. Located across the Sixth Street Bridge from downtown Pittsburgh, the center will be even more accessible when an underwater rail tunnel is completed in 2009.

Despite all the recent activity, overbuilding is not yet a concern, the developers say. These are projects that will get local citizens to cross rivers and other boundaries to shop, something they have not been accustomed to doing. Finally, Pittsburgh is about to get the retail it warrants, developers say. “It’s a bit of a late bloomer,” said Biel. “But it’s coming on strong.”