The owner of the four-building Gateway Center complex has seen the success of live, work, play environments like Bakery Square in the East End. It is now thinking about bringing the same concept to its Downtown campus.
Hertz Investment Group is considering a plan to convert the 25-story Three Gateway Center building on Liberty Avenue into apartments in a bid to enliven and broaden the appeal of a campus built 70 years ago during Pittsburgh’s first renaissance.
“We’re looking at doing it. We’re super excited about the potential of it,” said Tim McCarthy, Hertz senior vice president.
The possible conversion had its genesis in a setback: The 2020 decision by Dollar Bank to move from its Three Gateway Center headquarters to 11 Stanwix Street a few blocks away.
That left the 400,000-square-foot Three Gateway Center with a quarter of its office space vacant.
Rather than simply trying to fill it with another tenant, California-based Hertz decided to consider other options, including what “live, work, and play” would look like at Gateway Center, Mr. McCarthy said.
Should it follow through with the plan, Hertz plans to invest more than $100 million to rehab the building for apartments. It is looking at more than 300 units in all, a mix of studios, one- and two-bedroom, and perhaps even two-floor townhouses.
“If we’re going to do it, we’re not going to do it cheaply. We’re going to go all the way. We’re going to do it the right way,” Mr. McCarthy said.
He added that the cruciform shape of the building, designed by Eggers & Higgins, the same architects who worked on the Thomas Jefferson Memorial, lends itself to a residential conversion.
Hertz has been meeting with potential partners in redeveloping the building and hopes to decide within three to four months whether to move ahead with the plan.
The potential $100 million project would be on top of other sizable investments Hertz has made to Gateway Center in recent years, including $5 million in tenant amenities.
In addition, it made a big splash in April when it signed the Dickie, McCamey & Chilcote PC law firm to take 79,719 square feet of space in Four Gateway Center. It represented one of the largest lease transactions in Downtown in five years.
Mr. McCarthy sees the residential component as complementing and adding to the office buildings within the complex. As part of the plan, the Three Gateway conversion would include first floor retail space that could be used for a restaurant.
“We think this type of conversion can really help with the amenity package and just the overall environment,” he said.
Jeremy Kronman, the CBRE vice chairman who leases Gateway Center, said Hertz will still oversee about 1.1 million square feet of office space even with the conversion.
In the past 30 months, Hertz has done 95 transactions involving long-term leases and extensions totaling about 700,000 square feet, he added. The signings, Mr. Kronman said, have given Hertz the ability to try new ideas.
“They’re completely stable now so they can afford to do this,” he said. “There are no problems here.”
Likewise, Mr. McCarthy stressed that Hertz, which purchased the four Gateway Center buildings for $55 million in 2004, is committed to the Downtown campus.
About a decade ago, Hertz put the complex up for sale but then had a change of heart and decided to retain it.
“We intend to own Gateway Center for an indefinite amount of time. We love the asset. We love Pittsburgh,” Mr. McCarthy said.
Gerard McLaughlin, executive managing director of the Newmark real estate firm, called the potential Three Gateway Center conversion “ a great idea.”
He said it would take a large office building off line, which would be good for the overall market. He also liked the location near Point State Park and the fact that the structure appeared to be suited for this type of rehab.
“The depth of the market for multifamily is probably my biggest question, especially with all the people who have announced that they are going to build or who are underway already building multifamily,” he said.
Indeed, the Pittsburgh Downtown Partnership has estimated that there are 822 units of housing in the pipeline in the Golden Triangle.
They include a plan to build a 300-unit apartment complex at the site of the Wood Street YWCA, one that would include a 20-story addition on top of the existing building.
Also in the works is the conversion of an old PPG warehouse on Fort Duquesne Boulevard into 142 apartments and the rehab of the former GNC headquarters on Wood Street into 254 apartments.
That’s all in addition to about 4,100 residential units that already exist in Downtown.
Jeremy Waldrup, PDP president and CEO, said the Downtown units are doing well, with a 94% occupancy at the end of the first quarter. That suggests there is a market for more, he added.
“I think there’s strength in the market. We’ve seen some really great conversions with full occupancy and waiting lists,” he said. “High quality product creates strong demand.”
He supported the proposed Gateway Center conversion.
“I love the location. I think it’s absolutely fantastic for residential. I think it makes a lot of sense for developers to be looking at this potential opportunity. I think it's the right move for Downtown,” he said.
Mark Belko: mbelko@post-gazette.com or 412-263-1262.
First Published: June 23, 2022, 10:00 a.m.
Updated: June 23, 2022, 10:36 a.m.
