Editor’s note: yesterday, we published new data from U-Haul showing Pittsburgh had the highest percentage of inbound to outbound moves in 2012.
We reached out to newly minted Pittsburgh resident Dom Beveridge, a multifamily real estate and lodging/travel industry consultant, to explain the incredible influx to the Steel City.
Here is an edited version of the note he sent us:
I recently moved here from California for my wife’s work — she’s in the oil industry. That’s not unusual – if one half of a couple has a career in oil (where you have to move around in order to advance) then the other can’t have a location-bound job. Other oil companies are doing the same.
The energy boom here is real. But in my view the important thing to understand is that it’s in its very early stages. Production right now is tiny, given that the Appalachians sit the world’s second largest known gas reserve (after Iran/Qatar). I think it’s because natural gas prices are very low in the US – which (bizarrely) means that supply doesn’t grow as quickly as it would if gas were as expensive as crude oil, for example. But big oil companies have been buying up shale gas producers and are in it for the long run. Over time demand will grow (frankly it’s ridiculous that the US continues to mine and burn coal given the abundance of gas), which will push prices and production up. Which means that for the next generation or two wealth should accumulate rapidly in and around Pittsburgh.
There are a few other factors that – I think – set the city up nicely. There was never much of a housing bubble in Pittsburgh. House prices were relatively low both before and after the financial crash. So I don’t think the city suffered that characteristic of lots of people suddenly being under water on their houses. So local businesses probably came through the downturn relatively unscathed. Further, prior to the invention of horizontal drilling (the technology that made the shale gas boom possible when it was invented about a decade ago), Pittsburgh’s economy was already growing, having re-invented itself as a centre of higher education and medicine.
My wife (who actually grew up here) points to an event a few years ago. The US Steel Building (the tallest building between NY and Chicago) became the UPMC building. It felt like that change to the skyline signaled a change in the city’s economic fortunes. Pitt and CMU are excellent universities. UPMC is a world class medical organisation. CMU is a top engineering school, and produces an abundance of the skills needed in a knowledge-based economy. It’s what made Google set up shop here. Their presence – and presumably other, related companies – are changing the East End of the city (the area near the universities). Folks that knew that part of town 10 years ago say that the transformation has been remarkable. Neighborhoods like East Liberty, Lawrenceville etc, used to be rough and have little to offer culturally, etc. Now they’re hotbeds of good restaurants, entertainment and culture. Nobody could have said that a few years ago!
There are now more jobs of the type customarily found in SF and Silicon Valley in Pittsburgh. I think that’s mostly to do with Google – and again, that’s not a reflection of Google moving lots of people from SF to Pittsburgh, rather the competition for talent in the Bay Area is so fierce right now – especially for Facebook and Google – that it makes sense to set up operations close to major engineering schools (like CMU) in a few different US cities.
So I guess the summary is, I think the city has been doing well for some time, mostly because of favourable underlying economics and the long-term growth in the education and medical industries. But shale gas is changing the fortunes of the city and will continue to do so for a long time.