Dwindling demand for office space has forced a developer to rethink a major expansion of its sprawling Bakery Square development in Pittsburgh’s East End and focus on retail and housing instead of office space.
Pittsburgh-based developer Walnut Capital for years has been eyeing a 14-acre, $500 million extension of its flagship development.
City Council last year signed off on a plan that would allow the 20-acre Bakery Square development to stretch onto properties Walnut Capital owns in Larimer and East Liberty, adjacent to the existing footprint.
But those plans are now being revised, said Jonathan Kamin, an attorney for Walnut Capital. The changes could include drastically scaling back proposals for 1.5 million square feet of new office space and pivoting to focus more on retail and residential development.
Kamin on Tuesday convinced the city’s planning commission to allow the developer to move ahead with a phase-by-phase approach to branching out Bakery Square without first completing an extensive traffic study.
Bakery Square is a specially planned district, meaning the site has its own rules for land use that the planning commission and council have approved.
Specially planned districts must get approval of a master plan — complete with a study of traffic impacts — before building.
Kamin said it would be a “ridiculous waste of time” to complete a traffic study for a plan that is in limbo. He advocated for a phase-by-phase approach that would offer the developer more flexibility to adapt as plans change.
Walnut Capital in 2009 opened the first phase of Bakery Square. Situated on the site of a former Nabisco plant in Larimer and Shadyside, the 20-acre development includes a Google office, restaurants, shops and other amenities.
The original plan for the expansion, Kamin said, was predicated on a “strong belief” that there would be demand for office space. But since the covid-19 pandemic popularized remote work, many businesses have emptied or scaled back their offices.
“As we worked through the process, our office prospects became more bleak,” Kamin told commissioners.
Potential anchor tenants — which Kamin did not name — told the developer they were no longer interested in offices. Kamin said that forced Walnut Capital to explore “what, in fact, was feasible,” like retail and housing.
With changes to the overall development plan in the pipeline, Kamin said, the requirement for a sitewide traffic study became a “brick wall.”
“This is not about skirting any of those obligations,” Kamin said. “What we’re really asking to do is proceed on a phase-by-phase basis once we know what we are in fact doing.”
The next phase — which Walnut Capital can now seek approvals for, despite not having a sitewide traffic study — will redevelop a property next to Trader Joe’s, which will remain, Kamin said.
This portion of the project is expected to include a mixed-use residential and office development with Partner4Work — a local workforce development organization — as the primary tenant.
Commissioners unanimously agreed to allow the developer to move ahead in a phased approach, with the condition that the developer meet with city officials to determine when traffic studies may be needed.
“We understand that certain market conditions require some flexibility here,” Vice Chair Rachel O’Neill said.
Pittsburgh officials are looking to tweak the requirements around traffic studies more broadly, said Angie Martinez, assistant director of the Department of Mobility and Infrastructure.
Currently, traffic studies are required for large developments that — like Bakery Square — require a specially planned district. They’re also required for institutional master plans, which, for example, govern development at the city’s universities.
“In its application, it’s definitely been imperfect,” Martinez said of the existing traffic study requirements.
Changes to those rules are in the works as Mayor Corey O’Connor is looking to slash red tape for developments and foster growth in the city.
On his first full day in office last week, O’Connor signed an executive order requiring various departments to find ways within the next 60 days to speed up the permitting process.
Martinez said more flexible traffic study rules could coincide with that effort.
Walnut Capital already has committed to a community benefits deal as part of its expansion. It pledged to help fund a $25 million effort to build or rehabilitate 100 for-sale affordable homes in the city’s East End, with a focus on Larimer.