Has Pittsburgh’s focus on ‘whiz-bang tech startups’ left manufacturing companies out of the big picture? | News | Pittsburgh | Pittsburgh City Paper

Has Pittsburgh’s focus on ‘whiz-bang tech startups’ left manufacturing companies out of the big picture?

“The options get very narrow.”

From left, Allegheny County Executive Rich Fitzgerald, Gov. Tom Wolf, state Sen. Jay Costa and state Rep. Dan Frankel at Wigle Whiskey in March
From left, Allegheny County Executive Rich Fitzgerald, Gov. Tom Wolf, state Sen. Jay Costa and state Rep. Dan Frankel at Wigle Whiskey in March

Wigle Whiskey was buzzing on a Thursday morning in March, and not with the normal happy-hour crowd of patrons looking to sample some award-winning craft liquor. The Strip District distillery was filled with eight Democratic politicians and their respective entourages. Pittsburgh Mayor Bill Peduto, Allegheny County Chief Executive Rich Fitzgerald, state senators Jay Costa and Wayne Fontana and others were all singing the praises of Wigle for raising its minimum wage to $10.10 an hour. Gov. Tom Wolf even showed up to hold a press conference. 

“This is a really big deal. … We are trying to send a message that in Pennsylvania, we need to do this,” said Wolf at the press conference, referencing the push to raise the state minimum wage. “It makes good business sense. All Pennsylvanians need this, and examples like Wigle show [this is important].” 

Pittsburgh City Councilor Corey O’Connor said Wigle was the first company to take advantage of his minimum-wage initiative, which provides free advertising at bus shelters for companies that increase their minimum wage to $10.10 an hour. “The city wins, the business wins, and most importantly, the workers win,” said O’Connor.

But while politicians are eager to politicize the good labor initiatives of small businesses like Wigle, when it comes to helping them and others expand or move into the city, some are feeling left behind. 

“Since there is no commitment to manufacturing and certainly no commitment to a sector like food manufacturing in the city, the options get very narrow,” says Joe Bute, of Hollymead Capital, a company that invests in creating locally sourced food companies.

Wigle has felt this pressure, too. The distillery is expanding to a larger facility in North Side’s Spring Garden neighborhood. And co-owner Meredith Grelli says that while Wigle has gotten some support from city officials, it was a struggle to find a site to expand. 

Grelli says Wigle tried many tactics to locate a larger site, including reaching out to community-development corporations, contacting city officials, searching online and meeting with brokers.

“We went to a broker once and told them what we were looking for,” says Grelli. “And they said, ‘Good luck, let us know if you find it.’”

After more than a year of searching, Grelli says Wigle finally found a place up the street from its barrel house on Spring Garden Avenue, at the site of an old tannery.

Wigle’s difficulty in finding a large facility is not unique. Hitchhiker Brewing needed a year to find a suitable building in the South Side, and founder Gary Olden expressed relief when his plan was OK’d by the Urban Redevelopment Authority of Pittsburgh in January. Hollymead’s Bute says he has been looking for a space for a food-manufacturing incubator for about a year but has not come close to finding what he is looking for.

He wrote in an email to City Paper that there is a weak commitment to manufacturing, especially food manufacturing, in the city. He cites the housing boom and loss of manufacturing spaces in Lawrenceville as a prime example. 

“The city does not seem to have a proactive policy of any sort to protect areas of the city for light manufacturing,” wrote Bute. “This will push more of that use out of the city.”

In fact, two large food manufacturers looking to expand recently moved outside Pittsburgh city limits. Paragon Foods moved from Lawrenceville to a new $15 million, 88,000-square-foot facility in Warrendale that could accommodate up to 190 jobs. Alber & Leff Foods, makers of B&L Sour Cream, is moving from Chateau in the North Side to Bridgeville, in the South Hills. According to the Pittsburgh Business Times, the food distributor had been searching for a new site for more than five years.

Alber & Leff’s owner told the Business Times that “it’s tough to leave the city, but we had nowhere to build there.” The company had been located in Chateau for more than 30 years.

Bute has toured old manufacturing sites in the North Side (including Alber & Leff’s old site), but says that many of them need extensive work to become functional again. He says many city buildings that were once home to manufacturing are being converted to other uses.

Rick Schweikert, a real-estate broker at Keller Williams, says the market is “very tight” for commercial real estate and that a lot of manufacturing buildings are being converted to residential spaces and offices.

Schweikert says this competition is only exaggerated because “manufacturers want to be in places where their workers and management want to live.” 

This comes at a time when the region is experiencing a boom in manufacturing investments. Last year, 63 manufacturing expansions were announced, more than in any other sector of the economy. However, it appears that many of them were outside of city limits. According to 2014 stats (the most recent CP could find) from the business coalition Pittsburgh  Regional Alliance, out of 40 manufacturing-related expansions that year, only six were located in Pittsburgh, and one of those was by soon-to-be-relocated Paragon Foods.

Despite the obstacles and trends, Bute is optimistic that his food-incubator will take off soon, considering the growing desire for locally sourced food and attention to social-justice issues. Bute says light manufacturing can provide good jobs and address income inequality. However, he feels the city’s economic priorities are misguided.

“We will hopefully have good news on this front soon ... [but] Pittsburgh is way in the dark ages and full of itself with whiz-bang tech startups that don’t add jobs or create long-term value,” says Bute. “Clearly there is little effort to define the local food system as an economic unit like we do technology.”

In summer 2014, Pittsburgh Magazine demanded that Pittsburgh “needs to be more braggy” in terms of its emerging tech market. Less than two years later, it is hard to imagine that sentiment ever needed to be uttered. 

National publications have featured Pittsburgh as one of the next tech-boom cities, and companies like Apple, Facebook and Google get press coverage when they announce just about anything here. Uber, the ride-hailing giant, received a headline recently in the Pittsburgh Post-Gazette just for considering moving onto the Almono site in Hazelwood. 

When Uber was looking to expand in December, it reached out to the Regional Industrial Development Corporation for help, according to Uber’s Dan Beaven. Within two months, Uber announced plans to become the first tenant at the Almono site, which is owned by the RIDC. “I can’t tell you how great our relationship with … the mayor is,” said Beaven at the February announcement.

Jeh Kazimi of Breezie, a company that makes senior-friendly tablet software, also highlighted the close relationship of tech companies and municipal head honchos during Innovation Week, a city-sponsored event in April to highlight the work of tech companies in the region in April.

Kazimi says he heard about the tech growth in Pittsburgh from a private-equity partner who was a Pittsburgh native. Kazimi started visiting in March 2015. During one visit he met with representatives from the Urban Redevelopment Authority, and briefly ran into Mayor Bill Peduto. When he flew back to his home, in London, a couple days later, there was already a letter from Peduto waiting for him. “Who does that?!” Kazimi told City Paper at the Innovation Week event in the Strip District. Breezie moved to Oakland in August 2015 and will eventually employ 14 to 20 people, according to Kazimi.

URA spokesperson Gigi Saladna says manufacturing expansion can be more complex and expensive than expansion of tech companies, but doesn’t agree with some criticisms of the URA’s involvement.

“The URA and city reject the claim that we do not prioritize manufacturing companies in our economic development strategy,” Saldana says. She cites the recent successful expansions of Penn Brewery, J Harris & Sons, Chris’ Candies, the Proud Company, Thread and many others.

Saladna also cites the recent announcement of the URA’s sale of the former Detective’s Building in East Liberty to Schoolhouse Electric, a Portland, Ore.-based light-fixture company. Schoolhouse plans to use the building as its mid-Atlantic headquarters, and Saladna says that the company “noted Pittsburgh’s access to robust manufacturing supply chains and skilled workforce as critical to their attraction to Pittsburgh for expansion.” However, the role the URA played in bringing Schoolhouse to Pittsburgh was limited. At a recent URA meeting, the company’s founder, Brian Faherty, told CP that he discovered the Detective Building on his own while visiting the Ace Hotel, one of his clients.   

But not all tech companies looking to move into the city get extra attention from city officials. Avishai Geller of Maven Machines, which creates smart Bluetooth earbuds, said he found space for his company on his own by applying to AlphaLab, a tech incubator in East Liberty.

Pittsburgh has at least seven incubators that can provide spaces for tech companies to start and grow. (One of the city’s few quasi food-incubators, the Pittsburgh Public Market, closed in February and whether it will relocate remains unclear.)

Kenny Chen, a board member at philanthropy firm Social Venture Partners, says many tech companies get their start at incubator spaces. He adds that burgeoning tech companies can find temporary space at incubators in as little as one day, and that successful companies bred in incubators take two or three months to find permanent locations.

“As a whole, Pittsburgh is driving itself for companies to grow,” says Chen of the tech industry. “We are absolutely on an upswing.” 

And while the upswing is good for improving Pittsburgh’s reputation as a tech hub, the growth of tech companies doesn’t always contribute to a rising tide for the local economy. Some of the tech companies garnering the most attention don’t create that many jobs. For example, Facebook acquired virtual-reality company Oculus (which announced plans to move to Oakland this year) for $2 billion. At the time, Oculus had only 75 employees. 

A 2015 study from the University of Oxford highlights some of the problems of over-prioritizing tech: “Because digital businesses require only limited capital investment, employment opportunities created by technological change may continue to stagnate as the U.S. economy is becoming increasingly digitized.”

The study’s author, Carl Benedikt Frey, said in an interview with Forbes magazine last year that tech growth can have harsh implications for regional inequality. He cites the catch-22 that the San Francisco Bay Area is currently experiencing. “[Tech growth] drives up housing prices and makes it more and more difficult for workers to move to San Francisco, where the jobs are emerging,” said Frey.

Grelli, of Wigle, is concerned about this issue as well. Wigle currently employs nearly 60 part- and full-time workers, and will grow that when its new facility is completed. Grelli says it makes sense for manufacturers to be located in the city because workers can commute via public transportation and companies can develop positive relationships with the community. Because of these positive effects, Grelli would like to see the city set aside more spaces for light manufacturers. She cites the Strip District as an example of how manufacturing districts are changing.

Since moving to the Strip in 2010, Grelli has seen a “huge transformation” of the neighborhood, including the development of luxury housing, boutique restaurants and hotels. 

“If we were looking for a space here now, this [distillery] couldn’t happen,” she says. Last June, Apple signed a lease at a newly constructed building next door to Wigle. The tech giant should be moving in soon.

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