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PNC Financial Services Group Inc. is expected to announce plans Monday to build a 25-plus-story office/hotel/condominium complex adjacent to its pair of office towers.

It's one of three projects that promise to reignite attempts at fixing Pittsburgh's crumbling core and could spark a new Downtown renaissance, local experts say.

The Reed Smith law firm is expected to take about 200,000 square feet of the office space, with PNC reserving some of the remaining 150,000 square feet to accommodate its future needs.

The estimated $170 million project will be built on the north side of Fifth Avenue on properties PNC has acquired over the past 20 years between Liberty Avenue and Wood Street.

Gov. Ed Rendell is expected to be in town to discuss $30 million in state loans, grants and tax credits for the PNC project and two others. PNC is also believed to want $18 million in tax breaks to help pay for construction.

Dennis Yablonsky, secretary of the Department of Community and Economic Development, said Thursday a news conference is scheduled for 10 a.m. Monday.

While the Fifth and Forbes rebirth is considered critical to Downtown's future, some real estate executives are worried about adding new office space to a glutted market.

It also raises questions about what place the corridor's few remaining local retailers have in the new plans.

Some say such worries are necessary concessions to the momentum the new projects will build for all of Downtown.

"The big success of having a significant investment in that district (Fifth and Forbes) is going to more than outweigh the negative of adding a few more hundred thousand square feet to the central business district," said Larry Walsh, senior vice president of Rugby Realty, owner of several Downtown office buildings.

Fifth and Forbes will be "a catalyst for all of Downtown, which is what Mayor (Tom) Murphy was looking for for 10 years," Walsh said.

On Monday, Millcraft Industries Inc. revealed plans to spend nearly $50 million to redevelop the closed Lazarus department store -- renamed Piatt Place for its developers -- on the same side of Fifth Avenue, on the opposite corner of Wood, into a retail/office/residential complex.

The third and final piece of the Fifth-Forbes puzzle will come when Washington, D.C.-based Madison Marquette reveals its plans to redevelop a cluster of properties owned by the Urban Redevelopment Authority concentrated between Market Square and Wood Street.

As leasing agent for the nearly half-empty Dominion Tower on Liberty Avenue, Pat Greene of CB Richard Ellis/Pittsburgh, is dubious of having more than 450,000 square feet of office space, equivalent to another Gulf Tower, added to a market currently experiencing a 19 percent vacancy rate.

Millcraft's plans include 105,000 square feet of office space on the second and third floors of the Lazarus building.

"It's wonderful to have new construction in downtown Pittsburgh," Greene said. "The concern is that there is a further dilution of the office market. Reed Smith could be taking existing inventory, so it doesn't help the city in terms of net office lease absorption."

Reducing the potential for a worsening office space glut are three factors, said Jeremy Kronman, executive vice president at CB Richard Ellis. "For the first time in a while, the fundamental Downtown office trends are positive," he said.

First, companies are beginning to expand again.

Rugby Realty's Walsh agrees, pointing out that his company purchased the Frick Building in Downtown four months ago at 60 percent occupancy. It's now 90 percent full, largely due to existing tenant expansion.

And Carnegie Learning Inc., a growing educational software start-up, recently decided to relocate from the Strip District to the Frick Building, taking the 15,000-square-foot penthouse.

Secondly, construction costs are rising, making new suburban office buildings more rare, while rents have bottomed out and are starting to rise slightly as utilities and other costs increase.

According to GVA Oxford's third-quarter Pittsburgh Real Estate Market Watch, over the short term, suburban office buildings that offer free parking will continue to absorb tenants more quickly than Downtown.

But it said new speculative office construction is on the decline in the suburbs.

"Interest in the Central Business District market will gradually return in 2006 as residential developments spark retail developments and renewed interest from office tenants," the GVA Oxford report said.

The third factor is the increasing amount of second-tier office space being converted to apartments and condominiums.

The GVA Oxford report estimates that nearly 600,000 square feet -- or about 2.5 percent of Downtown's 23 million square feet of office inventory -- is slated to become condominiums.

CB Richard Ellis' Kronman is one of many local real estate executives who believe the 180,000-square-foot building that Reed Smith will be vacating on Sixth Avenue in 2008 will likely be converted to a non-office use as apartments, condos or a boutique hotel.

According to real estate transfer records, PNC has spent about $14 million over the past 20 years acquiring the properties it will demolish to build the new structure.

The only remaining businesses are an Asian restaurant in the former Harris Flowers building at Fifth and Liberty, a Payless shoe store at Fifth and Market streets, a wig shop and a basement book store.

As he awaits what Madison Marquette plans for the URA property, Nick Mesisca, owner of Sneaker Villa on Wood Street between Fifth and Forbes, said he hopes local retailers aren't left out.

Mesisca, who opened his store in 2002 and operates another in East Liberty, said he is encouraged by plans for more Downtown housing to drive foot traffic into the area. But he is concerned that the apartment and condo projects announced to date cater primarily to the wealthy, and not to the teen and young adult customer he targets.

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