Greater Reading Office Reportby Bryan Cole
The greater Reading suburban office market ended 2014 with a vacancy rate for Class A, or highest quality, office buildings at 15.01 percent, which includes existing and proposed sites. The vacancy rate for only existing Class A office buildings is 4.39 percent.
There were no changes in vacancy rates from the third quarter of 2014, but there was an increase in vacancy from the same period in 2013. The average rental rates remained unchanged at $17.50 to $22.50 per square foot modified gross, which is a decrease in the rates from the same period in 2013.
Deals of primary focus within the Class A building sector were the newly constructed National Penn Bank facility at 30 Commerce Drive in Spring Ridge and the two proposed office pad sites at 835 and 845 Berkshire Blvd., Wyomissing. Although the total square footage of the new National Penn Bank building was 48,000 square feet, it left three vacancies within the older, Class B office product in the Berks County marketplace. These spaces, with the exception of 30 Commerce Drive, remained vacant at the close of 2014.
The Class B suburban office market ended 2014 with a vacancy rate of 18.35 percent for existing and proposed sites. The vacancy rate for only existing Class B office buildings is 16.14 percent. This is a slight increase in vacancy rates from the third quarter of 2014 and a large increase from the same period in 2013. The average rental rates remained unchanged at $12.50 to $15.50 per square foot modified gross from the third quarter of 2014 to the fourth quarter of 2014, and that is a larger decrease from the same period in 2014, when average rental rates were $12.50 to $17.50 per square foot.
Deals of primary focus within the Class B building sector were two new leases: the 26,016-square-foot lease at 1125 Berkshire Blvd. in Wyomissing and the 16,000-square-foot lease at 2001 State Hill Road in Wyomissing. The activity level for second generation Class B space has slowed in the fourth quarter; however, this is typical toward the holiday months. The first and second quarter 2015 most likely will see an increase in activity.
There were multiple sales completed within the Class B office market, including the sale of 1001 Hill Ave., a 150,000-square-foot mixed-use facility in Wyomissing; a 30,000-square-foot multistory office building in Flying Hills; the former J.C. Ehrlich facility in Wyomissing; and a 25,000- square-foot retail building converted to medical in Exeter Township. All of the facilities described with exception of 1001 Hill Ave. were purchased by end users.
The Class C suburban office market of older properties in less desirable areas and in need of renovation ended 2014 with a vacancy rate of 14.92 percent, which is a slight decrease from the same period in 2013.
The outlook for the office market sector going into the first quarter of 2015 is continued optimism as activity levels continue to remain active.
The greater Reading downtown office market ended 2014 with a vacancy rate for Class A office buildings at 23.25 percent. This was a complete reversal in rates, as it was a highly negative change in vacancy rates from the same period of 2013.
However, it was a steady third to fourth quarter in 2014. The average rental rates decreased slightly from the third quarter to the end of the fourth quarter of 2013 at $11 per square foot modified gross to $14.50 per square foot modified gross.
The reason for the large increases in vacancy rates was due to the sale of 401 Penn St. to I-Lead Charter School and the reintroduction of space to the market. Our initial understanding was that I-Lead would be leasing some of the space out, but nothing has been clearly defined.
The Class B downtown office market ended 2014 with a vacancy rate of 19.96 percent. This was a slight decrease in vacancy rates from the third quarter of 2014, and it was a large decrease from the same period in 2013. The average rental rates remained unchanged at $7.50 per square foot modified gross in the third quarter 2014 to $11 per square foot modified gross. This is similar to the rates from the same period in 2013.
Overall vacancy rates for Class C buildings rose to 23.62 percent. This was because of a few Class C tenants moving to higher-tier properties and various buildings that were previously tracked as Class B buildings being changed to Class C buildings because of a reevaluation of assets and conditions. n
Bryan Cole, SIOR is a real estate office and medical specialist for NAI Keystone Commercial & Industrial LLC. The website is http://www.Bryan-Cole.com
The full Report can be seen at http://www.bryan-cole.com/current-office-report.html