Greater Reading Office Market Overview – 4th Qtr. 2013

Greater Reading Office Market Overview
4th Quarter 2013 Report
By Bryan Cole

Suburban Office Market Overview

The Greater Reading Suburban Office Market ended the 4th quarter of 2013 with a vacancy rate for Class A Office buildings at 12.71 percent. This is a large decrease in vacancy rates from 3rd quarter of 2013 and a larger decrease in vacancy from same period in 2012. The average rental rates increased to $17.50 – $22.50 per square foot Modified Gross, which is also an increase in the rates from the same period in 2012.

Deals of primary focus within Class A building sector were the 53,000 sf. lease at 1 Meridian Blvd, in Wyomissing, which was a relocation from another area of Berks County, and the reduction of around 50,000 sf. of space previously slated for office buildings being converted to a hotel. The lease outlined, along with other market factors, helped to reduce vacancy rates and increase overall absorption.

The Class B Suburban Office Market ended the 4th quarter of 2013 with a vacancy rate of 16.12 percent. This is a large decrease in vacancy rates from 3rd quarter of 2013, and it is a decrease from the same period in 2012. The average rental rates increased $14.50 – $18.50 per square foot Modified Gross from the 3rd quarter of 2013 to 4th quarter of 2013 and that is an increase from the same period in 2012, when average rental rates were $11.00 – $16.50 per square foot.

Deals of primary focus within the Class B building sector were two new leases, including the 26,016 sf. lease at 1125 Berkshire Blvd. in Wyomissing, and the 15,000 sf. lease at 6 Commerce Drive in Wyomissing. The activity level for second generation Class B space has slowed in the 4th quarter, however, this is typical toward the holiday months.

And the Class C Suburban Office Market ended the 4th quarter of 2013 with a vacancy rate of 13.07 percent, which contained no change from the 3rd quarter of 2013.

Our outlook for the office market sector going into the 1st quarter of 2014 is continued optimism as activity levels continue to remain strong.

Downtown Reading Office Market Overview

The Greater Reading Downtown Office Market ended the 4th quarter of 2013 with a vacancy rate for Class A Office buildings at 5.45 percent. This was welcome news as it was a very large positive change in vacancy rates from 3rd quarter of 2013; it was also a large decrease from the same period in 2012. The average rental rates slightly decreased from the 3rd to the 4th quarter of 2013 at $11.00 per square foot Modified Gross to $14.50 per square foot Modified Gross.

The reason for the large drop in vacancy rates was due to the sale of 401 Penn Street to I-Lead Charter School. Although the public’s understanding is they will be leasing some of the space out, nothing has been clearly defined. Due to the sale, the large block of available space has been removed from the market, causing vacancy rates to significantly drop.
The Class B Downtown Office Market ended the 4th quarter of 2013 with a vacancy rate of 25.59 percent. This was an increase in vacancy rates from 3rd quarter of 2013, and it was a large increase from the same period in 2012. The average rental rates remained unchanged at $7.50 per square foot Modified Gross in the 4th quarter 2013 to $11.00 per square foot Modified Gross, this is however a slight decrease to the rates from the same period 2012.

Overall Vacancy Rates for Class C buildings jumped from 4th quarter to more than 23.35 percent. This was due to 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 re-evaluating the assets and conditions.

www.Bryan-Cole.com

 

Bryan Cole | Sr. Associate

Bcole@naikeystone.com

NAI Keystone Commercial & Industrial, LLC

3970 Perkiomen Ave, Suite 200

Reading, PA 19606

www.Bryan-Cole.com or www.WyomissingOfficeSpace.com

Direct +1 610 370 8502 |Main +1 610 779 1400 | Fax +1 610 779 1985

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