Greater Reading Office Sector, Continuous Growth within a Secondary Market

The Greater Reading office sector is showing continuous growth with most of the activity surrounding the Wyomissing / Spring Ridge area.  Tenants cite the central location, access to quality workforce and nearby supporting services as reasons to locate here.

Suburban vacancy rates have slightly increased from 7.5% to 10.5% in Class "A" Buildings as a result of increased new speculative building. Although the vacancy rates are showing increases, the market continues to be very competitive with gross rates topping $20 per foot on a regular basis. The Class "B" sector is experiencing a 15.7 vacancy rate, up from 8.5% largely due to larger corporations moving from Class "B" buildings into larger blocks of contiguous space in Class "A" buildings.  Most of this activity seen has been from businesses already located within the county limits.

The suburban market has continued to see strong activity on the sale side.  Fully leased offices for investment are scarce and when available command a 8% cap rate. We are seeing an increase in value-added properties with investors being attracted to the growing Berks County market.  Some of the notable transactions that prove this analysis correct are the acquisition of One Meridian Blvd., by BPG, Partners; 525 Lancaster Avenue and 210 George Street by Tripoint Properties; 2561 Bernville Road by Direct Link Technologies; and the Former Agere Site by StonePointe Management Group. These five properties were largely vacant when purchased and total 1.2 mil. Sq. Ft. in size, they now have 650,000 Sq. Ft. available.

Although greater Reading is a competitive market for an investor, capitalization rates within the market are stabilized and range from 8 to 8.5% for single tenant net leased office buildings and 9 to 9.5% for multi-tenant properties. This contrasts to the 7 to 7.5% that we see in surrounding (out-of-county) areas.

Downtown vacancy rates have decreased from 12% to 6.4% in Class "A" buildings primarily due to the addition/occupancy of the Sovereign Plaza Building at 5^th & Penn.  Vacancy rates in downtown Class "B" buildings have had slight increases from 13% to 15.8% with larger blocks of contiguous space making up most of the vacancy. Although difficult to divide and transition to smaller users, owners are becoming more flexible and finding ways to meet the market demands.

As the downtown market continues to improve, we are seeing a great deal of activity from out of town investors who see the tremendous value in Reading's low purchase prices. Low per foot prices in the $20 to $45 range allow these owners an opportunity to add value and still offer space at extremely low lease rates. 

Suburban new construction is in high demand with prices in the Wyomissing Spring Ridge market regularly topping $200 per square foot. Notable new developments in the County include: Kinsley's new 158,000 Sq. Ft. Wyomissing Corporate Campus at the former Glen Gery Brick site; the completion of the 7^th building at Century Blvd.; Exeter Ridge Corporate Center, a Class "A" spec in Exeter Township, and the West Ridge Business Campus near the airport. On the medical scene, St. Joseph's Medical Center opened its new $150 Mil. Campus near the airport which is changing the dynamic of that area and The Reading Hospital & Medical Center completed the "N" Building totaling over 387,000 Sq.Ft.

Overall, greater Reading's office sector will continue to see growth and allow businesses a great location and quality workforce at affordable rates.