Greater Reading Office Market Report – End of 1st Quarter 2015

Greater Reading Office Market Overview
1^st Quarter 2015 Report
By Bryan Cole, SIOR

Suburban Overview

The Greater Reading Suburban Office Market ended the 1^st quarter of 2015 with a vacancy rate for Class A 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%. There were no changes in vacancy rates from the close of 2014, however it is an increase from the same period 2014. The average rental rates remained unchanged at $17.50 – $22.50 per square foot Modified Gross, which is a decreases in the rates from the same period in 2014.

The Class B Suburban Office Market ended the 1^st quarter of 2015 with a vacancy rate of 18.19% for existing and proposed sites. The vacancy rate for only Existing Class B Office buildings is 15.98%. This is a slight decrease in vacancy rates from end of year 2014, and it is larger increase from the same period in 2014. The average rental rates remained unchanged at $12.50 – $15.50 per square foot Modified Gross from the End of 2014 to 1^st quarter of 2015 and that is a larger decrease from the same period in 2014, when average rental rates were $12.50 – $17.50 per square foot.

And the Class C Suburban Office Market ended the 1^st quarter 2015 with a vacancy rate of 14.28%, which is a slight decrease from the same period 2014.

The outlook for the office market sector going into the 2^nd quarter of 2015 is very optimistic due to the high level of interest in the marketplace. There are upwards of 80,000 sf. of deals in the marketplace.

Cap Rates for Investment grade office buildings remains low due to attractive financing. The most important variables are length of leases, credit of tenant(s), type of lease, and type of asset (I.E. Single Tenant, Multi-Tenant, Medical, Back Office).

Overall activity continues to come from within the local marketplace. The majority of the transactions taking place are companies that already call Greater Reading home. However, most of these deals have resulted in larger footprints and longer commitments.

Downtown Overview

The Greater Reading Downtown Office Market ended the 1^st quarter of 2015 with a vacancy rate for Class A Office buildings at 22.64%. It was a slight increases in rates from the end of year 2014. The average rental rates remained unchanged from 4^th quarter 2014 thru 1^st quarter 2015 at $11.00 per square foot Modified Gross to $14.50 per square foot Modified Gross.

The reason for the slight decrease in vacancy rates was due to the relocation and expansion of an existing downtown engineering firm. The Class A market noticed a benefit of the expansion, however Class B space would see a slight increase due to the move.

The Class B Downtown Office Market ended the 1^st quarter of 2015 with a vacancy rate of 21.68%. This was a slight increase in vacancy rates from the end of 2014, and it was a large increase from the same period in 2014. The average rental rates remained unchanged at $7.50 per square foot Modified Gross at the end of 2014 to $11.00 per square foot Modified Gross, this is similar to the rates from the same period 2014.