Greater Reading Office Market Overview 2nd Quarter 2015 Report

 

Suburban OverviewThe Greater Reading Suburban Office Market ended the 2nd quarter of 2015 with a vacancy rate for class A Office buildings at 10.93% percent which includes existing and proposed sites. The vacancy rate for only existing class A office buildings is 4.57%. This is a decrease in vacancy rates from end of 1st Quarter 2015, and a decrease from the same period 2014 which was at 13.55%. The average rental rates remained unchanged at $17.50 - $22.50 per s/f Modified Gross, which is a decreases in the rates from the same period in 2014.The class B Suburban Office Market ended the 1st quarter of 2015 with a vacancy rate of 18.40% for existing and proposed sites. The vacancy rate for only existing class B office buildings is 16.19%. This is a slight increase in vacancy rates from end of 1st quarter 2015, and it is a decrease from the same period in 2014. The average rental rates remained unchanged at $12.50 - $15.50 per s/f Modified Gross from the End of 1st quarter 2015 to end of 2nd 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 s/f.And the class C suburban office market ended the 2nd quarter 2015 with a vacancy rate of 13.97%, which is a slight decrease from the same period 2014 and the previous quarter.The outlook for the office market sector going into the 3rd quarter of 2015 is very optimistic due to the high level of continued interest in the marketplace. Various deals that are finalized, were completed in the beginning of the 3rd quarter including an 18,000 s/f. lease on Berkshire Blvd. which will could help 3rd quarter numbers.The opinions in the next two paragraphs below are from 1st quarter 2015 and remain unchanged.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 OverviewThe Greater Reading Downtown Office Market ended the 2nd quarter of 2015 with a vacancy rate for class A office buildings at 22.63%. It was a slight decrease in rates from the end of 1st quarter 2015. The average rental rates remained unchanged from 1st quarter 2015 thru 2nd quarter 2015 at $11.00 per s/f modified gross to $14.50 per s/f modified gross.The reason for the slight decrease in vacancy rates was due to the new location of an 11,000 s/f. Tenant at 501 Washington St. and expansions of various tenants throughout the marketplace. The class A market noticed a benefit of the expansion of the large lease completed in the 1st quarter of 2015, however class B space is feeling the effect into the 2nd quarter of 2015 due to the large vacancy that was created by the move.The Class B Downtown Office Market ended the 2nd quarter of 2015 with a vacancy rate of 23.10%. This was an increase in vacancy rates from the end of 1st quarter 2015, and it was a smaller increase from the same period in 2014. The average rental rates remained unchanged at $7.50 per s/f modified gross at the end of the 2nd quarter to $11.00 per s/f modified gross, this is similar to the rates from the same period 2014.Overall Vacancy Rates for Class C buildings remained unchanged at 23.62%.Check www.Bryan-Cole.com for a full and comprehensive Office Market Report.Bryan Cole, SIOR is a principal at NAI Keystone Commercial & Industrial, LLC. Subscribe at www.NAIKeystoneBlog.com

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