Suburban Office Market Report - By Bryan Cole

Committed to Greater Reading. Connected to the World.

2011 Year - End Report

Reading, Berks County Pennsylvania

Suburban Office Market Report

Suburban Office Market Report - Bryan Cole

From the Authors Desk
2012
This report provides an overview of the current office market conditions in Suburban Berks County Pennsylvania. NAI Keystone maintains a comprehensive list of all available properties within the Berks County marketplace, including but not limited to; available space, number of facilities in market, asking rents, incentives, extra costs, etc The information that NAI Keystone has assembled is separated by Class A and Class B facilities and consists of market data such as, absorption rates, vacancy rates, asking rents, etc...

Bryan E. Cole Broker Bcole@naikeystone.com 610.370.8502 (direct) 610.370.8503 (e-fax) www.Bryan-Cole.com

The report will be available on a quarterly basis by emailing us at marketing@bryanecole.com and asking to subscribe to our mailing list.

Bryan E. Cole Resume

Bryan joined NAI Keystone in July of 2004, but before joining NAI, Bryan Cole spent 4 years active duty in the U.S. Marine Corp, including a 6 month deployment in Afghanistan, a 4 month deployment in Kuwait/Iraq, and a 7 month deployment in Japan. Prior to joining the military Bryan was involved in the construction of commercial and multi -unit properties in the Philadelphia suburbs. Bryan has experience working with a diverse group of individuals in numerous countries throughout the world. During Bryans time at NAI, he has sold in the excess of $250 Million Dollars worth of Commercial Real Estate, and leased hundreds of thousands of square feet of industrial and office/medical space. Because of this, Bryan earned NAI gold club status his first year in the business which is presented to approximately 75 - 100 brokers within the NAI Global network, which is comprised of over 8,000 Brokers. Bryan is currently working on earning both his CCIM designation and SIOR designation. Bryan has been NAI Keystone's Top Performer from 2006 - 2011.

Personal Memberships: NAI (New America International) Veterans of Foreign Wars PA Assoc. of Realtors NAI Office Council CoreNet Global National Assoc. of Realtors NAI Retail Council Young Professionals Network Commercial Industrial Council of Berks CIC Board Member (2007) Chapter President of National Marine Corp Business Network Berks Chamber of Commerce NAI Gold Club ICSC Member NAI Corporate Services Council CCIM Candidate SIOR Candidate WERC TriState Board or Realtors Council of Supply Chain Management NAIOP Member

NAI Keystone - Bryan Cole

Suburban Office Market Report End of 2011
TRENDS
Vacancy Rates
Class A Class B

OVERVIEW:
The 2011 Greater Reading Office Market experienced similar activity as the previous year; however unlike 2010 the market noted a slight positive absorption. This was mainly due to the majority of the tenants in the local market maintaining their space rather than reducing or relocating. The activity level was still there in the 1st thru 3rd quarters of 2011; however companies were nervous about making decisions on moving or relocating from their existing facilities. The positive absorption came from some tenants taking advantage of the market by extending their lease terms to take advantage of the lower base rental rates and tenant incentives and few slightly increasing their footprints. New developed slowed in 2011 with only a few facilities being built which includes the 33,000 sf. speculative project at The Wyomissing Corporate Campus and the Reading Hospitals newly built MOB in Cumru Township. Class A rental rates in 2011 remained flat with rates ranging from $15.50 - $16.75 (Triple Net) on the high side; however there was considerable downward pressure on pricing within this segment. The Class B sector experienced the same in 2011 as did Class A, starting at 13.6% and ending at 13.2%, however while vacancy rates decreased, rental rates has a slight increase. Base rental rates slightly increased within this sector ranging from $9 -10 per square foot and tops out at $13-14 per square foot with gross rates coming in around $16-17 per square foot!

Net Absorption
Class A Class B

Asking Rents
Class A Class B

Construction
Class A Class B

Completed Lease Transactions:

Tenant:
Reading Hospital & Medical Group Travelers Insurance

Building:
Grings Hill

Size (SF):
Greater than 20,000 SF

City
Cumru Township

1105 Berkshire Blvd

Greater than 50,000 SF

Wyomissing

Origin Healthcare

1 Granite Point

Less Than 10,000 SF

Wyomissing

Dimensions Inc.

999 Berkshire Blvd

Less Than 10,000 SF

Wyomissing

Girls Scouts of America

210 George Street

Less Than 5,000 SF

Muhlenberg

Suburban Office Market Report - Bryan Cole

Greater Reading Office Market Report - End of Year 2011 Report The 2011 Greater Reading Office Market experienced similar activity as the previous year; however unlike 2010 the market noted a slight positive absorption. This was mainly due to the majority of the tenants in the local market maintaining their space rather than reducing or relocating. The activity level was still there in the 1 st thru 3rd quarters of 2011; however companies were nervous about making decisions on moving or relocating from their existing facilities. The positive absorption came from some tenants taking advantage of the market by extending their lease terms to take advantage of the lower base rental rates and tenant incentives and few slightly increasing their footprints. These renewals included The Travelers insurance group who renewed their lease at 1105 Berkshire Blvd, Wyomissing which consisted of approximately 60,000 +/- square feet, along with STV Inc., who renewed their lease at 205 W. Welsh Drive in Douglassville, which was approximately 50,000 sf. New developments slowed in 2011 with only a few facilities being built which includes the 33,000 sf. speculative project at The Wyomissing Corporate Campus and the Reading Hospitals newly built MOB in Cumru Township. The 4th quarter 2011 into the 1st quarter 2012 experienced an extreme level of activity. There are approximately 200,000 sf. of new and existing tenants circulating the market; looking to move into the county or relocate from the existing facilities within the county. Although the level of activity has jumped, there have also been recent press releases of large tenants vacating large blocks of contiguous space or looking to sub-lease their space. This includes the announcement of CNA looking to close down or downsize its Reading facility which contains approximately 260,000 sf., along with Teleflex marketing their 60,000 sf. for Sub -Lease at 1 Meridian Boulevard in Wyomissing, IMS Healthcare reducing their footprint locally, and Sovereign Bank continuing to try and sub -lease their 57,000 sf. office building on Berkshire Blvd. Overall the end of year 2011 showed a slight decrease in Suburban Class A building Vacancies starting at 12.4% in late 2010 and closing at 12.2%, mostly due to a new build to suit for the Reading Hospital and Medical Group, along with companies increasing their footprints at 1 Granite Point, and 1105 Berkshire Blvd. Class A buildings have typically been a safe sector in the marketplace because of low inventory; however with new developments coming on line, and companies still looking for lower rents the Class A sector has seen less demand. This will and has changed in 2012 with a great deal of the activity surrounding this type of product. Class A rental rates in 2011 remained flat with rates ranging from $15.50 - $16.75 (Triple Net) on the high side; however there was considerable downward pressure on pricing within this segment. The Class B sector experienced the same in 2011 as did Class A, starting at 13.6% and ending at 13.2%, however while vacancy rates decreased, rental rates has a slight increase. Base rental rates slightly increased within this sector ranging from $9 -10 per square foot and tops out at $13-14 per square foot with gross rates coming in around $16-17 per square foot! 2012 is showing signs of hope, with new tenants entering the market place, and rental rates continuing along a steady course. Deals will continue getting done because landlords are reacting to current market conditions, which means companies are getting favorable incentives, such as introductory rates, rent abatements and additional tenant improvements. Also, landlords are now offering tenant improvements and incentives to keep their existing tenants. Check out my blog at www.Bryanecole.wordpress.com for more market information and updates within the Greater Reading Office Sector along with checking our website at www.Bryan-Cole.com Written and compiled by Bryan Cole of NAI Keystone Commercial & Industrial, LLC

NAI Keystone - Bryan Cole

Competitive Set - Contiguous Blocks of Space
Status
Existing Proposed Existing Proposed Existing Proposed Proposed Proposed Proposed Existing Proposed Existing Proposed Proposed Proposed Existing Existing Existing Existing Existing Stone Ponte Center Three Meridian Blvd Berkshire Knoll Spring Office & Medical Campus - Bldg. 1 Meridian Building Wyomissing Corporate Campus Building C Wyomissing - Proposed Bldg. Spring Office & Medical Campus - Bldg. 3 Spring Office & Medical Campus - Bldg. 2 730 Hemlock Road Wyomissing Corporate Campus Building D 2001 State Hill Road Carlino Pad Site - Spring Ridge Spring Office & Medical Campus - Bldg. 4 Alcon Building 965 Berkshire Blvd. 210 George Street Wyomissing Corporate Campus Building E Exeter Ridge Corporate Center 601 Heisters Lane

Property Name

City
Muhlenberg Wyomissing Wyomissing Sinking Spring Wyomissing Wyomissing Wyomissing Sinking Spring Sinking Spring Morgantown Wyomissing Wyomissing Wyomissing Sinking Spring Wyomissing Wyomissing Muhlenberg Wyomissing Exeter Muhlenberg

Zip
19605 19610 19610 19607 19610 19610 19610 19607 19607 19543 19610 19610 19610 19607 19610 19610 19605 19610 19606 19605

Gross Bldg. SF
279,000 67,290 57,346 53,160 372,900 43,000 40,000 35,000 35,000 34,491 33,500 50,154 30,000 30,000 30,000 11,014 37,500 27,200 38,000 23,040

Vacant SF Lease Price

229,000 67,290 57,346 53,160 111,070* 43,000 40,000 35,000 35,000 34,491 33,500 25,000 30,000 30,000 30,000 11,014 27,500 27,200 25,100 23,040 $10.00 NNN $16.75 NNN $15.75 NNN $16.00 NNN $19.50 Grs $13.85 NNN $.00 $16.00 NNN $16.00 NNN $.00 $15.85 NNN $13.00 NNN $.00 $16.00 NNN $.00 $11.00 NNN $12.50 NNN $15.85 NNN $16.50 NNN $4.00 NNN

* 10,000 SF coming on line 1st qtr. 2013 and 60,000 SF is currently being subleased.

Large Scale Developments

Meridian Condos 67,692 +/- sf of Single Story Office Condos. Located in Spring Twp. PA Total of 4 Buildings Proposed For Sale or Lease

Wyomissing Corporate Campus 169,000 Total Square Feet Located in Wyomissing PA 19610 For Lease 3 Buildings Existing with 2 additional buildings proposed

Spring Corporate Campus 167,000 Total Square Feet Located in Spring Twp. PA 19609 For Lease or Sale 6 buildings proposed with the smallest calculated at 6,000 sf.

NAI Keystone - Bryan Cole

Territorial Markets

Central Berks

Eastern Berks

Northern Berks

Southern Berks

Western Berks

South Eastern Berks

NAI Keystone - Bryan Cole

Methodology/Definitions/Sub Market Map
Absorption (Net) The change in occupied space in a given time period. Available Square Footage Net rentable area considered available for lease; excludes sublease space. Average Asking Rental Rate Rental rate as quoted from each buildings owner/ management company, For office space, a full service rate was requested; for retail, a triple net rate requested; for industrial, a NN basis. Building Class Class A Product is office Space of steel and concrete construction, built after 1980, quality tenants, excellent amenities & premium rates. Class B product is office Space built after 1980, fair to good finishes & wide range of tenants. Direct Vacancy Space currently available for lease directly with the landlord or building owner. Market Size Includes all existing and under construction office buildings (office, office condo, office loft, office medical, all classes and all sizes, both multi-tenant and single-tenant, including owner-occupied buildings) within each market. Overall Vacancy All unoccupied lease space, either direct or sublease.

SF/PSF Square foot/per square foot, used as a unit of measurement. Sublease Arrangement in which a tenant leases rental property to another, and the tenant becomes the landlord to the subtenant. Sublease Space Total square footage being marketed for lease by the tenant. Sublease space is not considered in the overall occupancy or absorption numbers - only direct leases are included. Sublease Vacancy Space currently available in the market for sublease with an existing tenant within a building acting as the landlord.

Contact info:
Bryan Cole Office & Medical Specialist 610.370.8502 (direct) Bcole@naikeystone.com

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Bryan Cole
NAI Keystone Commercial & Industrial, LLC Exeter Ridge Corporate Center 3970 Perkiomen Avenue Suite 200 Reading, PA 19606 www.Bryan-Cole.com www.NAIKeystone.com