Berks office space: Still a buyer's market

John Gleason, left, executive director of Digestive Disease Associates, and Dr. Louis La Luna, president, outside the practice?s new office building in Wyomissing.

By Erin Negley
Reading Eagle
Digestive Disease Associates started as Berks? first gastroenterology practice in 1972 and has grown to a staff of 13 physicians plus an affiliated surgery center that saw more than 12,000 patients last year.

Through the years, the practice has expanded to three locations in the Wyomissing area, but patients often went to the wrong office. There was little physical room for the company to grow.

So the search for a bigger space started in 2011.

It?s still a buyer?s market, and Digestive Disease Associates found a brand-new building in the Wyomissing Corporate Center that included a deal for improvements. In December, the practice opened a 19,000-square-foot office, and, across the hall, Berks Center for Digestive Health, a 12,000-square-foot surgery center for colonoscopies and other procedures. The building has space for the more than 90 employees, for a lab and for growth.

The Berks County commercial real estate market is better than it was at the start of the recession, but it?s still sluggish. Tenants and buyers still have the upper hand. Vacancies for office space in both the suburban and Reading markets, across class levels, increased in 2012, and average rental rates decreased, but real estate sources are looking for 2013 to improve.

?The economy is not going to blast off,? said Jeff Meyers, senior real estate economist with CoStar Group, a Washington D.C. provider of commercial real estate information. ?The office market absolutely will improve, but it won?t be strong until 2014 or 2015.?

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Nationally, the commercial real estate market continued its slow recovery in 2012, aided by the recovering equity and residential markets and historically low interest rates, according to ?Expectations and Market Realities in Real Estate 2013: Turn the Page? released in February by Deloitte, Real Estate Research Corp. and the National Association of Realtors. However, in the second half of the year, real estate sales slowed as uncertainty increased with the election and the ?fiscal cliff.?

?We?re not back to 2007 levels, but we?re steadily on our way up,? said Sam Tenenbaum, real estate economist with CoStar Group.

Locally, real estate sales and leases increased in 2012.

?I think everybody was hoping to see when the bottom was going to hit and take advantage of the low rates and the good deals,? said Bryan Cole, a broker with NAI Keystone Commercial & Industrial LLC, Exeter Township.

?It?s still in a recovery mode, still unsettled, but it?s much better than 2011,? said Steve Willems, the company?s managing principal.

During the recession, many companies cut costs, laid off employees and streamlined operations.

?The ones that did make it came out much stronger,? Willems said.

Those companies now are taking that accumulated cash and looking for the best real estate deals. Investors have quickly scooped up foreclosed properties at big discounts.

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A sketch of National Penn Bancshares Inc.?s building planned for Spring Township.

Wyomissing and Spring Township remain the top neighborhoods for office space. In late 2012, for example, A to Z Vacuum and Fan moved to North Park Road in Wyomissing, and National Penn Bank started building a new building at Spring Ridge in Spring Township.

Wyomissing has evolved to become Berks County?s economic center, said Fred Levering, a Realtor with Prudential Landis Homesale Services and a member of borough council. Some tenants? first question to him as a Realtor is whether a property has a Wyomissing address.

?People want to be where it?s perceived as successful,? he said.

for Spring Township. Below: The former Arrow International Inc. building in Wyomissing is one of the commercial buildings on the market in Berks County.

There?s also the benefit of proximity to businesses. Wyomissing recently relaxed parking requirements and continues to maintain landscaping along State Hill Road to keep up appearances.

Last year?s commercial real estate market was the best in the borough since the beginning of the recession, Levering said.

?We?re not bleeding anymore, but we?re not yet growing how we?d like to be,? he said.

There?s growth elsewhere, too. Several Muhlenberg Township companies, such as Reitnouer Inc., Fidelity Technologies Corp. and Pratt Industries, have expanded.

Also, construction is under way for several large warehouses at Berks Park 78 in Bethel Township.

However, Fairgrounds Square Mall, the center of the Fifth Street Highway corridor, was in foreclosure and recently was auctioned.

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In Reading, Berks Women in Crisis? new headquarters on Chestnut Street and 525 Student Apartments on Lancaster Avenue opened in 2012.

National tenants and franchises looking to expand in urban markets continued to consider Reading as well, said Alan W. Shuman, president of Shuman Development Group, 50 N. Fifth St.

And top-quality urban retail spaces with good parking are doing well, Shuman said. But financing is difficult if an investor doesn?t qualify for federal loan programs.

There are still large blocks of vacant downtown Reading office space, including about 25,000 square feet at the Madison building. The largest vacancy came after CNA announced plans to sell its building at Fourth and Penn streets and move to a smaller building outside the city. The company uses 80,000 square feet of the 260,000-square-foot building.

While there?s demand for quality commercial space, costs for lower-class space have dropped.

?There?s lots of bargain-hunters or bottom-feeders looking for distressed properties they can pick up for pennies on the dollar,? Shuman said.

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With some of the economic uncertainty past, commercial real estate appears to be positioned well in 2013, according to the real estate report.

?The outlook is for a continued slow recovery, with modest economic growth over the next few years and for slow job growth to continue,? the report said. ?It is expected that once businesses get used to the new tax increases, business spending (including hiring) may increase.?

Locally, there?s pent-up demand in the suburban market, which should improve sales and leases this year, especially at Berks Park 78 and the Airport Industrial Park in Bern Township.

?We?re optimistic that it?s going to be a pretty good year,? Cole said. ?There?s new deals getting done as we speak.?

Contact Erin Negley: 610-371-5047 or enegley@readingeagle.com.

Source: http://businessweekly.readingeagle.com/berks-office-space-still-a-buyers-market/?utm_source=rss&utm_medium=rss&utm_campaign=berks-office-space-still-a-buyers-market

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