How Incentives Are Spurring New Development In A Long-Struggling Pennsylvania City

Developers are chasing resurgent economic vitality in Eastern Pennsylvania’s midsized post-industrial cities, and some believe Reading is next in line.

The city suffered in the 1980s from deindustrialization and job losses in its once-strong banking sector, and by 2011, it had become the poorest small city in the nation with a 41.3% poverty rate.

That metric has since fallen to 28.7%, and its population has grown from 88,000 in 2010 to 96,000 last year, U.S. Census Data shows.

But development hasn’t kept up with that growth: Last month, Reading officials reported that the city has a housing shortage of 5,000 units.

The city has rolled out new development incentives over the last two years in an effort to boost housing supply and spur economic growth, and in recent months, developers have undertaken a string of new projects. The city's property owners are now seeing higher values and stronger commercial leasing demand. 

“The residential side has gone crazy. I see buildings selling now for 10 times what they sold for 30 years ago,” said Shuman Development Group President Alan Shuman, one of Reading's most influential real estate players.

“We have three shopping centers in the city, and I don’t have a single vacant spot,” he added.

There are many vacant buildings and former industrial sites around the city that could potentially contribute to the housing supply, but a large share of them would need significant work to become habitable again, Shuman said.

In December 2024, Reading was added to Pennsylvania’s Community Redevelopment Impact Zone program, an initiative designed to help those types of projects pencil.

The CRIZ program, previously implemented in Lancaster and Bethlehem, allows state and local taxes generated within an area of up to 130 acres to be captured instead by a local authority. 

A nine-person body then redistributes that revenue within the CRIZ to spur economic development and job growth. This often comes in the form of construction financing.

“The biggest challenge is, for the longest time, we’re talking about redevelopment,” said Ramus Realty Group agent Isamac Torres-Figueroa, who is also a board member of the Berks County Latino Chamber of Commerce. “Now, we have this wonderful economic tool to be able to get us there.”

The program is new in Reading, but Shuman is already using it for two major projects.

One is the construction of a $45M, 170K SF shopping center at the former Glidden paint factory, a brownfield site on the north side of town. While move-ins won’t begin for two years, Shuman said he is already fielding inquiries from prospective tenants.

The other is a $52M mixed-used development on Fifth and Penn streets downtown. It will include 150 apartments and 53K SF of retail across a mix of historic buildings and a five-story ground-up build. The final phase is set to deliver in late 2028 or 2029.

“Once you build that building, or you buy that business, or expand that business, whatever debt service you have for doing that work can be offset by the tax revenue generated by that business or a business on that site,” Shuman said of the CRIZ program.

The Fifth and Penn site is adjacent to the 120K SF office building at 450 Penn St., which nonprofit Our City Reading is converting into a mixed-use space with retail, apartments and offices, with assistance from the CRIZ. The organization is backed by the department store chain Boscov’s, which was founded in Reading but is now based outside the city in Exeter Township.

Philly Office Retail President Ken Weinstein was previously slated to redevelop the Fifth and Penn site, but he backed out in 2024 after struggling to make it pencil. The Reading CRIZ was still not finalized at the time, and the developer said financing from the program may have pushed his version of the project over the finish line.

But the experience didn’t tarnish his view of the city.

“A lot of times when you leave projects unfinished, you leave with a bad taste in your mouth, and that's just not the case here,” Weinstein said.

“Everyone warned us that the political leadership in Reading was very disjointed, and we found just the opposite,” he added. “We couldn’t have gotten more support.”

Given the difficult economics for development today and the relatively low rents in the city, any new projects in downtown Reading would require some form of government support, Weinstein said. 

In addition to the CRIZ program, officials last month opened applications until July 6 for the pilot Downtown Housing Development Grant Program.

The initiative is designed to incentivize the rehabilitation or conversion of apartments above historic retail buildings. The grants ranging from $25K to $100K must be used for noncosmetic deficiencies.

“They are marketing downtown Reading harder than I’ve ever seen in the past,” Weinstein said, adding that the mayor “seems to be very focused on how to revitalize downtown Reading.”

Mayor Eddie Moran, who has been in office since 2020, is much more friendly to developers than previous administrations, Shuman said. 

“We’re on the right trajectory, but we’re a decade behind because we’ve had some lapses at City Hall,” Shuman said.

There is also excitement about plans to reactivate passenger rail service between Reading and Philadelphia after it was discontinued in the 1970s, Torres-Figueroa said. 

The tracks remain in place, and the Schuylkill River Passenger Rail Authority expects the train connection to return by 2031 via a partnership with Amtrak. The city council heard a proposal for a transit-oriented district in parts of downtown Reading drafted in response to that timeline earlier this month.

Even with these incentives and the new transit line, large redevelopment opportunities on the market in Reading aren’t all flying off the shelves.

Heights Advisors listed the former Central Catholic High School property for sale earlier this year, with Trophy Commercial Real Estate Managing Director Craig Thom serving as the broker.

While the property is already partially entitled for 78 units, the asking price was decreased from $3.4M to $2.9M in recent weeks. It is in a CRIZ, but because there’s no commercial component to the current plans, Thom said the project would not qualify for any of the program’s financing.

While the Reading Zoning Hearing Board granted Heights Advisors zoning relief in 2023 after Moran threw his weight behind the project, it did so in spite of a city council resolution opposing the redevelopment. Former Councilor Marcia Goodman-Hinnershitz cited concerns about residential density in the neighborhood overlooking downtown. 

“These deals are tougher because you need to find the right individual that can navigate the historic tax credits,” Thom said. “You need to find the right developer who’s keen on the Reading market.”

The broker is seeing some real estate players drawn to Reading because it has better cost spreads than they can find in Lancaster and the Lehigh Valley.

“In those other markets, there are a lot of investors looking to get in. They want to get into deals, but there’s a lot of competition,” Thom said. “It’s definitely easier to get a deal in Reading.”