Royals plan to loan out Butler
Pardew feels Butler is not performing at his peak after missing five months of last season with an ankle injury.
Though Butler has featured regularly this term, Pardew believes the 28-year-old's confidence is at a low ebb.
The Royals' First Division rivals Preston North End and Stoke City have previously enquired about Butler's availability and Pardew admitted he may hand the marksman a temporary spell away from The Madejski Stadium.
"He has never really been the same since coming back from a serious injury," said Pardew.
"Martin is a good enough player for the First Division, but his problems are in his head.
"I have had one or two clubs enquiring about the possibility of taking him on loan and that might be the way to give him a run of first team games to build up his confidence."