1/11/21 Philadelphia Mastermind Group Meeting

Philadelphia January 2021 – Key Takeaways

• Commercial real estate is affected by a variety of factors in the world at large, including the pandemic and the economic crisis that accompanied it, racial injustice, and climate change.  Political risk has been added to that spectrum. (Michael Sklaroff / Ballad Spahr)
• Many members are reporting an uptick in activity, including general increased activity for this time of year, increased leasing momentum, interest in hotel properties for re-purposing, increases in suburban office, increase in retail value add deals, steady client project activity, positive rent growth / occupancy rate in Philadelphia in relation to the national average and a general feeling of cautious optimism.  (Sara McCormick / Ballard Spahr, Christian Dalzell / Counter Management, Ian Grusd / Ten-X, Mark Celoni / Pennoni, Robert Bright / Talson Solutions, Paul Fiorilla / Yardi)
• There has been an increase in online transactions since the beginning of the pandemic, with 81% of platform users in 2020 being first-time users. Though there are some distressed properties on the market, the majority (85-90%) are not distressed.  Expecting more distressed properties in Q2 and Q3. (Ian Grusd / Ten-X)
• The three strongest markets in the Philadelphia area are life sciences, industrial and multi-family.  Public clients have seen a revenue decline while the private side is filling in. (Mark Celoni / Pennoni)

• Members discussed projections about what their offices may be like once the majority of the population has been vaccinated, and it’s expected to get back to something close to normal with some added flexibility.  But it may take a few years. (Michael Sklaroff / Ballard Spahr, Mark Celoni / Pennoni, Ed Opall / Eisner/Amper)
• To prepare for future problems in commercial real estate debt, EisnerAmper has created a debt advisory group to handle those issues. (Ed Opall / EisnerAmper)
• There is a second round of PPP which businesses may be eligible for if they can show a 25% decline in business from 2019 to 2020.  Regarding the first round of PPP, some people are starting to see actual forgiveness on the loan. (Ed Opall / EisnerAmper)
• There is a lack of funding for public projects in areas of transportation and infrastructure, which is impacting projects. (Robert Bright / Talson)
• Some companies are re-thinking large parts of the way they conduct business, which may have a direct or indirect impact on real estate. (Jeffrey Pakrul / Talson Solutions)
• Rates are expected to increase in early 2021 with pressure on banks and lenders to tighten their spreads. (Joe Sisson / Chatham Financial)
• There is data showing domestic migration from areas such as New York and San Francisco to areas such as Texas, Florida and Arizona. (Paul Fiorilla / Yardi)
• The office market is down but hoping for a better outlook in the 3rd and 4th quarter of 2021 (Matt Shanahan / Colliers)
• The insurance industry is still in a hard market, with higher rates, more stringent terms and conditions, and increased underwriting scrutiny. (Matt Musilli / Johnson, Kendall & Johnson)

Some companies did create pandemic insurance products, and while they wrote a lot of policies it was not cost effective to pay them out. Most policies are either too expensive for the buyer or too risky for the insurance company. (Matt Musilli / Johnson, Kendall & Johnson)