6/14/21 Philadelphia Mastermind Group Meeting

Key Take Aways from Philadelphia June 2021

• Industrial market continues to be hot, particularly in private industry. (Ballard Spahr LLP – Bart Mellits, Pennoni – Mark Celoni, Colliers – Matt Shanahan)
• Office activity and leases continue to be slow, though it is better in the suburbs. Life sciences are up, which encompasses some office space. (Ballard Spahr LLP – Bart Mellits, Pennoni – Mark Celoni, Colliers – Matt Shanahan)
• Affordable housing continues to be an obstacle for the City of Philadelphia. (Ballard Spahr LLP – Michael Sklaroff)
• Construction costs are an obstacle for both affordable housing and other development projects in the city. (Ballard Spahr LLP – Michael Sklaroff, Becker & Frondorf – Charles Moleski )
• Rental rates are slowing despite exploding housing costs. Expectation of a slide in rental rates for the office market. (Becker & Frondorf – Charles Moleski, Colliers – Matt Shanahan )
• Work that had been put on hold due to uncertainty is starting to pick up. (Pennoni – Mark Celoni)
• Lumber and steel costs continue to be an obstacle, as well as other shortages (such as white paint). Difficult to predict when and if that may change. (Federal Reserve Bank of Philadelphia – Paul Flora, Becker & Frondorf – Charles Moleski)
• Labor shortages continue to be an obstacle, but wages had been stagnant for awhile so it may just be catching up. Head hunters may also play a role in increasing labor wages. (Federal Reserve Bank of Philadelphia – Paul Flora, Becker & Frondorf – Charles Moleski, Ed Opall – EisnerAmper)
• Employee Retention Credit is a big issue and clients continue to get money back using this credit. (Ed Opall – EisnerAmper)
• Biden tax proposal continues to be an issue and some deals are structured around predictions. (Ed Opall – EisnerAmper
• Office market is slow and employees are slowly returning. Most offices are not yet making returns mandatory. (Ed Opall – EisnerAmper, Ballard Spahr LLP – Bart Mellits)
• Leasing activity is much higher in early 2021 than it was in late 2020. Influx from other markets as well as an affordable market to other comparable large metropolitan markets. Anticipating increases in rents. (Counter Management – Christian Dalzell)
• There is growing concern about municipal risk associated with investing in Philadelphia. (Counter Management – Christian Dalzell, Ballard Spahr LLP – Michael Sklaroff)
• More in person meetings are taking place and some members have stopped offering Zoom options for meetings. (Johnson, Kendall & Johnson – Matt Musilli)
• Uptick in alternative risk financing and alternative structuring of insurance. (Johnson, Kendall & Johnson – Matt Musilli)
• Non-profits expecting a staffing uptick. (Becker & Frondorf – Charles Moleski)
• Hospitality / hotels are doing well for the weekends but are down during the week, which shows business travel has not yet returned. This is an issue for the hotel industry. (Becker & Frondorf – Charles Moleski)
• Class A office will probably remain healthy, but Class B will get hurt in the long run and some Class B office buildings may be converted into retail or residential. Only about 20% of offices leases have come up for natural expiration. Will have a better understanding once more leases come due. (Colliers – Matt Shanahan)
• ESG (Environmental, Social, Governance) is a set of non-financial criteria used to evaluate companies – internally and externally – and to manage business risks and opportunities. (Ballard Spahr LLP – Renie Boudreau)
• ESG is not new but has an increased focus. It encompasses climate change, diversity, equity, inclusion, plastics pollution, etc. and is being pushed by investors, shareholders, board members, employees and consumers. (Ballard Spahr LLP – Renie Boudreau)
• Proponents of affordable housing are touting energy efficiency as additional reasons to develop. (Ballard Spahr LLP – Renie Boudreau)