12/13/21 Philadelphia Mastermind Group Meeting

Key Take Aways from Philadelphia December 2021

• Most companies are busy but staffing is a challenge.  Some law firms are referring business because they can’t handle the volume and they are in bidding wars for talented employees. (Bart Mellits – Ballard Spahr, Jim Karmolinski – Kelly Maiello Architects, Robert Bright – Talson Solutions)
• Philadelphia Youth Basketball is about to close on a new facility, which was a pro bono deal for Ballard Sphar that was seven years in the making. (Bart Mellits – Ballard Spahr)
• While working from home is popular among employees, which are currently in demand, it may not be in their own best interest.  While flexibility has been good, some employees find that they are continuously working.  It’s unclear the long term downsides of working from home, particularly for new employees.  There has been a breakdown in communication, education and support, especially for younger folks, which is a big problem that is not being addressed. (Christian Dalzell – Counter Management, Bart Mellits – Ballard Spahr, Jim Karmolinski – Kelly Maiello Architects, Kathy Babcock – Kelly Maiello Architects, Matt Shanahan – Colliers, Paul Flora – Federal Reserve Bank of Philadelphia)
• There has been a pronounced uptick in rents, with rents climbing up as much as $600 per unit, and the boom has continued even around the holidays. (Christian Dalzell – Counter Management, Christina Lutz – Counter Management)
• CBRE released a report predicting office rents to fall by 6% over the next year, though some expect it to fall further and it does not take into account increased expenses.  Philadelphia benefits from migration from places like New York, but is not doing as well as southern markets.  Many tenants are working on downsizing options. (Paul Flora – Federal Reserve Bank of Philadelphia, Matt Shanahan – Colliers)
• Representations and Warranties Insurance is becoming a more important part of a lot of deals, as buyers don’t want money sitting in escrow and it helps offset unknown issues. (Javier Gonzalez – PL Risk Advisors)
• There is a lot of migration to southern markets which is offsetting some of the losses in office space due to working from home.  While some young people don’t like commuting via car in these markets, many prefer the options for larger housing in those markets. (Jim Karmolinski – Kelly Maiello Architects, Rick Lackey – REAL Professionals Network)
• Many companies are finishing deals before 12/31 to avoid potential increases in capital gains taxes. (Javier Gonzalez – PL Risk Advisors)
• Talson Solutions is finishing their 20th anniversary celebration. (Robert Bright – Talson Solutions)
• The infrastructure bill is providing a lot of funding for projects in a variety of industries, particularly transportation. (Robert Bright – Talson Solutions)
• Life sciences continue to be a big driver in the Philadelphia office market. (Matt Shanahan – Colliers)
• Ransomware has recently become one of the most concerning types of cyber attacks. (Alexandra Bretschneider – Johnson Kendall & Johnson)
• Cybercrime is projected to cost the world $6 trillion in 2021, making it the third-largest economy after the U.S. and China.   Average extortion demands have grown dramatically from $178,254 in 2020 to $570k in 2021.  55% of attacks were on small businesses with less than 100 employees and the average business experienced 16 days of interruption. (Alexandra Bretschneider – Johnson Kendall & Johnson)
• Supply chain risks are also issues and the vulnerability of other businesses to attacks could impact your business. (Alexandra Bretschneider – Johnson Kendall & Johnson)
• Businesses must strike a balance between cost, security and privacy and convenience as well as between people, processes and technology.  This helps to create cyber resilience, since being completely secure is impossible. (Alexandra Bretschneider – Johnson Kendall & Johnson)
• Cyber insurance includes coverage for the economic or legal costs arising from a data breach or a network event.  Includes the following: Incident Response (Includes IT Forensics, Legal, PR, and notification costs), Lawsuits & Privacy Regulatory (includes legal fees, legal settlements and also regulatory fines where insurable), Investigation – legal fees, fines when insurable), Cyber Crime (costs such as ransom or extortion) and Business Losses (impact to operations, reputational harm). (Alexandra Bretschneider – Johnson Kendall & Johnson)
• Cyber Insurance includes the following key considerations: Adequacy of Limits, Hosted vs. On Premise Services, Reputational Harm, Bodily Injury or Property Damage, Social Engineering, Hardware Coverage & Betterment, Evolving Regulations. (Alexandra Bretschneider – Johnson Kendall & Johnson)
• Cyber insurance rates are increasing and will continue increasing. (Alexandra Bretschneider – Johnson Kendall & Johnson)
• The 5 best practices for cyber security are:  Prepare to meet insurability requirements, Manage access and patches, Employee training, review insurance coverage, Incident response preparedness. And as a bonus, review your financial transaction processes. (Alexandra Bretschneider – Johnson Kendall & Johnson)
• Common insurability requirements include multi-factor authentication, segregated backups, employee training, cyber incident response policy, etc. (Alexandra Bretschneider – Johnson Kendall & Johnson)