July 2023 Philadelphia Mastermind Group Key Take Aways!
• Attended a conference on Life Science Real Estate in NYC and Philadelphia was the star of the conference. Many investors reported preferring to be investing in Philadelphia instead of other life sciences markets, particularly because of the universities. (Bart Mellits – Ballard Spahr)
• Life sciences remains active and prices are holding, especially compared to general office. (Bart Mellits – Ballard Spahr)
• Bisnow conference was very informative. Philadelphia is striving to be #3 city in the country for life sciences and is considered by some to be the last affordable city in the northeast region. (Merrie Winston – Talson Solutions)
• Involved in a project for a client in San Diego that is life sciences and was done on spec due to the strength of the market. (Bart Mellits – Ballard Spahr)
• Philadelphia has more universities than San Diego and the cost of living is better. Also closer in proximity to DC and NYC. New York is not a big driver of life sciences – the cost of living is high and there are so many other things going on. (Merrie Winston – Talson Solutions, Bart Mellits – Ballard Spahr, Pam Arms – Columbia Bank)
• There are communities in Philadelphia where people live, eat, work, and play in the same area. (Merrie Winston – Talson Solutions)
• Lots of housing going up in West Philly near University City. (Bart Mellits – Ballard Spahr)
• Toll Brothers attended the conference on life sciences because they’re following the trends of where people are moving. (Bart Mellits – Ballard Spahr)
• Life sciences in Philadelphia is mostly new construction, though there is a lot of talk about conversions, due to all the struggling office properties. Only 1 in 10 buildings are a candidate for conversion due to restrictions. (Bart Mellits – Ballard Spahr)
• Life science projects are slowing down significantly. Perhaps the markets are flooded. There are some concerns, but some think it will start filling up again. (Craig Bryson- Pennoni Associates)
• Trends from the last two years have been warehousing for retail and life sciences, and both have slowed down significantly. (Craig Bryson- Pennoni Associates)
• There is a lot of artificial liquidity over the past few years and there were record levels of savings, which spurred a lot of consumer spending. With inflation, a lot of consumer savings dried up and they are cutting back on big item purchases. Though consumer spending is still robust, the economy is seeing a lot of different signals. (Brenda Nguyen – CoStar Group)
• Interest rates and a lack of stability are slowing things down. (Brenda Nguyen – CoStar Group)
• Believes we’re in the early innings of the office market, anticipating 2024 and 2025 being the main event. Some office buildings have gone back to the owner, but not a lot yet. But there are buildings that are in trouble.. San Fran is leading the office market losses and people don’t want to live in downtown anymore due to the lawlessness. (Brenda Nguyen – CoStar Group, Pam Arms – Columbia Bank, Ed Opall – EisnerAmper)
• They are working on a lot of life sciences projects throughout the city, including CHOP, Drexel, and Jefferson. (Merrie Winston – Talson Solutions)
• Construction costs on the auditing side of the business continue to go up. (Merrie Winston – Talson Solutions)
• Lots of work on the audit side in the transportation sector. Cities are spending money fast before it goes away. (Merrie Winston – Talson Solutions)
• The public sector, especially public transportation, has gone up while the private sector has gone down. (Craig Bryson- Pennoni Associates)
• Have not seen manufacturing pick up in this area, but there is a lot going on with data centers and manufacturing in the middle of the country. (Merrie Winston – Talson Solutions)
• Manufacturing has become a leading industry in Lehigh. There are also some in Berks as well, including a large battery plant in Kutztown, which has had trouble finding quality housing. (Brenda Nguyen – CoStar Group, Pam Arms – Columbia Bank)
• EisnerAmper is growing like crazy and just brought in a firm of approximately 600 people from the Gulf Coast and one from Chicago of around 80 people. On top of 3 firms they absorbed in the past few years. (Ed Opall – EisnerAmper)
• Clients have money to invest in properties, but there’s no price that makes sense right now, so nothing is happening. Existing properties are selling one by one, so real estate work is contracting. (Ed Opall – EisnerAmper)
• It will take a few years to work out with the office market, but other sectors may not take as long. (Brenda Nguyen – CoStar Group)
• Money was cheap and easy, but people who weren’t really real estate investors are getting shaken out of the market. Didn’t have the experience or the network. (Pam Arms – Columbia Bank)
• People who have good liquidity in the deal and are working with quality land are still able to get loans that make sense. (Pam Arms – Columbia Bank)
• Rates are not necessarily that high. People are freaking out, but we’re moving towards a normalized rate environment. Younger people don’t understand that. (Pam Arms – Columbia Bank)
• Haven’t seen layoffs in the industry like they’re seeing now. (Pam Arms – Columbia Bank)
• Philadelphia and multi-family are probably going to be okay. (Pam Arms – Columbia Bank)
• Seeing softer rate increases for rentals. (Pam Arms – Columbia Bank)
• Housing prices have not come down much, which is surprising. Pent up demand is keeping the prices high. New homes are still selling to first time homebuyers because they don’t have to wait for someone to sell. (Pam Arms – Columbia Bank, Ed Opall – EisnerAmper)
• Demand in the rental market has changed some due to the habits and preferences of millennials to be more transitional and have less stuff. Increased school debt is also making home purchases difficult. (Merrie Winston – Talson Solutions, Pam Arms – Columbia Bank, Craig Bryson- Pennoni Associates)
• There is record low levels of inventory and many people are priced out of the market. If you can’t buy, you have to rent. (Brenda Nguyen – CoStar Group)
• Johnson, Kendall & Johnson recently acquired a financial services firm operating out of Tampa. (Matt Musilli – Johnson, Kendall & Johnson)
• Lenders are requiring more restrictions on insurance and it can be difficult to find agreement. (Matt Musilli – Johnson, Kendall & Johnson)
• Continue to be busy and recently made some new hires. (Jim Karmolinski – Kelly Maiello Architects)
• Some projects in development are moving slower. (Jim Karmolinski – Kelly Maiello Architects)
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