Montgomery County Planning Department

Research & Technology Center

The MD-355 / I-270 Technology Corridor

Montgomery County, Maryland

SUMMARY OF RESEARCH
2006 - 2007
 Montgomery County Planning Department
Research & Technology Center

RECENT RESEARCH REPORTS

on the
MD-355 / I-270 Technology Corridor
Montgomery County, Maryland
2006 – 2007

Biotech Industry Space Demands

Krishna Akundi

Census Update Survey Profile

Pamela Zorich

Demographics
Pamela Zorich

Housing Profile
Sharon Suarez

Industrial Land Market

Krishna Akundi

Industries & Jobs Profile

Lisa Madigan Tate

Jobs and Housing Balance

Wayne Koempel

Leased Office Space Market Trends

Krishna Akundi

Retail Overview
Krishna Akundi

Summary of Research
Lisa Madigan Tate

MD355/I270 Research Summary Report Page 2 June 12, 2007

 Contents

Introduction.................................................................................. 3
Research Overview ..................................................................... 4
Summary of Findings.................................................................. 5
Analysis........................................................................................ 6
Detailed Findings:
• Demographics....................................................................... 8
• Housing............................................................................... 12
• Economic Activity................................................................ 14
• Commercial Space ............................................................. 18
• Retail Market....................................................................... 20

Introduction

A high quality of life and access to exceptional talent and economic opportunity are the
MD-355/I-270 Corridor’s signature strengths.

These strengths are intertwined and self-reinforcing. Good jobs and ample business
opportunities attract skilled workers and business investment that in turn enable local
government to provide quality schools, amenities and services—making the Corridor an even
more appealing place to live, work and do business.

The MD-355/I-270 Corridor has absorbed significant growth over the past several decades
while retaining an enviable quality of life. But the costs of that growth—traffic congestion,
escalating land and housing prices, heavier loads on public services and infrastructure, and
greater pressure on the environment—are beginning to undermine the Corridor’s fundamental
livability and economic competitiveness. It is equally important to recognize that the Corridor’s
population and economy are not just growing, they are changing—becoming far more diverse
than in the past.

How will a more complex, densely developed demographic and economic environment affect
the Corridor’s future? And how can Montgomery County manage continuing growth and
change—mitigating their costs and challenges without compromising the Corridor’s quality of life
or missing out on the Corridor’s potential?

MD355/I270 Research Summary Report Page 3 June 12, 2007

Research Overview

The Montgomery County Planning Department’s MD-355/I-270 Corridor Project aims to provide
a cohesive perspective on design and development issues that span individual communities
and master plan boundaries within the Corridor.

To that end, Research Center staff compiled and analyzed demographic, housing, retail,
commercial real estate and economic information for the Corridor as a whole, delivering their
findings in a series of data sets and reports to Community-Based Planning earlier this year. 1

This summary report draws from the wealth of information in these studies in order to:

• provide a comprehensive, data-rich profile of the Corridor;

• describe the main forces reshaping its economic,
MD-355/I-270 Corridor Research
demographic and built environments; and
Biotech Industry Space Demands
• suggest implications for Corridor-wide policies and Census Update Survey Profile
strategies that might help mitigate emerging challenges Demographics
and bolster key competitive strengths. Housing Profile
Industrial Land Market
Industries & Jobs Profile
Research Team findings are summarized below. Key trends and Jobs and Housing Balance
their possible implications for planning and policy are analyzed Leased Office Space Market Trends
in the next section. The last section provides statistics and other Retail Overview
details supporting these findings and recommendations.

Future growth will concentrate in the Corridor

The Corridor has 65% of residential, 72% of household and 83% of job growth
capacity Countywide (2005 to 2030).

MD-355/I-270 CORRIDOR REMAINDER OF COUNTY

72,109
28,249

26,313 141,751
132,891
67,987

Population Growth Household Growth Employment Growth

Source: Round 7.0 COG Forecast

1
Additional community-level data and analyses will be prepared as needed for individual master plan updates.

MD355/I270 Research Summary Report Page 4 June 12, 2007

 Summary of Findings

Demographics Economic Activity

• The Corridor has a large, well-educated, • The MD-355/I-270 Corridor is Montgomery
affluent and diverse population. County’s economic engine.
• Corridor residents are not equally advantaged • The biotechnology industry is a critical
in education, income, English proficiency and economic driver.
other assets.
• The Corridor economy is predominantly
• The Corridor is home to almost half of service-driven.
Montgomery County’s workforce, but more
than one-third of the Corridor’s employed • The service sector is highly diversified,
residents commute to jobs outside the County. with advanced professional, research and
technology services at the core.
• The Corridor will become more densely
populated over the next 25 years. • Advanced services and construction have
led job growth in the Corridor.
• The expected demographic profile of future
residents will in some ways be similar to the • Most Corridor businesses are small, but
current population, but also more diverse. employers of all sizes support the job
base.

Housing • Small and mid-sized establishments have

supplied most recent job growth in the
• The Corridor supplies a major share of Corridor.
Montgomery County’s housing stock.
• The Corridor has added business
• Demand is high for all unit types in the establishments of all sizes in recent years.
Corridor.
• Corridor rents are higher than the County Commercial Real Estate
average, and vacancy rates are low.
• The Corridor is Montgomery County’s
• Homeownership opportunities exist in all primary office market.
categories of Corridor housing.
• The Corridor also contains the wealth of
• Housing costs are very high relative to the County’s industrial and flex space.
incomes, putting homeownership increasingly
out of reach of new homebuyers. • Market forces may undermine the future
availability of industrial space for biotech
and other uses.

Retail
• The Corridor contains more than half of
Montgomery County’s retail base.
• The Corridor is not meeting local retail
demand.

MD355/I270 Research Summary Report Page 5 June 12, 2007

Analysis

The MD-355/I-270 Corridor is changing visibly.

Corridor share of County population
With communities adding jobs, houses, Source: 2005 Census Update Survey
businesses and people, it is becoming more
MD-355/I-270 Corridor Remainder of County
densely developed. It also is diversifying, with a
population that is increasingly varied in age,
income, ethnicity, culture, language and housing.
Integrating and providing services to this larger,
more complex population–without compromising 44%
the high quality of life that residents continue to 56%
demand–will be a challenge.

The economic base also is growing and

diversifying. No longer just a suburb of the
nation’s capital, the Corridor has emerged as a
globally-known center for science and
technology-driven industry.

Area businesses prosper from proximity to the

U.S. federal government–the world’s largest Corridor Housing Growth Forecast
Capacity for new households by area. (2005 to 2030)
technology buyer. Top locally-based federal
Multi-Family Single-Family
research centers support a major biotechnology
industry cluster and offer promising future Clarksburg 3,733 9,414
opportunities such as nanotechnology. Germantown 4,264 899

Economic expansion, population growth and Gaithersburg & Vicinity 19,177 5,409

diversification are fueling new rounds of Rockville 3,682 373

development. The Corridor’s large, affluent
North Bethesda 12,219 33
consumer base has attracted a lively retail,
restaurant and residential service mix. Robust Bethesda/Chevy Chase 8,077 707
commercial and residential building and
Source: Round 7.0 COG Forecast
renovation activity sustain the local construction
sector.

New Corridor residents–many from highly qualified backgrounds–augment an already

extraordinary talent pool. This larger, more varied skill base could open new creative and
entrepreneurial business directions–from digital media to international market development to
technology commercialization. New and expanding opportunities also could induce well-
educated younger residents and recruits to stay in the area despite its rising cost of living.

Policy can help overcome the challenges and leverage the opportunities presented by dynamic
growth and change. The need to manage growth at the County level strongly influences the
Corridor’s development trajectory. By channeling residential and economic development into
already-developed centers served by transit and highways, Montgomery County hopes to
protect its open, green and agricultural space–vital elements of local quality of life and
environmental health–while making better use of existing transport and service infrastructure.

MD355/I270 Research Summary Report Page 6 June 12, 2007

The County’s approach to managing growth could Corridor share of County employment
bolster the Corridor’s key competitive strengths–a Source: Round 7.0 COG Forecast (2005)
high quality of life, exceptional base of talent and
MD-355/I-270 Corridor Remainder of County
economic opportunity–over the long run. Smart
Growth can help foster and sustain diverse urban
centers where critical thinking, creativity, adaptability
and innovation–and the businesses and residents
these qualities attract–are able to thrive. 28%

Key to generating these competitive benefits is to 72%

ensure that Smart Growth-based plans produce
mixed-use urban environments that are livable for
residents, and workable for employers. From a
demographic point of view, three elements are
valuable: mobility; affordable, attractive housing; and
diverse, tolerant communities. By facilitating the movement of people, goods and services
around the region, controlling labor costs and expanding the pool of talent, these elements
directly benefit the business community as well.

Smart growth could further enhance the Corridor’s (and the County’s) long term economic
competitiveness by including strategies to create:

• affordable, flexible work spaces and commercial zones that help companies
respond quickly to changing technological or industry conditions;
• commercial centers attractive and convenient to customers and employees;
and
• diverse and ample commercial space suitable for researchers, businesses,
clients, suppliers, professionals and maintenance services, enabling them
to locate in close proximity to one another.

Finally, it is important to emphasize that innovative

land use planning and strong commitment to quality Corridor Job Growth Forecast
Capacity for new employment by area. (2005 to 2030)
schools, services and infrastructure are the core of
Montgomery County’s livability and economic Clarksburg 18,867
competitiveness. Maintaining these very high civic
standards will be crucial to making Smart Growth Germantown 19,938
work in the MD-355/I-270 Corridor. Gaithersburg & Vicinity 37,880

Rockville 29,430

North Bethesda 18,895

Bethesda/Chevy Chase 16,741

Source: Round 7.0 COG Forecast

MD355/I270 Research Summary Report Page 7 June 12, 2007

Detailed Findings: Demographics

The Corridor has a large, well-educated, affluent A diverse population

and diverse population. Source: 2005 Census Update Survey
1%
• The Corridor is home to 410,000 people–
44 percent of Montgomery County’s household 12% White non-
population. Hispanic
14% Hispanic
• Among Corridor residents ages 25 and over, 66 59% Asian
percent are college graduates. 37 percent also 14%
have earned a graduate, professional or Black non-Hispanic
doctoral degree.
• At $84,860, the Corridor’s median household
income is slightly higher than the countywide
median and $39,000 above the U.S. median.
• Homeownership in the Corridor exceeds the national rate of 67 percent,
with 73 percent of households occupied by owners. (Countywide,
homeownership rates have risen across all racial groups, especially among
Asian-Americans.)
• 40 percent of Corridor residents are minorities, including Asian/Pacific
Islanders (14 percent), Hispanics (14 percent) and African-Americans
(12 percent).
• Foreign-born residents account for 29 percent (117,000) of the Corridor’s
population.
• Among Corridor households, 36 percent have at least one foreign-born
head of household or spouse. Among Corridor residents ages 5 and over,
36 percent speak a language other than English at home.

A very highly-educated population

Educational Attainment of Adults Ages 5 and over. (2005)

Less than High School High School Graduate Associate's Degree

Bachelor's Degree Graduate, Professional or Doctoral Degree

MD355/I270 Corridor 7% 21% 6% 29% 37%

Montgomery County 8% 22% 6% 29% 35%

United States 16% 50% 7% 17% 10%

Source: M-NCPPC 2005 Census Update Survey; U.S. Census, 2005 American Community Survey (United States)

MD355/I270 Research Summary Report Page 8 June 12, 2007

Corridor residents are not equally advantaged in education, income, English
proficiency and other assets.
• Seven percent of adult residents lack a high
school education—although this is smaller Corridor Income Distribution
than the number of adults in the County Source: 2005 Census Update Survey
(eight percent) or the nation as a whole (16
percent) who have not finished high school. 35%

• One in ten residents is not proficient in 25%

English, a significant barrier to employment 22%
19%
and social integration.
• Housing costs consume more than 30
percent of household income for 40 percent Under 50,000 $50,000 to $100,000 to $150,000+
of renters and 17 percent of homeowners in 99,999 149,999
the Corridor.
• New residents—owners and renters alike—typically pay higher than
average costs for housing.
• More than a quarter of Corridor households have median incomes below
$50,000, qualifying them for Montgomery County’s Moderately-Priced
Dwelling Units program.
• Recent in-mover households have a somewhat lower median household
income ($72,035), reflecting the fact that young adults not yet in their prime
earning years often are the people starting new households.
• Households with a foreign-born head or spouse earn 85 percent of the
$89,319 median income of native-born households.
• Heads of households working in Montgomery County typically have lower
median household incomes than those employed outside the County.

The Corridor is home to almost half of Montgomery County’s workforce, but more than
one-third of the Corridor’s employed residents commute to jobs outside the County.
• The Corridor is home to nearly half (45 percent) of Montgomery County’s
resident labor force.
• 46 percent of the Corridor’s 235,000 employed residents commute to jobs
outside Montgomery County, including 20 percent to Washington, DC and 8
percent to Virginia.
• Three out of four employed Corridor residents commute by car, with
16 percent taking public transit and 4 percent working from home.
Commutes by car average 28 minutes, compared to 48 minutes by public
transit.

MD355/I270 Research Summary Report Page 9 June 12, 2007

The Corridor will become more densely populated
over the next 25 years. Nearly 30 percent of Corridor residents are
• One in five Montgomery County residents is new, foreign-born
having moved into the County between 2000 and Source: 2005 Census Update Survey
2005. Half of the County’s new households settle
in the Corridor.
• The Corridor will add an estimated 150,000 new
residents—70 percent of Montgomery County’s 29% Foreign born
total population growth—over the next 25 years.
By 2030, nearly half of Montgomery County’s 1.2 Native-born
million residents will live in the Corridor. 71%

• High birth rates and rapid movement of people

into the area—especially from abroad—is
propelling population growth.
• Land use policies will channel most new housing into already-developed
areas, giving the Corridor’s built environment an increasingly urbanized,
mixed-use character.

The expected demographic profile of future residents will in some ways be similar to the
current population, but also more diverse.
• Much of the existing population is maturing in place. In 2005, around
45,000 Corridor residents—11 percent of the population—were age 65 or
older. Half were over the age of 74.
• With baby boomer residents aging—and being more likely than prior
generations to stay in their homes after reaching retirement age—senior
citizens are expected to be the Corridor’s fastest-growing age group.

As has been noted, most of Montgomery County’s future population growth will be in the
Corridor. The characteristics of people moving into the County suggest how the
Corridor’s demographic profile will evolve.
• Nearly 60 percent of Montgomery County’s new residents come from
outside the region. They are most likely to be highly-educated, married
couples in their thirties with children.
• Half work outside Montgomery County.
• Most (53 percent) people moving into Montgomery County are (non-
Hispanic) Whites. But White non-Hispanics also constitute an even higher
proportion of people leaving the County. Consequently, minorities (including
foreign-born residents) are fueling Montgomery County’s net population
growth.
• Households with foreign-born head or spouse typically are younger and
larger (with more children) and more ethnically diverse, have greater
extremes in educational attainment, and are more likely to carpool or take
transit to work.

MD355/I270 Research Summary Report Page 10 June 12, 2007

 • Almost half (44 percent) of new residents speak a language other than
English at home.
• More than half of new resident households rent their dwelling.
• Garden apartments are the first housing choice for 31 percent of new
residents moving into the County from outside the Washington, DC
metropolitan area. People moving in from Washington, DC, Maryland or
Virginia are more likely to choose single-family dwellings.

MD355/I270 Research Summary Report Page 11 June 12, 2007

Detailed Findings: Housing

The Corridor supplies a major share of

Housing Stock in the I-270 Corridor
Montgomery County’s housing stock. Source: 2005 Census Update Survey
• There are 161,000 households in the
Corridor—46 percent of households 6%
Countywide—with an additional 24,000 Single-family Detached
units approved for construction. 20%
Single-family Attached
48%
• The ratio of jobs to existing and approved Garden Apartment
housing is 2.49. By 2030, the Corridor will 26%
have an estimated 229,000 units, bringing High-Rise Apartment
the ratio of jobs to housing to 2.19.
• The Corridor contains a
significant percentage of the
County’s senior housing Housing Tenure
resources, with more than 60 Owned v. Rent Units by Housing Type
Source: 2005 Census Update Survey
percent of all retirement
community and assisted living Owner-occupied units Renter-occupied units
facility units or beds, half of all
nursing home units and a third of Single-family Detached 95%
senior subsidized units
Countywide.
Single-family Attached 91% 9%
• More than 85 percent of housing
was built before 2000. Nearly 16 Garden Apartment 35% 65%
percent of single-family homes
were built before 1950, when 62%
High-Rise Apartment 38%
nearly all housing construction
was of this type.

Demand is high for all unit types in the Corridor.

• The majority (64 percent) of households are housed in single-family
dwellings, of which most (62 percent) are in detached units versus 38
percent in townhouses, duplexes or other attached single-family units.
• Multi-family units supply the remaining share of Corridor housing, with 25
percent of households living in garden apartments and 11 percent in high-
rise units.
• More Corridor residents—including families and empty-nesters—are opting
for apartments and condominiums.

Homeownership opportunities exist in all categories of Corridor housing.

• Nearly all single-family dwellings (94 percent) are owner-occupied,
compared to 36 percent of multi-family units.
• Garden apartments account for 59 percent of all renter households in the
Corridor and high-rise apartments provide another 26 percent.

MD355/I270 Research Summary Report Page 12 June 12, 2007

Housing costs are very high relative to
incomes, putting homeownership Corridor home prices are steep
increasingly out of reach of new homebuyers. Median price of homes sold in the Corridor (2006)

• High owner-occupancy rates mask the $806,107

serious consequences of rapid housing
$610,000
price appreciation. Many homeowners could $491,659
not afford to purchase their current homes
$340,000
today. Some residents have used equity $279,990 $290,358
windfalls to trade up, but this has become
more difficult; middle- and lower-income
residents and people moving in from less
Condo Condo Single- Single- Single- Single-
expensive regions are being shut out. Some (Existing) (New) Family Family Family Family
businesses report that the cost of housing Attached Attached Detached Detached
has made it much harder to recruit recent (Existing) (New) (Existing) (New)
graduates and employees with young
families.
New homebuyers need high incomes
• Montgomery County has the highest Income needed to buy a median-priced home in the Corridor (2006)
median homeownership and rental costs
in Maryland. On average, Corridor
homeowners spend $1,668 on housing Single-Family Detached (New) $225,958
costs, and renters spend $1,284.
$171,474
• Median sales prices in all housing
categories fall within 15 percent of the Single-Family Attached (New) $138,596
Countywide median. In 2006, all
$96,461
categories of housing sold for slightly
below the County median price, with new Condo (New) $89,855
condominiums sales prices lagging in
particular. Existing detached single-family $86,718
homes were an exception, selling around
11 percent above the County median of
$555,000.
• Purchasing a new single-family home in the Corridor at the median sales
price of $806,000 would require a household income of nearly $226,000.
• With a median sales price of nearly $280,000, existing condominiums were
the only unit type affordable to households earning the area median
income.

Corridor rents are higher than the County average, and vacancy rates are low.
• The Corridor contains half of Montgomery County’s apartment stock.
• Renting is more expensive in the Corridor than in the County as a whole. In
2006, turnover rents in most of the Corridor averaged $1,368 to $1,550,
compared to the $1,212 Countywide rate. (Average rents in the small
market area at the Corridor’s northernmost end were $986.)
• As in most of Montgomery County, the Corridor’s apartment market is tight,
with vacancies between 1.7 percent and 5.4 percent. Vacancies are lowest
in Rockville and Bethesda-Chevy Chase submarkets.

MD355/I270 Research Summary Report Page 13 June 12, 2007

Detailed Findings: Economic Activity

The MD-355/I-270 Corridor is Montgomery County’s economic engine.

• More than 300,000 people work in the Fortune 1000 Companies based in the MD-355/I-270 Corridor
Corridor’s 18,000+ business establishments Source: Fortune Magazine (2007)
for a total business payroll of more than $15 U.S. Rank State Rank Company Revenues ($billions)
57 1 Lockheed Martin $39.6
billion. 203 3 Marriott International $12.2
313 4 Coventry Health Care $7.7
• Between 1998 and 2004, the Corridor 452 6 Host Hotels & Resorts $5.0
garnered three-fourths of Montgomery 906 10 USEC $1.8
County’s total growth in private-sector jobs
and payroll, and added new business
establishments at twice the pace of the
rest of the County. Fastest Growing Technology Companies based in the Corridor
Source: Deloitte Fast 500 (2006)
• Three major highways—I-270, the Rank
Capital Beltway and MD-355—as well Company 5-year growth City U.S. Fast 500 Maryland Fast 50
NexTone Communications 7901% Gaithersburg 36 1
as Metrorail and MARC commuter train BroadSoft 2171% Gaithersburg 99 4
lines serve the Corridor. Montgomery WealthEngine.com 606% Bethesda 250 10
Catapult Technology 567% Bethesda 258 13
County’s commercial space is GenVec 501% Gaithersburg 289 15
concentrated along this transportation Systems Integration & Development 340% Rockville 365 19
spine, with the Corridor’s 91 million Digene Corporation 237% Gaithersburg 456 23
EntreMed 218% Rockville 489 24
square feet of leased office, industrial, CNSI 203% Rockville - 26
flex and retail space accounting for 78 Optelecom-NKF 157% Germantown - 30
Infinite Computer Solutions 129% Rockville - 34
percent of total leased County inventory. MedImmune 101% Gaithersburg - 36
OPNET Technologies 95% Bethesda - 37
• Lockheed Martin, IBM, Marriott Capital Technology Information Services 89% Rockville - 39
International, MedImmune and Human CoStar Group 85% Bethesda - 40
Genome Sciences are among the Gene Logic 83% Gaithersburg - 42
Human Genome Sciences 49% Rockville - 44
globally-known companies that are Savantage Solutions 48% Rockville - 45
headquartered or have a significant Dataprise 46% Rockville - 47
presence in the Corridor.

• The Corridor also

contains two world- Montgomery County's Economic Engine
renowned federal Source: M-NCPPC analysis of 2004 County Business Pattern zip code data
research campuses—the MD-355/I-270 Corridor Remainder of County
National Institutes of
Health (NIH) and the
National Institute of Commercial Real Estate 78% 22%
Standards and
Technology (NIST)—and Business Payroll 79% 21%
major satellite offices for
the U.S. Department of
Health and Human Private Sector Jobs 74% 26%
Services and the U.S.
Department of Energy. Business Establishments 69% 31%

MD355/I270 Research Summary Report Page 14 June 12, 2007

The Corridor economy is predominantly service-driven.
• The 355/270 Corridor economy is strongly oriented to professional,
technology, financial and consumer-supported services.
• Goods-producing sectors such as Corridor employment base
construction and manufacturing play Source: M-NCPPC analysis of 2004 County Business Pattern data
a smaller role with roughly 10 18%
Professional, Scientific, Technical Services
percent of area jobs and
Retail trade
establishments. 13%
Health Care and Social Assistance
• The Corridor’s professional, 28%
Support Services
business and technology industry 10%
Construction
core, along with its large residential
Accommodation & Food Services
base, creates significant secondary 9%
7%
demand for local construction, retail 7% 8% Finance & Insurance
and support services. Other

The service sector is highly diversified,

with advanced professional, research and technology services at the core.
• 30 percent of the Corridor’s private sector jobs are in professional and
business services. The Corridor contains 80 percent of Montgomery
County’s jobs in this sector. Advanced services–including information
technology, biotechnology, legal, research and scientific services–alone
account for the largest core of jobs (56,000) and business establishments
(4,060) in the Corridor.
• Consumer-driven industries–such as health services, real estate and
leisure services–together make up a third of the Corridor’s economic base.
• The Corridor contains 78 percent of Montgomery County’s trade and
transportation industries, which supply around 20 percent of Corridor jobs
and business establishments.
• Information sector industries—including software, data processing,
telecommunications and publishing—account for only 5 percent of local
employment.
Corridor business establishments

Professional, Scientific, Technical Services 4,060

Retail trade 2,099

Health Care and Social Assistance 2,055

Other services (except public administration) 1,514

Construction 1,437

Finance & Insurance 1,233

Accommodation & Food Services 1,125

Other 4,636

MD355/I270 Research Summary Report Page 15 June 12, 2007

Advanced services and construction have led job growth in the Corridor.
• Professional, scientific and technical services outpaced all other sectors in
job growth, adding more than 10,000 jobs between 1998 and 2004.
• The construction sector added jobs at the fastest rate—26 percent—
reflecting brisk building construction and remodeling demand in recent
years.
• The information sector lost the greatest number of jobs, due to nationwide
telecommunications restructuring soon after that industry had expanded
rapidly in the Corridor during the 1990s. More recent data suggests this
sector is beginning to rebound locally.
• The Corridor’s manufacturing sector lost16 percent of its job base–an
attrition well below the 24 percent national rate. Most of the nearly 10,000
manufacturing jobs that remain in the Corridor are in printing or high tech
equipment-making establishments (both of which serve the region’s large
technology and professional service sectors).

Most Corridor businesses are small, but employers of all sizes support the job base.
• As in most areas, the great majority (94 percent) of Corridor business
establishments are small, with fewer than 50 employees. More than half
(55 percent) have fewer than 5 employees. Less than one percent
(excluding government job sites) have 250 or more employees.
• However, larger employers supply more than half of all jobs in the Corridor,
with 33 percent of jobs (100,000) in mid-sized establishments of 50 to 249
employees, and 21 percent (65,000) in job sites with 250 or more
employees.

The biotechnology industry is a critical economic driver.

• The federal presence is and will continue to be a critical driver of biotech/
bioscience activity in the region, state, and county. The government’s
emphasis on biodefense and nanotechnology will positively impact
Montgomery County.
• Montgomery County is not considered ideal for large-scale manufacturing.
However, it does have the land and resources for additional research and
development facilities.
• Montgomery County has the largest concentration of lab space in the
region. Thus, the economies of scale already exist to add more lab space
here than start from scratch elsewhere.
• Bioscience and other R&D space developers are keenly interested in the
County’s I-3 zoned land. Germantown has 400 acres and Clarksburg has
571 acres in I-3 zones.
• Industrially-zoned land that allows for light industrial uses, such as I-1 and I-
4, also would appeal to certain types of biotech firms. These biotech firms
might find Twinbrook a suitable location; however, locations that appear

MD355/I270 Research Summary Report Page 16 June 12, 2007

 lucrative may prove unsuitable because of size, ownership, and
infrastructure issues.
• Montgomery County would be better positioned to influence the global and
national biotech industry if its capital markets and technology transfer
market were stronger.

Small and mid-sized establishments have supplied most recent job growth in the
Corridor.
• Mid-sized establishments provided most (58 percent) job growth in the
Corridor, adding nearly 15,000 jobs between 1998 and 2004. Small
establishments added another 11,000 jobs, accounting for 43 percent of
total job growth
• Most job growth (19 percent) was in 100-to-249 employee job sites,
followed by 20-to-49 employee job sites (18 percent).

The Corridor has added business establishments of all sizes in recent years.
• Most businesses start small, so most new establishments are small.
60 percent of new Corridor business establishments have fewer than 5
employees and 91 percent have fewer than 50 employees.
• The fastest growth—between 16 and 17 percent—was among mid-sized
establishments with 50 to 249 employees.
• There was a modest 6 percent decline in the number of 250-to-499
employee job sites, which could be the result of decentralization (which
could include distributing new and existing employees to smaller nearby
spaces), downsizing or relocation.

Most new businesses are small, but business of all sizes

produce job growth
Corridor job and establishment growth by establishment size (1999 to 2004)
Source: M –N CPPC Research C enter analy sis of 2004 County Business Pattern data

<50 em ploy ees 50 to 99 em ploy ees 100 to 499 em ploy ees 500+ em ploy ees

New Establishments 91%

New Jobs 43% 22% 29%

MD355/I270 Research Summary Report Page 17 June 12, 2007

Detailed Findings: Commercial Space

The Corridor is Montgomery County’s primary office market.

• Nearly 80 percent of the County’s leased office space is located in the I-270
Corridor. Current leased office space inventory is 49.5 million square feet,
with 1.3 million square feet under construction. An additional 14.2 million
square feet is proposed for delivery in 2008-2009.
• The Corridor contains 81 percent of Montgomery County’s prime Class A
office space. Half of the Corridor’s total office square footage is in 164
Class A buildings—typically the most prestigious properties fetching above-
average rents. Class A office buildings are mostly in Bethesda and
Rockville.
• After a downturn in recent years, the office market appears to be on a
modest but clear rebound. At 7.1 percent, Class A vacancies are the lowest
in a decade. Rents are rising for the first time since a tumble in 2001, and
averaged $32 per square foot in the prime Bethesda market.
• The market for Class B
space—43 percent of the Commercial space is concentrated in the Corridor
Corridor’s total office Source: CoStar, 3rd quarter 2006
inventory—is recovering
from a sharp decline during MD355 / I-270 Corridor Rest of County
2001 to 2004. Vacancy
rates in Class C buildings— Office 49.5 12.9
8 percent of Corridor office
space—have fluctuated Flex 11.9 2.0
between 5 and 8 percent in Millions of Square Feet
recent years, and currently Industrial 10.5 1.8
are at the high end of that
range. Retail 18.8 9.4

The Corridor also contains the

wealth of the County’s industrial and flex space. Corridor Commercial Space by Type
• With 5,325 acres of industrially-zoned land and Source: CoStar, 3rd quarter 2006

11 million square feet of leased industrial space,

the Corridor accounts for 73 percent of the
Retail
County’s industrial acreage, 84 percent of its 21%
industrial land value and 85 percent of its leased
space. Utilized industrial space ratios (a measure
of development intensity) average 2.88, with the
highest intensity of use in North Bethesda (4.69) Industrial Office
and the lowest in Clarksburg (1.83). 12% 54%

• The vast majority of industrial uses are in light

Flex
industrial I-1 and I-4 zoned land. Most I-1 land is
13%
in the Shady Grove/Derwood area and in a few
dispersed smaller pockets; I-4 land is
concentrated near Twinbrook, the Montgomery County Airpark and

MD355/I270 Research Summary Report Page 18 June 12, 2007

 Clarksburg. The largest concentration of land zoned I-3 (Technology and
Business Park) is in the Germantown/Clarksburg area, with 1,000 acres.
• Flex space also is concentrated along I-270 and MD-355, with more than
12 million square feet of leased space—85 percent of the Countywide
total—in the area.

Market forces may undermine the future availability of industrial space for biotech and
other uses.
• Competition from local business or residential service providers for existing
light industrial/flex space—along with growing pressure to convert land to
more profitable non-industrial uses—present a challenge to preserving,
assembling and expanding space for biotech and other critical economic
clusters.
• High land costs, strict environmental standards, a dearth of large industrial
tracts, a workforce and other factors greatly limit the County’s overall
competitiveness as an industrial location.
• Light industrial and flex space in the Corridor often is taken up by business
and residential service providers such as building materials, plumbing
supply, landscaping, medical supply, electronic equipment and automotive
supply companies. With strong local markets, these tenants generally can
afford the Corridor’s higher lease rates, and their stability makes them more
attractive than startups and businesses in riskier sectors, including biotech.
• There is strong pressure to convert industrial space in all categories to
office, retail and mixed-use developments, which generally offer higher
returns to industrial landowners.

MD355/I270 Research Summary Report Page 19 June 12, 2007

Detailed Findings: Retail Market

The Corridor contains more than half of Montgomery County’s retail base.
• The Corridor accounts for 56 percent of retail sales Countywide.
• The majority of shopping centers in the County are located along the
Corridor as well as Georgia Avenue, reflecting the fact that retail
development typically follows residential development. The Corridor
contains Montgomery County’s largest and best-known retail outlets,
including its two largest regional shopping centers (Bethesda’s Westfield
ShoppingTown Montgomery and White Flint Mall in North Bethesda). It also
has two “power centers” (the I-270 Center in Gaithersburg and Milestone in
Germantown). Bethesda Row exemplifies the “lifestyle center” model
appearing in affluent communities across the country.
• Gaithersburg’s Washingtonian represents the “omnicenter” model
combining power center, lifestyle center and regional mall features.

The Corridor (and the County as a whole) is not meeting local retail demand.
• Despite multiple shopping opportunities retail spending by Corridor
residents in 2005 exceeded local sales by $1.5 billion annually—indicating
that people are going outside the Corridor for many of their shopping
needs.
• Research shows that Corridor residents are most likely to go outside the
County to shop in (1) department stores and superstores; (2) home building
and garden stores; (3) gasoline stations; and (4) drug stores.
• Recent analysis of a similar retail gap for Montgomery County as a whole
suggests land use and zoning regulations may limit retail growth for
aesthetic, environmental and other reasons. Examples include Rockville’s
restrictions on future big-box retail, or the County setting strict zoning and
permit standards for certain types of large retailers. High land or lease costs
and a lack of suitable properties also are factors. Within more mature
suburban areas, obsolescent shopping centers currently occupy valuable
land.

MD355/I270 Research Summary Report Page 20 June 12, 2007