MARCH 2003

Economic Forces That Shape

Montgomery County

Annual Update 2003

March 2003

Produced by

Research & Technology Center

Montgomery County Department of Park and Planning
Maryland-National Capital Park and Planning Commission

with

RESI Research & Consulting

Towson University
THE MARYLAND-NATIONAL CAPITAL PARK & PLANNING COMMISSION

The Maryland-National Capital Park & Planning Commission is a bi-county agency

created by the General Assembly of Maryland in 1927. The Commission’s
geographic authority covers most of Montgomery and Prince George’s counties. The
Commission’s planning jurisdiction, the Maryland-Washington Regional District,
comprises 1,001 square miles; its parks jurisdiction, the Metropolitan District,
comprises 919 square miles.

The Commission has three major functions:

(1) The preparation, adoption, and, from time to time, amendment or

extension of The General Plan (On Wedges and Corridors) for the
Physical Development of the Maryland-Washington Regional District
Within Montgomery and Prince George’s Counties.

(2) The acquisition, development, operation and maintenance of a public park

system.

(3) In Prince George’s County only, the operation of the entire County public
recreation program.

The Commission operates in each county through a Planning Board appointed by and
responsible to the county government. The Planning Boards are responsible for
preparation of all local master plans, recommendations on zoning amendments,
administration of subdivision regulations, and general administrations of parks.

The Maryland-National Capital Park & Planning Commission encourages the

involvement and participation of individuals with disabilities, and its facilities are
accessible. For assistance with special needs (e.g., large print materials, listening
devices, sign language interpretation, etc.), please contact the Community
Relations Office, 301-495-4600 or TDD 301-495-1331.
 ELECTED AND APPOINTED OFFICIALS

County Council
Michael L. Subin, President
Steve Silverman, Vice President

Phil Andrews
Howard Denis
Nancy Floreen
Mike Knapp
George Leventhal
Tom Perez
Marilyn Praisner

County Executive
Douglas M. Duncan

The Maryland-National Capital Park & Planning Commission

Derick P. Berlage, Chairman
Elizabeth M. Hewlett,Vice Chairman

Commissioners

Montgomery County Prince George’s County

Planning Board Planning Board

Derick P. Berlage, Chairman Elizabeth M. Hewlett, Chairman

Wendy C. Purdue, Vice Chair William M. Eley, Jr., Vice-Chair
Allison Bryant George H. Lowe, Jr.,
John Robinson Albert Scott
Meredith K. Wellington
 Abstract
Title: Economic Forces That Shape Montgomery County: Annual
Update 2003

Author: Montgomery County Department of Park and Planning

Maryland - National Capital Park and Planning Commission

Subject: Economic Indicators of the Health of Montgomery County’s

Economy, Focusing On Job Growth, Federal Impact, Commercial
Space Activity, and the Housing Market

Source of Copies: The Maryland-National Capital Park & Planning Commission

8787 Georgia Avenue, Silver Spring, Maryland, 20910
301-495-4700
http://www.mc-mncppc.org

Date: March 2003

Number of Pages: 40

Abstract: Economic Forces That Shape Montgomery County is an annual

report started in the mid-1990s when there was concern about
Montgomery County’s slow recovery from the 1991 recession. The
report includes information not available elsewhere, especially:
trends in high-technology employment sectors; trends in federal
government activity as an employer, as a landlord and tenant, and
as a purchaser of goods and services; trends in the commercial
space market; and trends in the housing market.
Economic Forces That Shape Montgomery County
Annual Update 2003

Table of Contents

About Economic Forces That Shape Montgomery County ....................................... 1

2003 Annual Update

Review of Selected Economic Indicators.......................................................... 2

A Graphical Review:
Job Growth ..................................................................................................... 9
Federal Impact.............................................................................................. 15
Commercial Space Market ........................................................................... 17
Housing Market............................................................................................ 20

Appendices

Employment Trends Tables ............................................................................... 24

Federal Impact Tables ........................................................................................ 34
 ECONOMIC FORCES THAT SHAPE MONTGOMERY COUNTY
ANNUAL UPDATE 2003

About Economic Forces That Shape Montgomery County

Economic Forces That Shape Montgomery County is an annual report started in
the mid-1990s when there was concern about Montgomery County’s slow recovery from
the 1991 recession. The first report found slow growth but very healthy fundamentals.
Since then, each subsequent report has found somewhat more rapid growth, whereupon
last year we were able to conclude that the economy very healthy, growing at a rapid but
manageable pace.

The Economic Forces studies seek to support the Montgomery County Council’s
economic analysis needs, particularly during preparation of the budget and when
evaluating economic development initiatives or regulatory proposals. To accomplish this,
the Research & Technology Center has worked with County government agencies to
identify economic trends and for suggestions on how to improve the usefulness of the
report. Such collaboration helps eliminate duplication of effort while helping to assure
that even though opinions may differ, the information underlying those opinions is
consistent and valid.

A major value of each Economic Forces update is that a review of the trends
indicates issues that deserve more in-depth study. In the past, such studies have included
a study of Class B & C office space, a commercial sites characteristics inventory, in-
depth reports on at Montgomery County’s information technology and biotechnology
industries, and housing market studies. Other recent projects include an update to a 1993
analysis of retail space and an update of our inventory of land available for non-
residential construction.

Developing the in-house expertise required to complete the Economic Forces

update has strengthened the Research & Technology Center’s ability to support master
plan development and to respond quickly and thoroughly when policy questions arise,
such as debates on the Annual Growth Policy, affordable housing, elderly housing, and
other issues.

1
 ECONOMIC FORCES THAT SHAPE MONTGOMERY COUNTY
ANNUAL UPDATE 2003

Review of Economic Indicators

Each annual update of Economic Forces That Shape Montgomery County

contains four core areas that updated each year:

• Job Growth: This section consists of a review of statistics on jobs created or lost
by each industry in Montgomery County, compared to the state and the nation,
with special emphasis on the County’s technology sectors. This section relies on
ES-202 data compiled by each state and reported to the U.S. Bureau of Labor
Statistics. These data are tabulated by RESI at Towson University for the
Research & Technology Center staff in a format that RESI originally developed to
for their own analyses of state and regional economies.

• Federal Impact: By far the largest single influence on Montgomery County’s

economy is the Federal government: as an employer, as a landowner, as a tenant,
and as a purchaser of goods and services. Each year, Research & Technology
Center staff survey each Federal installation in the County about current and
expected employment changes, construction plans, and space leasing activities.
Typically, Research staff also analyze federal purchasing and contracting activity
– however, the Federal Procurement Data Center has not yet released these data
for FY 2002. Staff will provide the Planning Board and County Council will an
analysis of federal procurement trends when the data are available.

• Commercial Space Activity: The relationship of economic trends to the pace and
character of development is of particular interest to officials and staff making land
use decisions. One of the major questions addressed by the first Economic Forces
That Shape Montgomery County report focused on understanding the collapse of
the commercial space market that occurred during the 1990-91 recession.
Subsequent reports have focused on tracking and understanding the market’s
recovery as well as looking for signs of pending weakness.

• The Housing Market: Last year, Economic Forces included a report on the
County’s housing market from the perspective of County residents – those who
are, or intend to be, homeowners or tenants in the County. We have decided to
include the housing analysis in this year’s report as well, since housing continues
to be one of the strongest aspects of the economy and because housing issues are
the focus of considerable public attention at this time.

2
 ECONOMIC FORCES THAT SHAPE MONTGOMERY COUNTY
ANNUAL UPDATE 2003

Job Growth
Montgomery County added 2,159 jobs between the second quarter of 2001 and
the second quarter of 2002 for a growth rate of 0.5 percent. That is less than one-third the
1.9 percent growth rate (8,323 jobs) recorded between the second quarters of 2000 and
2001. Virtually all of these jobs – 2,079 – were created by the public sector.

Between the second quarters of 2001 and 2002, private sector jobs grew by just
831. The sectors that performed best included construction (up 1,337 jobs; professional,
scientific, and technical services (up 1,741 jobs); and health care and social assistance (up
1,692 jobs). Sectors with the largest losses include manufacturing (down 1,520 jobs);
administrative, support, and waste (down 2,071 jobs); and real estate, rental and leasing
(down 697 jobs).
Montgomery County At-Place Employment
In last year’s report, we 2001 2002 Change
noted that public sector job Private Sector 368,801 369,632 0.2%
growth was accelerating as Public Sector 81,426 83,505 2.6%
private sector job growth slowed. Non-classifiable 1,809 1,058 41.5%
At that time, public sector jobs Total jobs 452,036 454,195 5.0%
were growing at a 2.8 percent
rate, compared to a 1.7 percent growth rate for private sector jobs. As we now look at job
growth between the second quarters of 2001 and 2002, we see that public sector jobs are
still growing by about the same rate (2.6 percent), while, as noted the private sector grew
by just 0.2 percent.

“Non-classifiable” jobs – jobs for which there was insufficient information to

assign them to a particular sector – fell from 1,809 to 1,058, a 41.5 percent decline.

The High Tech Sectors: No Longer Outperforming the Economy

Last year, as the overall job growth rate slowed, Montgomery County’s high
technology sectors – aerospace, biotechnology, information technology,
telecommunications, and high-tech manufacturing – grew more than twice as fast as the
economy as a whole. This is no longer true. High tech jobs fell by 6.9 percent between
the second quarters of 2001 and 2002 to 71,406 from a high of 80,341 in the fourth
quarter of 2000. High tech jobs are about 19 percent of all private sector jobs in the
County.

The 71,406 figure does not include the many public sector high tech jobs in
Montgomery County, including those at federal installations such as the National
Institutes of Health, the National Institute for Standards and Technology, and the
Department of Energy.

Montgomery County’s 6.9 percent decline in high tech jobs is somewhat greater
than the state’s 8.9 percent decline but less than the national decline of 7.5 percent.

3
 ECONOMIC FORCES THAT SHAPE MONTGOMERY COUNTY
ANNUAL UPDATE 2003
Information technology was the hardest hit of the technology sectors in
Montgomery County. Information technology in Montgomery County fell by 17.4
percent, or 4,887 jobs. This compares to a decline of 10.6 percent for the state and a
decline of 5.9 percent for the United States. There are now 23,200 information
technology jobs in Montgomery County, slightly less than 1988 levels.

Biotechnology is the one bright spot among County tech sectors, growing by 10.8
percent between the second quarters of 2001 and 2002. This is well ahead of the 4.5
percent growth for biotechnology jobs in the state. Nationally, biotechnology jobs grew
by just 0.2 percent. Montgomery County now as about 13,300 biotechnology jobs.

Reversing a several-year trend, Montgomery County’s aerospace industry lost

jobs in the past year, declining 10.4 percent. As in several other high tech sectors, jobs in
aerospace peaked in the fourth quarter of 2004, when Montgomery County had 18,852
aerospace jobs. Montgomery County’s aerospace industry now has 16,325 jobs.

In last year’s report, telecommunications was a high-growth sector for

Montgomery County, growing by about 7 percent between the second quarters of 2000
and 2001. That trend just about reversed between the second quarters of 2001 and 2002,
with telecommunications jobs declining by 6.9 percent. This was a smaller decline than
the 12.8 percent decline for the state and the 8.0 percent decline for the nation as a whole.
There are 11,700 telecommunications jobs in Montgomery County.

High tech manufacturing in Montgomery County consists of companies

manufacturing industrial machinery, electronic equipment, transportation equipment, and
instruments and measuring devices. The sector is relatively small (6,900 jobs) and
volatile. Between the second quarters of 2001 and 2002, Montgomery County’s high tech
manufacturing sector lost 15 percent of its jobs, compared to a 5 percent decline in the
state and a10 percent decline for the nation.

Other Major Sectors

“Business services” is a major component of the County’s economy, comprising

over 58,000 jobs. Business services jobs peaked in the first quarter of 2001 at 62,126
jobs. Between the second quarters of 2001 and 2002, business services jobs in
Montgomery County declined 6 percent, compared with an 8.2 percent drop in the state
and a 3.3 percent drop nationally.

Engineering and management services is a sector that includes engineers,

architects, accountants and management consultants. Engineering and management
services jobs fell by 1.7 percent in Montgomery County between the second quarters of
2001 and 2002, compared to a 2.7 percent decline at the state level and a 1.6 percent
decline nationally. There are now 32,612 engineering and management services jobs in
Montgomery County.

4
 ECONOMIC FORCES THAT SHAPE MONTGOMERY COUNTY
ANNUAL UPDATE 2003
Another Montgomery County “signature” industry is the hotel and lodging sector
because we are home to the headquarters of two of the nation’s leading hotel
corporations, Marriott and Choice. This industry was hit very hard by September 11 and
the economic downturn. Lodging industry jobs declined by 17 percent between the
second quarters of 2001 and 2002. There are 6,533 lodging industry jobs in Montgomery
County.

The highest-paying sectors (employing more than 500 people) in Montgomery

County are: security and commodity brokers (average wage: $89,100), broadcasting
(average wage: $86,100), chemical manufacturing (average wage: $81,400),
telecommunications services (average wage: $81,200), computer and electronic product
manufacturing (average wage: $78,800), utilities (average wage: $76,600), wholesale
durable goods (average wage: $75,700), and professional, scientific, and technical
services (average wage: $65,300),

The average salary paid by a Montgomery County job in the second quarter of
2002 was $46,500 per year, about $500 more than the previous year. The average private
sector job pays about $43,600 while the average public sector job pays $59,400. The
comparatively higher salaries paid by the public sector are due to federal government
salaries, which average $74,400. Of the major private sectors, the “arts, entertainment
and recreation” sector pays the lowest average wages, about $17,500 per year.

Federal Impact
The federal government plays three very important roles in Montgomery County’s
economy: it is an employer, it is a tenant and landowner, and it is a purchaser of goods
and services.

During fiscal year 2001, the federal government pumped $10.6 billion dollars into
the County’s economy in the form of federal expenditures, 22 percent of all the federal
expenditures in Maryland. The federal government spent $3.9 billon to purchase goods
and services, paid $3.1 billion in wages and salaries to County workers, and paid County
residents $2.7 billion in direct payments to individuals for retirement and other benefit
programs.

Federally Leased Space

Federally leased space has remained relatively unchanged since December 1999.
The General Services Administration (GSA) leases 6.7 million square feet of space in
Montgomery County, an increase of almost 2 percent compared to the 6.6 million square
feet leased in March 2002. GSA leases about 11 percent of the County’s existing rental
office space and pays an annual rent totaling $135 million.

Over half of GSA’s inventory, 67 percent or 4.5 million square feet, is occupied
by the Department of Health and Human Services. The Department of Commerce is the

5
 ECONOMIC FORCES THAT SHAPE MONTGOMERY COUNTY
ANNUAL UPDATE 2003
only other agency occupying more than 1 million square feet of GSA leased space, its 1.1
million square feet is 17 percent of GSA’s inventory in the County.

Over half of GSA’s leased space is in the Rockville area, which includes most of
North Bethesda. GSA leases 3.7 million square feet of space in the Rockville area, 55
percent of their County inventory. Two other areas have over 1 million square feet of
GSA leased space: Silver Spring has 1.2 million square feet (18 percent) and Bethesda
has 1 million square feet (15 percent).

About 41 percent of GSA’s leased space, 2.8 million square feet, is up for renewal
in the next 3 years (2003-2005). Health and Human Services occupies about 80 percent
of this space, mainly in the Rockville area. If recent history is any indication, GSA will
likely renew most of these leases. GSA renewed all the 11 leases up for renewal in 2002.
GSA would like to renew most leases because moving means relocation costs. The main
reasons for not renewing leases are: consolidating into government owned space, not
needing the space due to changes in work programs or employment levels, and buildings
becoming too old and outdated.

Survey of Agencies

Collectively, the thirteen agencies and installations surveyed estimate they have
about 59,900 workers in 2003, an increase of about 2 percent or 1,300 workers compared
to 2002. The increase in workers is almost evenly split between owned and leased
facilities. Most of the increase is at the National Institutes of Health and the National
Imagery and Mapping Agency. The National Institute of Standards and Technology, the
Nuclear Regulatory Commission, and the U. S. Army Adelphi Laboratory Center
reported more modest gains. The Department of Energy reported a slight decline.

Collectively, the agencies anticipate job levels increasing by about 9 percent

(5,600 jobs) in the next 2 years reaching a total of about 65,500 workers in 2005. If this
forecast holds, it would be the first time workers at these agencies would exceed 60,000
since 1994 when they reported 61,400 workers. They anticipate job increases of 11
percent between 2005 and 2015 when workers at these agencies will number about
72,400.

Given the federal policy of shifting workers from leased space to owned space,
workers at federally owned space are expected to increase by about 13,700 between 2003
and 2015. The main shift from leased to owned space would be the Food and Drug
Administration’s consolidation at their facility in White Oak and the anticipated purchase
by the federal government of the National Oceanic and Atmospheric Administration’s
buildings in Silver Spring. Even with these major shifts from leased to owned space, the
federal government expects to remain a major tenant in the County’s office market. NIH
anticipates adding about 5,700 workers in leased space between 2003 and 2015. Other
Health and Human Service agencies might also increase workers in leased space and
most of the other agencies anticipate workers in leased space remaining at current levels.

6
 ECONOMIC FORCES THAT SHAPE MONTGOMERY COUNTY
ANNUAL UPDATE 2003

Commercial Space Market

Last year at this time we said that the office market was about to enter a mild
recession that should last about a year. That recession has lasted until now and appears to
be ending as predicted.

In the past year office vacancies in the County have increased by 2.7 million
square feet from 10.8 percent to 12.8 percent including sublet vacancies. Occupied office
space increased by 1.2 million square feet, indicating expansion of about 2.5 percent in
office use. Class A occupancy increased 5.9 percent.

The amount of space available for sublet has declined from its highs of December
of 2002 but has slipped back up a little in the past month. Discovery’s office space in
Bethesda may add to the sublet vacancy rate as they move more employees into their new
Silver Spring headquarters.

Class A office rents have rebounded some since October but have slipped back a
little in the past month. The 800,000 square feet of office space under construction is 69
percent pre-leased, a strong indicator.

Buildings proposed for completion in 2003 and 2004, but not under construction
yet, have almost no pre-leasing so they are unlikely to be started until an economic
recovery is clear. This will enable office market recovery to proceed without added new
space to hold down rents.

Finally, the flex and industrial space markets are solid with added space, declining
vacancies near 6 percent and increasing rents.

Housing Market
Record low interest rates have kept housing comparatively affordable despite
rising prices. The effects of the continued downturn in many sectors of the economy on
other investment opportunities may also have contributed to the attractiveness of housing.
The median income household could afford the median priced townhouse in mid-2002,
new or existing, according to the Department of Park and Planning’s Affordability Index.
New single-family detached housing, however, remained far out of reach for most
households at a median price of $475,700 for the first two quarters of 2002.

The median price of all single-family housing reached a new high of $260,000 at
the end of the second quarter of 2002. The median price of new townhouses remained
basically flat, while new and existing detached and existing townhouses all increased
substantially. The level townhouse price probably reflects a shift to more construction in
the I-270 corridor compared to the more expensive down-County areas, rather than a
flattening of prices.

7
 ECONOMIC FORCES THAT SHAPE MONTGOMERY COUNTY
ANNUAL UPDATE 2003
In spite of rising prices, time on the market before a house is sold continued to
decline, dropping to 26 days from 29 the previous year. Time on the market increased in
the last quarter of the year to 29 days, but an increase is typical of the fourth quarter.
Meanwhile, the number of units sold declined slightly, one of the few single-family
indicators to remain essentially unchanged.

Rental housing vacancies and rents moderated somewhat according to the 2002
Department of Housing and Community Affairs (DHCA) survey. Vacancies rose from a
record low of 1.8 percent to a still very low 3.5 percent between 2001 and 2002. Rents
rose 4.5 percent to an average of $1,076, following an 11 percent increase in 2001. This
modest improvement in the rental market stems from a combination of renters moving to
home ownership to take advantage of low interest rates and an increase in apartment
construction.

Residential completions reached a 12-year high of 5,485 units. Multi-family led

the way with 2,044 units, 46 percent above the previous year. Townhouse completions
almost doubled from 776 in 2001 to 1,529 in 2002, while single-family detached
completions declined slightly from 2,005 to 1,912.

The number of single-family units in the pipeline of approved development edged

ahead of multi-family approvals for the first time in several years. The shift appears to
reflect the market’s response to the booming single-family sales market.

8
M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

2003 Conclusions
Economic Forces That Shape • Local economy exhibits strengths in
face of national downturn
Montgomery County
• Job growth: flat overall, tech sectors
Annual Update 2003 among hardest hit
• Federal impact: leasing & employment
outlook still strong
• Commercial market: short, mild
recession ending
• Housing market: still strong but
leveling off.

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Pluses & Minuses Pluses & Minuses

+ Jobs: biotech up, unemployment rate - Job growth weak overall, tech and
declines, assistance caseload still low high-wage industries decline
+ Federal government retains strong role - Commercial construction: exiting
as employer and tenant short, mild recession phase; vacancy
+ County in good position to weather rates are up
commercial space recession
+ Housing market still strong

1
M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Job growth themes

• Job growth slowed to 2,159 - just 0.5%.

Job Growth • Most sectors saw little change, but high

technology lost 6.8%.
Performance • Biotech shines among tech sectors.
– Aerospace: down 10.4%
– Biotechnology: up 10.8%
– Information technology : down 17.4%
– Telecommunications: down 6.8%
– High tech manufacturing: down 15%
• Higher income industries lost jobs.

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Annual job growth: 2,159 jobs Tech jobs drop to 1997 levels
25,000 135
Second quarter figures (change from previous year) Source: RESI compilation of DLLR data (2002Q2)
130
20,000
125
15,000
Index: 1988Q1=100

120
10,000
115
Montgomery Co.
5,000 110
Maryland
0 105 United States
1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

-5,000 100

-10,000 95
90
-15,000
1988Q1
1988Q4
1989Q3
1990Q2
1991Q1
1991Q4
1992Q3
1993Q2
1994Q1
1994Q4
1995Q3

1996Q2
1997Q1
1997Q4

1998Q3
1999Q2

2000Q1
2000Q4
2001Q3

2002Q2

Source: RESI compilation of DLLR data

-20,000
Between the second quarters of 2001 and 2002, Montgomery
County added 2,159 jobs, growing 0.5 percent. There are 71,400 high tech jobs in Montgomery County.

2
M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Aerospace rebound falters Biotech grows 11%

115 Source: RESI compilation of DLLR data (2002Q2)
240 Source: RESI compilation of DLLR data (2002Q2)
110 220
Montgomery Co.
105 200
Index: 1988Q1=100

Index: 1988Q1=100
United States
100 Maryland 180
95 Montgomery Co. 160
Maryland
90 140
85 120 United States

80 100
1988Q1
1988Q4
1989Q3
1990Q2

1991Q1
1991Q4

1992Q3
1993Q2
1994Q1
1994Q4
1995Q3
1996Q2
1997Q1
1997Q4
1998Q3
1999Q2
2000Q1
2000Q4
2001Q3

2002Q2

1988Q1

1988Q4
1989Q3
1990Q2

1991Q1
1991Q4

1992Q3
1993Q2
1994Q1
1994Q4
1995Q3

1996Q2
1997Q1
1997Q4

1998Q3
1999Q2
2000Q1
2000Q4
2001Q3

2002Q2
There are 16,325 aerospace industry jobs in Montgomery County. There are 13,300 biotech industry jobs in Montgomery County.

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

County Infotech jobs down 18% Telecom: County down 7%

200 Source: RESI compilation of DLLR data (2002Q2)
170 Source: RESI compilation of DLLR data (2002Q2)
180 160
United States 150
160
Index: 1988Q1=100

Index: 1988Q1=100

140 Montgomery Co.

140 Maryland 130
120 120 United States
110 Maryland
100 Montgomery Co.
100
80 90
60 80
1988Q1
1988Q4
1989Q3
1990Q2

1991Q1
1991Q4
1992Q3
1993Q2
1994Q1
1994Q4
1995Q3

1996Q2
1997Q1
1997Q4
1998Q3
1999Q2

2000Q1
2000Q4
2001Q3

2002Q2

1988Q1
1988Q4
1989Q3
1990Q2

1991Q1
1991Q4
1992Q3
1993Q2
1994Q1
1994Q4
1995Q3

1996Q2
1997Q1
1997Q4
1998Q3
1999Q2

2000Q1
2000Q4
2001Q3

2002Q2

There are 23,200 infotech industry jobs in Montgomery County. There are 11,700 telecommunications industry jobs in Montgomery County.

3
M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

County has 1,100 fewer high County construction job growth

tech manufacturing jobs rate accelerates to 5.8%
105 Source: RESI compilation of DLLR data (2002Q2)
140 Source: RESI compilation of DLLR data (2002Q2)
100 130 United States
95 120
Index: 1988Q1=100

Index: 1988Q1=100
90 110 Maryland
85 United States
100 Montgomery Co.
80 Montgomery Co.
Maryland 90
75
70 80
65 70
60 60
1988Q1

1988Q4
1989Q3
1990Q2
1991Q1
1991Q4
1992Q3
1993Q2
1994Q1

1994Q4
1995Q3
1996Q2
1997Q1
1997Q4

1998Q3
1999Q2
2000Q1
2000Q4
2001Q3
2002Q2

1988Q1

1988Q4
1989Q3
1990Q2
1991Q1
1991Q4
1992Q3
1993Q2
1994Q1
1994Q4
1995Q3
1996Q2
1997Q1
1997Q4

1998Q3
1999Q2
2000Q1
2000Q4
2001Q3

2002Q2
There are 6,900 high tech manufacturing jobs in Montgomery County. There are 28,000 construction jobs in Montgomery County.

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Business services drops 6% How well do the new jobs pay?

220
Source: RESI compilation of DLLR data (2002Q2)
United States
200
We track job growth by average salary to
180
Index: 1988Q1=100

show how well new jobs are paying:

160 Maryland
140 Montgomery Co.
• High: Industries with jobs that pay an
average of $50,000
120
• Medium: Industries with jobs that pay an
100
average of $30,000 to $49,999
80
• Low: Industries with jobs that pay an
1988Q1
1988Q4
1989Q3
1990Q2
1991Q1
1991Q4

1992Q3
1993Q2
1994Q1
1994Q4
1995Q3
1996Q2
1997Q1
1997Q4

1998Q3
1999Q2
2000Q1
2000Q4
2001Q3
2002Q2

average of less than $30,000

There are 58,300 business services jobs in Montgomery County.

4
M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Lower income industries

are adding more jobs Jobless rate falls to 2.2%
130
Source: RESI compilation of DLLR data (2002Q2) Middle: 1.5% 4.5%
125 June 1992: 3.9%
4.0%
120 Low: 3.8%
3.5%
Index: 1988Q1=100

115
110 High: -2.1% 3.0%
105 2.5%
100 2.0%
95
1.5%
90 Jan 1988: 2.6%
1.0%
85 Dec 2002: 2.2%
80
0.5%
Source: MD DLLR
There are 77,200 jobs in high-wage industries, 195,800 jobs in medium-wage 0.0%
industries, and 104,800 jobs in low-wage industries in Montgomery County.
There are 11,500 unemployed persons in Montgomery County.

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

TCA caseload still low

14,000
April 1995: 13,004
12,000
10,000 Federal Government
8,000
Role
6,000 Feb 2003: 2,322
4,000
2,000 Jan 1986: 7,783
Source: MD DLLR
0
Feb-86
Feb-87

Feb-88
Feb-89

Feb-90

Feb-91

Feb-92
Feb-93
Feb-94

Feb-95

Feb-96

Feb-97

Feb-98
Feb-99

Feb-00

Feb-01

Feb-02

Feb-03

There are 2,322 recipients of temporary cash assistance in

Montgomery County.

5
M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

The federal government is a

major component of Worth $10.6 billion
Montgomery County’s economy • The federal government pumps billions
of dollars into the County’s economy.
As an employer,
– Almost 60,000 workers are in federal space, $3.9 billion
– In FY2001, the federal government paid $3.1 $3.1 billion
billion in wages to jobs in Montgomery County $2.7 billion
As a tenant,
– The General Services Administration leases
6.7 million square feet of commercial space in
the County,
As a purchaser of goods and services, FY2001 Procurement FY2001 Wages FY2001 Direct Payments
– FY01’s federal procurement is $3.9 billion the
County’s all-time high. Source: Consolidated Federal Funds Report

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Federal jobs expected to exceed Federal leasing reaches 6.7

1994 levels by 2005 million s.f.
80,000 8,000,000
Workers Square feet
70,000 7,000,000
60,000 6,000,000
50,000 5,000,000
40,000 Leased 4,000,000
30,000 Installation 3,000,000
20,000
2,000,000
10,000
1,000,000
0
0
94

96

97

99

00

01

02

03

05

10

15

1984 1989 1994 1996 1997 1999 2000 2002 2003

19

19

19

19

20

20

20

20

20

20

20

By 2015, jobs at installations are expected to grow by Since 1994, GSA has leased between 6.0 and
Source: M-NCPPC analysis of 38 percent above current levels. Jobs in leased space 6.7 million square feet of commercial space in
Source: General Services
US government data are expected to fluctuate between 22,300 and 25,500. Administration (GSA) Montgomery County

6
M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Health & Human Services Rockville area home to most

leases the most space federal leased space
Other
4%
Gaithersburg
Other
7%
10%
Health &
Nuclear Human
Bethesda
Regulatory Services
67% 15%
Commission Rockville
6% 56%

Dept. of
Commerce
17% Silver Spring
18%
GSA leases 3.7 mil. sq. ft. in Rockville
HHS & Commerce account for 84 percent of (which includes most of North Bethesda),
Source: General Services the County’s federal leased space, 5.6 million Source: General Services 1.2 mil. sq. ft. in Silver Spring, and 1.0 mil.
Administration (GSA) sq. ft. out of a total of 6.7 million sq. ft. Administration (GSA) sq. ft. in Bethesda.

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Leases for 2.8 million s.f. up

for renewal in 2003-2005
1,800,000
1,600,000
sq. ft. of leased space by lease expiration year Where Is the County’s
1,400,000
1,200,000
Office Market Headed?
1,000,000
800,000
600,000
400,000
200,000
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2013

Source: General Services 41 percent of GSA’s leased space in Montgomery

Administration (GSA) County is renewable in the next 3 years (2003-2005)

7
M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

The real estate cycle provides a Montgomery fared better than

framework for understanding Fairfax and region
2001 Oversupply Percent better or worse than March 2002
Expansion 1988 (Phase 3) 5%
(Phase 2) Vacant space
2000
0%
Net Absorption

-5%
Occupied space
1980,1997 2002 -10%

1991 -15%
-20%

1994 2003 -25%

Recovery Recession -30%
(Phase 1) (Phase 4) -35% Region Fairfax Montgomery
Time

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Class A office vacancy rates have Office leasing & occupancy

started to decline continue to grow
Office vacancy rates
10
15% Millions of square feet Leased
C 8
A Occupied
10% All 6
B
4
5%
2

0
0% Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02

Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Office leasing and occupancy growth in
Montgomery County since 1995. The symbols
show sublet vacancy subtracted from the total
amount of leased space.

8
M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Sublet vacancy rate sign of Class A rents have rebounded

possible recovery some since October
$32
Class A Average Asking Rents
Vacant, Class A, sublet space
4.0% $30
% of Space
3.0% $28
Recovery?
2.0% $26
Recession
1.0% $24
Recovery Expansion Æ Over Supply
0.0% $22
Sep-95

Sep-96

Sep-97

Sep-98

Sep-99

Sep-00

Sep-01

Sep-02

Sep-03

$20
Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Looking ahead – office under Montgomery County

construction is 69% leased Office Construction Cycles
Millions of square feet
5
Completed Under Construction Proposed Proposed
4 Under Const.
Millions of square feet
2
Existing
3

2
1
1

0
0
1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2003 2004

9
M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Office Market Recovery

Office Market Recovery
Negative Indicators
Positive Indicators
• Leasing of new buildings may leave
• Office space under construction now is sublet space vacant.
already 69% leased. • U.S. economy is in the doldrums,
• New starts are unlikely until recovery is undermining confidence.
sure because of almost no preleasing. • There are still 800,000 sq. ft. under
• There is positive space absorption & the construction.
County appears to have weathered the • 4.5 million sq.ft. available for
office recession. economic growth (to get to 5% vac.).

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Flex & Industrial Space Is

Doing Better Than Office
9.0%
• Declining vacancy
rate now at 6.8% Residential Market
• Positive 6.0% Mar-00
Mar-01
Indicators Are Strong
absorption
Mar-02
• Increasing rents 3.0% Mar-03 Growth in Some Indicators
Appears to Slow
0.0%
Vacancy Rate

10
M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Number of housing sales

Housing prices continue to rise
high and steady
Number of housing sales
15,489 15,372
$300,000
14,723 14,779 Median price of single-family home
13,088 $250,000
10,357
9,403 $200,000

$150,000

$100,000

$50,000

1st Half 2002

1987
1988
1989
1990
1991
1992

1993
1994
1995
1996

1997
1998
1999

2000
2001
1996 1997 1998 1999 2000 2001 2002

Source: M-NCPPC Research &

Source: MRIS
Technology Center

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Housing units continue Housing affordability shows

to sell quickly slight decline
But a rise in interest rates could increase this.
Days on the market
111 1.2
Affordability index for existing Montgomery County homes
1

0.8

55 0.6
45 0.4
29 26 0.2

0
89

90

91

92

93

94

95

96

97

98

99

00

01

02
19

19

19

19

19

19

19

19

19

19

19

20

20

20

1998 1999 2000 2001 2002

The higher the score, the more affordable the
Source: M-NCPPC Research & housing is. A score of 1 means the monthly
Sources: MRIS, COG Technology Center cost of buying a home equals 28% of gross income.

11
M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

The median income household can 2002 brings marked increase

afford the median priced townhouse in most prices
New townhouse prices stabilize
1.8
Affordability index Existing Townhouse New Single Family
1.6 $500,000
Median Prices
1.4 $450,000
1.2 $400,000
New Townhouse
1 $350,000 Existing Single Family
0.8 $300,000
Existing Single Family $250,000
0.6 New Townhouse
0.4 New Single Family $200,000
0.2 $150,000
Existing Townhouse
0 $100,000
$50,000
$0
*
90

91

92

93

94

95

96

97

98

99

00

01

02
19

19

19

19

19

19

19

19

19

19

20

20

2002*
1987
1988
1989
1990
1991
1992

1993
1994
1995
1996
1997
1998

1999
2000
2001
20

The higher the score, the more affordable the

Source: M-NCPPC Research & housing is. A score of 1 means the monthly Source: M-NCPPC Research &
Technology Center cost of buying a home equals 28% of gross income. Technology Center 2002 prices are for the first half of the year only.

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Mortgage rates continue to fall Apartment vacancy rates rise

Economic downturn, new units reduce pressure
30 year fixed effective mortgage interest rate
12.0%
5% Vacancy rate
10.0% 4.4% 4.2%
Trend 3.7%
8.0% 4% 3.5%
3.0%
6.0% 3% 2.5%
1.8%
4.0% 2%

2.0% 1%

0.0% 0%
1996 1997 1998 1999 2000 2001 2002
1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

Source: Federal Home Loan Source: Montgomery County Office of

Bank Board. Landlord-Tenant Affairs

12
M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

About 65,500 new units were built

Rents continue upward trend
from 1988 through 2002
8,500
Monthly rent, in dollars
$1,200 7,500 Housing completions, in units.
$1,076 2002 data are preliminary.
$1,030
6,500
$928
$871 5,500
$900
$726 4,500
3,500
$600
2,500 Single-Family Detached
1,500
$300 Townhouse
500 Multi-family
1998 1999 2000 2001 2002
-500

2002*
1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001
Turnover rents (Unsubsidized)
Poly. (Turnover rents (Unsubsidized))
Source: Montgomery County Office of Source; M-NCPPC Research & Townhouse and multi-family increased in 2002;
Landlord-Tenant Affairs Technology Center 2002 completions exceed prior 12 years

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Single-family approvals exceed

Major 2002 completions include:
multi-family, reversing recent trends
• King Farm 542
Pipeline of Approved Development, January 31, 2003 46,857
• Fallsgrove 439
• Avalon Bay 386
24,841
• Kingsview Village 289 22,016

• Kings Crossing 289

• American University Housing* 250
• Pinnacle (Germantown Town Center) 211
Single-Family Multi-Family Total
Source; M-NCPPC Research & *Conversion from office to residential use. Source; M-NCPPC Research &
Technology Center Technology Center

13
M-NCPPC Research & Technology Center

I-270 Corridor focus of approved

residential development

5,000+
4,000-4,999
2,000-3,999
1,000-1,999
500-999
>500

Source; M-NCPPC Research & Pipeline of Approved Development,

Technology Center January 31, 2003

14
 Acknowledgments
Montgomery County Department of Park and Planning

Charles R. Loehr, Director

Drew Dedrick, Chief, Research and Technology Center

Project Team

Wayne Koempel, Research Planner

Karl Moritz, Research Manager
Fred Peacock, Research Supervisor
Sally Roman, Research Supervisor

Other M-NCPPC Staff

Mary Goodman, Information Specialist

Matthew Greene, Senior Planner
Patricia Epperly, Administrative Aide
Charles Coleman, Reproduction Specialist

Other Contributors

Daraius Irani, Associate Director of Applied Economics, RESI, Towson University

John Hopkins, Research Associate, RESI, Towson University

For more information, please contact:

Karl Moritz, Research Manager, 301-495-1312
[email protected]