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Economic Forces That Shape Montgomery County

Annual Update 2004. Economic Forces That Shape Montgomery County. 2004 Conclusions. National downturn felt in local job market between 2 nd quarters of 2002 and 2003. Jobs: private sector up slightly, but mostly low- and mid-wage industries.

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Economic Forces That Shape Montgomery County

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  1. Annual Update 2004 Economic Forces That Shape Montgomery County

  2. 2004 Conclusions • National downturn felt in local job market between 2nd quarters of 2002 and 2003. • Jobs: private sector up slightly, but mostly low- and mid-wage industries. • Federal impact: leasing & employment outlook still strong • Commercial market: “short, mild” recession longer than expected. • Housing market: price increases accelerate as affordability suffers.

  3. Pluses & Minuses • Jobs: private sector adds some jobs during depth of recession, second half of 2003 looks better, unemployment rate still low • Federal government retains strong role as employer and tenant • County still in good position to weather commercial space recession • Housing market still extremely strong

  4. Pluses & Minuses • Jobs declined in second quarter. Losses felt disproportionately in technology and other high-wage industries • Commercial construction: exiting short, mild recession phase; vacancy rates are up • Housing affordability worsens.

  5. Job Growth Performance 2nd Quarter 2002 to 2nd Quarter 2003

  6. Job growth themes • The number of jobs increased by 1,921 to 452,169 • Biotech bright spot among tech sectors. • Aerospace: down 17% • Biotechnology: up 5% • Infotech & telecom (infocom): down 3% • High tech manufacturing: down 11% • Higher wage industries lost jobs. • Third quarter preview: jobs up 384 over previous year.

  7. Total jobs grew by about 1,900 Second quarter figures (change from previous year) Source: RESI compilation of DLLR data Between the second quarters of 2002 and 2003, Montgomery County added 1,921 jobs, or 0.4 percent.

  8. Tech jobs losses continue locally and nationally Source: RESI compilation of DLLR data (2003Q2) Index: 1990Q1=100 Montgomery Co. Maryland United States There are 51,000 high tech jobs in Montgomery County.

  9. Aerospace jobs drop sharply Source: RESI compilation of DLLR data (2003Q2) Index: 1990Q1=100 Maryland United States Montgomery Co. There are 15,000 aerospace industry jobs in Montgomery County.

  10. Biotech grows 5% Source: RESI compilation of DLLR data (2003Q2) Montgomery Co. Index: 1990Q1=100 Maryland United States There are 8,500 biotech industry jobs in Montgomery County.

  11. County infocom jobs down 3% Source: RESI compilation of DLLR data (2003Q2) Index: 1990Q1=100 United States Maryland Montgomery Co. There are 19,500 information technology and telecommunications industry jobs in Montgomery County.

  12. County has 1,100 fewer high tech manufacturing jobs Source: RESI compilation of DLLR data (2003Q2) Index: 1990Q1=100 Montgomery Co. Maryland United States There are 8,700 high tech manufacturing jobs in Montgomery County.

  13. Construction jobs hold steady Source: RESI compilation of DLLR data (2003Q2) United States Index: 1990Q1=100 Montgomery Co. Maryland There are 28,700 construction jobs in Montgomery County.

  14. Wholesale trade: slight decline Source: RESI compilation of DLLR data (2003Q2) United States Maryland Index: 1990Q1=100 Montgomery Co. There are 10,600 wholesale trade jobs in Montgomery County.

  15. Retail trade drops 1% Source: RESI compilation of DLLR data (2003Q2) United States Index: 1990Q1=100 Maryland Montgomery Co. There are 49,500 retail trade jobs in Montgomery County.

  16. Business services unchanged Source: RESI compilation of DLLR data (2003Q2) Maryland Index: 1990Q1=100 Montgomery Co. United States There are 94,800 business services jobs in Montgomery County.

  17. Health services follows US trend Source: RESI compilation of DLLR data (2003Q2) Montgomery Co. United States Maryland Index: 1990Q1=100 There are 38,500 health services jobs in Montgomery County.

  18. Engineering & management services down 7.4% Source: RESI compilation of DLLR data (2003Q2) United States Index: 1990Q1=100 Maryland Montgomery Co. There are 21,900 engineering & management services jobs in Montgomery County.

  19. Real estate jobs climb 3% Source: RESI compilation of DLLR data (2002Q2) United States Index: 1988Q1=100 Maryland Montgomery Co. There are 11,700 real estate jobs in Montgomery County.

  20. How well do the new jobs pay? • High: Industries with jobs that pay an average of $50,000 • Medium: Industries with jobs that pay an average of $30,000 to $49,999 • Low: Industries with jobs that pay an average of less than $30,000 We track job growth by average salary to show how well new jobs are paying:

  21. Middle-wage industries are adding more jobs Middle: 2.1% Source: RESI compilation of DLLR data (2003Q2) Low: 1.1% Index: 1988Q1=100 High: -1.4% There are 77,200 jobs in high-wage industries, 195,800 jobs in medium-wage industries, and 133,000 jobs in low-wage industries in Montgomery County.

  22. Regional statistics show growth in second half of 2003 At-place employment (change from previous year) Washington MSA Montgomery Co. 2002 2003 2001 Source: BLS, DLLR

  23. Jobless rate back under 3% June 1992: 3.9% Jan 1988: 2.6% Jan 2003: 2.6% Source: MD DLLR There are 13,000 unemployed persons in Montgomery County.

  24. TCA caseload rises slightly April 1995: 13,004 Jan 2004: 2,693 Jan 1986: 7,783 Source: MD DLLR There are 2,693 recipients of temporary cash assistance in Montgomery County.

  25. Federal Government Role

  26. The federal government is a major component of Montgomery County’s economy As an employer, • Almost 60,000 workers are in federal space, • In FY2002, the federal government paid $3.3 billion in wages to jobs in Montgomery County As a tenant, • The General Services Administration leases 6.9 million square feet of commercial space in the County, As a purchaser of goods and services, • FY02’s federal procurement was $4.7 billion the County’s all-time high.

  27. Worth $11.6 billion • The federal government pumps billions of dollars into the County’s economy. $4.7 billion $3.3 billion $2.7 billion Source: Consolidated Federal Funds Report

  28. Workers in federally owned or leased space now exceed 1994 levels Workers By 2015, jobs at installations are expected to grow by 41 percent above current levels. Jobs in leased space are expected to fluctuate between 21,900 and 26,500. Source: M-NCPPC analysis of US government data

  29. Federal leasing reaches 6.9 million sq. ft. Square feet Since 1994, GSA has leased between 6.0 and 6.9 million square feet of commercial space in Montgomery County Source: General Services Administration (GSA)

  30. Health & Human Services leases the most space HHS & Commerce account for 84 percent of the County’s federal leased space, 5.7 million sq. ft. out of a total of 6.9 million sq. ft. Source: General Services Administration (GSA)

  31. Rockville area home to most federal leased space GSA leases 3.9 mil. sq. ft. in Rockville (which includes most of North Bethesda), 1.3 mil. sq. ft. in Silver Spring, and 1.1 mil. sq. ft. in Bethesda. Source: General Services Administration (GSA)

  32. 30 percent of GSA’s leased space in Montgomery County is renewable in the next 2 years (2004-2005) Leases for 2.1 million sq. ft. up for renewal in 2004-2005 sq. ft. of leased space by lease expiration year Source: General Services Administration (GSA)

  33. Where Is the County’s Office Market Headed?

  34. The real estate cycle provides a framework for understanding 2001 Oversupply (Phase 3) Expansion (Phase 2) 1988 2000 1980,1997 2002 Net Absorption 1991 2003 1994 Recovery (Phase 1) 2004 Recession (Phase 4) Time

  35. The Washington, DC RegionClass A Office Market

  36. The region’s vacant Class A office space climbs 1st quarter data, in square feet Source: CoStar Group, Property Professional Database, Analytical Search, Historical Trends

  37. Much of region’s vacant Class A office space is in Northern Virginia Square feet Northern Virginia Suburban Maryland Suburban Maryland Washington, DC Source: CoStar Group, Property Professional Database, Analytical Search, Historical Trends

  38. First quarter 2004 exhibits slowing of Class A office space absorption 1st quarter Class A office space absorption, in square feet Source: CoStar Group, Property Professional Database, Analytical Search, Historical Trends

  39. DC asking rents increases, bucking regional trend Average asking price for Class A office space – first quarter Washington, DC: $44 Regional average: $30 Northern Virginia: $26 Suburban Maryland: $26 Source: CoStar Group, Property Professional Database, Analytical Search, Historical Trends

  40. The Montgomery CountyOffice Market

  41. County’s Class A office space rents steady compared to Fairfax Montgomery County: $29 Fairfax County: $25 Average rent for Class A office space – first quarter Source: CoStar Group, Property Professional Database, Analytical Search, Historical Trends

  42. About 100,000 sf of Class A space absorbed in 1st quarter 2004 Montgomery County net class A office space absorption, in square feet Source: CoStar Group, Property Professional Database, Analytical Search, Historical Trends

  43. Total Class A space grows, as does vacant & occupied. Sublet vacant Direct vacant Occupied Source: CoStar Group, Property Professional Database, Analytical Search, Historical Trends

  44. Vacancy rates return to 1995 levels; Class C space has lowest rate All types Source: CoStar Group, Property Professional Database, Analytical Search, Historical Trends

  45. Improving sublet vacancy rates indicates recovery Recovery? Recession Oversupply Recovery Expansion Source: CoStar Group, Property Professional Database, Analytical Search, Historical Trends

  46. Just over 1 million square feet under construction now Montgomery County office space completed per year in millions of square feet 2004: Under construction2005: Proposed for completion Source: Completions: M-NCPPC Research & Technology Center; under construction and proposed: CoStar Group, Property Professional Database.

  47. Discovery leads major Montgomery County Class A Office completions in 2003 ProjectSquare Ft.Submarket Discovery Communications 600,000 Silver Spring Human Genome Sciences 481,871 Germantown MedImmune Headquarters 210,000 Gaithersburg Twinbrook Metro Station 185,516 Rockville Redland Center 142,500 North Rockville Metro Executive Park 79,000 North Rockville Campus @ Holy Cross 65,000 Kensington/Wheaton Palisades of Bethesda 33,000 Bethesda/Chevy Chase Source: CoStar Group, Property Professional Database, Property Search

  48. I-270 sees several office projects under construction in 2004 DevelopmentSquare Ft.Submarket Expected Delivery Research Office Park 30,000 I-270 Corridor March 2004 Wood Glen Park 66,000 Potomac March 2004 Sandy Spring Phase I 30,000 I-270 Corridor June 2004 1405 Research Blvd. 75,999 I-270 Corridor June 2004 Washington Center 151,230 I-270 Corridor June 2004 Shady Grove Life Sciences 115,691 I-270 Corridor July 2004 Market Sq. @ Shady Grove 228,020 I-270 Corridor July 2004 8515 Georgia Avenue 183,000 Silver Spring August 2004 Chevy Chase Center 151,230 Bethesda/ May 2006 Chevy Chase Source: CoStar Group, Property Professional Database, Property Search

  49. 2 major Class A office projects proposed for 2005 in Rock Spring Park DevelopmentSquare Ft.Submarket Belward II 54,000 I-270 Corridor Sandy Spring Plaza Phase 2 125,000 Rockville Rock Spring Park 217,700 Bethesda/Chevy Chase Rock Spring Center I 300,000 Bethesda/Chevy Chase FallsGrove Research Center 350,000 I-270 Corridor Source: CoStar Group, Property Professional Database, Property Search

  50. Flex space: vacancy rates and rents edge higher Rents Vacancy rates Source: CoStar Group, Property Professional Database, Analytical Search, Historical Trends

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