Just two years ago, we started hearing warnings that the economic vitality of the Washington region — and especially suburban Maryland — was weakening. We called it then the first chill of impending winter.

Last year, winter arrived.

According to the Metropolitan Washington Council of Governments, commercial construction in the Washington metropolitan region fell by 28 percent in 2018.

While that was a precipitous decline, Maryland’s building industry recorded an absolute disaster, by far the worst numbers in the region.

Our state added just 1.4 million square feet of new commercial space, the lowest amount in any single year since 1956. For a little perspective, that was the year President Dwight Eisenhower was re-elected to his second term in the White House.

Overall, developers across the region added 10.4 million square feet of new space, down more than 4 million square feet from 2017, the June report said. Northern Virginia added 5.5 million square feet, and the District of Columbia 3.5 million square feet.

It is difficult to overstate the importance of commercial development for the long-term vitality of our local economy. Commercial projects include offices, stores and industrial uses. Because of the higher costs of such projects, they generate a lot of property tax revenue without requiring a lot of services, the way that new housing developments do.

The primary impact, however, is in employment. Commercial developments create jobs. To keep our unemployment rates low, the region needs to add jobs every year as young people graduate from colleges and technical schools, and new residents relocate here in search of a better life. That has not been an issue here for a long time, as the growth of the federal government and the government contracting sector have supported our economy.

However, in 2017, respected economist Stephen Fuller of George Mason University in Virginia warned that the Washington region was growing significantly slower than other areas around the country in the years following the end of the great recession.

Fuller reported that from 2010 to 2016, “the Boston region’s economy grew twice as fast as the Washington region’s economy, the Atlanta region grew three times as fast, the Seattle region grew almost four times as fast and Houston region and Dallas region each grew approximately five times as fast as the Washington region’s economy.”

It now looks as if Fuller has foreseen the future. The 2018 commercial development figures augur poorly for our economic future.

Maryland has been saddled for a long time with a reputation as not being friendly toward business. Many hoped that the election and then re-election of moderate Republican governor would change that perception. So far, the results have not been encouraging.

This means the state and local governments are going to have to work harder.

We were therefore encouraged by the state and local support for the planned Kite Pharma drug manufacturing plant in Urbana.

The Frederick County Council last week approved unanimously giving the company a $200,000 commercial and industrial tax credit. This is in addition to a $2 million loan from the state Department of Commerce. The California-based drug company will build a 279,000-square-foot building and hopes to add between 440 and 720 new jobs by 2025, according to the county.

These are the kinds of measured, responsible development incentives that Maryland and its local governments can offer to attract companies and create new jobs. But it will take a lot more work to add 10 or 20 such projects, which is what we need to keep pace with neighbors in our region.

(17) comments

Dwasserba

Wow. The hotel wasn't mentioned directly and specifically. Very suspicious.

stjohn42

FNP, you should not print an editorial without an attribution. This looks like someone is shilling for a real estate developer.

oldmagpie11

who wrote this? - no byline. Maybe someone at the Chamber of Commerce?

elymus43

There should be no tax incentives or other breaks for any company coming to any part of Maryland. The taxpayers are the big losers on any deals with companies wanting to come to MD.......

francesca_easa

Self reliance should be required of anybody and any company who wants to live/do business in America. Abe Pollin built Capital One Arena with his own money. Why can't all businesses do the same?

gabrielshorn2013

Spot on francesca. Unfortunately, we now have a system where each jurisdiction pimps themselves out to compete with even bigger pimps. Because of that, business don’t look for the best location based on local talent and basic economics, but rather, what location will pimp themselves the most. It’s a race to the bottom.

DickD

With Amazon coming to northern Virginia, the metropolitan area should be set for more growth and jobs.  But we are almost over the sugar high that Trump and the Republicans gave to the billionaires and large corporations.  So, nationwide there will be a slow down and likely a recession or worse, a depression.  Trump and the Republicans have destroyed monetary policy, so it will be hard to recover from the next slow down.

MD1756

"... It is difficult to overstate the importance of commercial development for the long-term vitality of our local economy. ..." Actually, I believe it is impossible to overstate the importance unless the economic growth comes without population growth. If you are simply replacing lower paying jobs with higher paying ones, that is good. Adding more jobs (thus more population) is bad especially when the growth doesn't completely pay for itself, and those costs should include external costs (i.e., additional pollution, climate change, lower quality of life due to increased traffic congestion, etc.). Politicians and economists need to stop being short sighted. With roughly 7.8 billion people on this planet, how many more do they think we need before the economy is sustainable without population growth? It seems like a significant part of the job growth we've had recently is on the lower half of the income range (i.e., unskilled labor).

francesca_easa

Oops. I missed the part about their 200k tax credit. Frustrating.

francesca_easa

And will Kite Pharma be required to hire 70% of their workforce from the local community? Or will they relocate all of their workers and hire overseas labor requiring more homes and demand on public services, with no boost in economic growth for those who already live here? Will they offer jobs no less than $20/hour? Or will their workers struggle to pay for housing and other costs of living here? Are they getting a huge tax break to build here? Or are they capable of paying for everything on their own?

gabrielshorn2013

Francesca, unless those conditions were stipulated in the original agreement with the State and County, it is up to Kite.

francesca_easa

It should be in every business agreement. Too bad they don't take over Fredericktowne Mall.

matts853

Yes, let’s please keep paving over what little natural spaces we have left to keep the pace of economic ‘progress’ and over consumption of natural resources booming. We definitely need MORE bricks, steel, and asphalt in our daily lives. And there’s simply not enough people in the DMV to keep up our high quality of life sustainable. This is tragic news indeed.

gabrielshorn2013

[thumbup]matt. Couple that with the existing excess capacity of commercial real estate in the DC region. Developers will not invest in new construction if they will knowingly lose money on it. The region is simply overdeveloped already.

MD1756

But don't you know we need public funding for that much needed hotel/conference center in downtown Frederick? According to the supporters, there is no excess capacity there but they still need public money to build it. Go figure.

gabrielshorn2013

[thumbup]

gary4books

Carroll Creek is an ideal place for a hotel. It might even help food vendors on the creek. If we did not need some start-up help, we would have a hotel now on the creek. That is the evidence that the money is needed.

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