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.