In the face of the worst national downturn in a decade, the Baltimore region fared reasonably well in 2002, and local economic development leaders are predicting a slightly better year in 2003.
"Obviously, we will be linked with the fortunes of the state and national economies," said Robert L. Hannon, before he resigned as executive director of economic development for Baltimore County. "But looking at this long-term, I think we have a lot of opportunities" to create growth in the region.
But growth could be slow, said Peter Morici, a professor of international business at the University of Maryland.
"It's going to look a lot more like the economy of the early '90s than the late '90s," Morici said. "We're not going to see 4 or 4 1/2 [percent annual growth] for awhile."
If there's a common theme for the six jurisdictions that make up the Baltimore metropolitan region, it's that business recruiting efforts are being stepped up this year.
The corporate consolidations of recent years, combined with the failure of new industries to develop as anticipated, have put a premium on corporate recruiting, experts on the region said.
While the slowdown has, in several areas, led to office vacancy rates that are at their recent highs, regional economic development leaders are attempting to use the available space as a lure to land new companies -- with some notable successes.
Indeed, across the region, development of new offices, distribution facilities or speculative office, warehouse and factory space will be slow but steady, at least through the first half of this year.
Some of that development is being spurred by the hope that the Bush administration's push for a stronger U.S. defense, as well as its Homeland Security initiatives, will bring new tenants to many of these new facilities.
Here is how experts see the metropolitan area's prospects this year:
Anne Arundel County
William A. "Bill" Badger Jr., president and chief executive of the Anne Arundel Economic Development Corp., said the county has seen some of the effect on the downturn -- such as the partial pullback of the so-called "photonics cluster." Ciena Corp. has had a difficult time, and iPhotonics was acquired by Solectron Corp.
But Badger said he still thinks that sector has a bright future, after capital spending by corporations and the telecommunications industry resumes as expected in the next year or two.
A key project on which work will continue this year is the David Taylor Research Center, the former U.S. Navy installation, which scientists used for studying submarine and other warfare technology. The center was transferred from the Navy to a private development, which intends to construct an opulent office park that will be marketed to high-tech firms.
While Arundel's unemployment rate remains low, the county hopes to add more jobs from the continued focus on domestic security, via the newly created Homeland Security Department, Badger and other officials have said.
The county already has a huge baseline of government agencies with offices in it. That, coupled with Anne Arundel's proximity to Washington, makes it an ideal location for when the Homeland Security agency expands, as it is expected to, Badger said.
Baltimore-Washington International Airport has seen travel volumes drop about 8 percent because of the effects of terrorism, Badger said. But the airport had been growing at a 10 percent to 15 percent clip, "and that clearly was not sustainable," he said.
"The good thing is that this pause is allowing all the infrastructure and construction to catch up," he said. The state-owned-and-operated airport is in the middle of a major upgrade and renovation project.
The Arundel Mills mall in Hanover continues to perform up to promised levels, and in June will see the opening of one its last anchors, the Medieval Times Dinner & Tournament, a 1,000-seat medieval-themed restaurant.
Baltimore
Despite the downturn, development of top-tier office space continues, said M.J. "Jay" Brodie, president of the Baltimore Development Corp., the city's economic development arm.
In fact, more Class A and Class B office space will come on line during the 2002-2003 period than during the prior 10 years combined, according to information provided by the BDC.
That expansion of available office space is crucial, experts say, since vacant space is the bait that helps economic development agencies land high-quality companies that are actually new to the area. And with those companies come new jobs.
One example is Bond Street Wharf, the new office development in the Fells Point area. Morgan Stanley recently announced that it was bringing an operation -- and at least 150 jobs -- to the city, using Bond Street Wharf as the unit's home.
"Do you think we would have landed Morgan Stanley without Bond Street Wharf?" asked Brodie. "I don't think so."
On the city's west side, the former Montgomery Ward building that was converted into office space has drawn tenants and is getting leased up, according to the city's development agency.
Another downtown development theme is retailing: The city is working hard to reverse a longtime trend by boosting its retail base. Baltimore, like cities across the country, has seen downtown retailers leave for outlying areas.
While the city's development agency is attempting to lure major retailers, such as discount department stores, the city also is trying to induce grocery firms to open stores to serve city neighborhoods.
Baltimore County
The county scored some significant economic development victories in 2002 -- despite the lackluster national economy -- and may add more this year, Hannon said.
"I've developed an increasing and deeper appreciation for the work force we have in place, for the educational assets that feed into it, and all the tried-and-true" elements, such as the highways and fiber-optic networks, which keep existing companies in place and draw new ones to Baltimore County, Hannon said. "And certainly the quality of life keeps the people here," and attracts additional residents.
In November, for instance, the Hunt Valley-based commercial leasing firm PHH Arval said it would build a new headquarters just north of Sparks. The project, worth $27 million to $32 million, will allow PHH to add as many as 200 employees to its work force of 1,000, Hannon said. The company -- which considered out-of-state sites -- wants to move its work force into the finished project by February 2004, he said.
In September, Charming Shoppes Inc. of Bensalem, Pa., agreed to buy the cavernous White Marsh warehouse building that Warner Bros. Studio Store abandoned in 2001.
Charming Shoppes expects to open the facility in 2004, initially employing 150, with the work force climbing to nearly 300 in the next several years. The project represents a capital investment of about $25 million for the apparel chain, according to the company and Hannon.
Also last year, firms such as Toyota Financial Services announced plans to place operations in Owings Mills. Toyota Financial, the insurance-and-finance arm of Toyota Motor Corp., said last June that it would place its Eastern region customer service center in Owings Mills.
One of the company's three regional U.S. hubs, the Owings Mills operation of the world's No. 4 carmaker is to employ 440.
According to Hannon, those three deals illustrate two of the economic development strategies the county will continue to pursue this year.
First, while simultaneously working to land new companies, Hannon said that Baltimore County would be putting extra emphasis on business retention.
Deals such as the Charming Shoppes project often grab the headlines, and are important, Hannon said. But if Baltimore County is to protect its employment base of 360,000 people, it has to make sure its 19,000 businesses stay put, he said.
The second order of business deals with geography.
This year, as it has in the past, Baltimore County's business recruiting-and-retention efforts continue to focus on Hunt Valley, Owings Mill and White Marsh as premium places for businesses to locate. But with the $60 million extension of Route 43 moving forward, the county now has an additional 700 acres of prime industrial land to start marketing.
The highway, which will run from White Marsh to Eastern Boulevard near Martin State Airport, won't be completed until 2005. But the county is already talking with business candidates, Hannon said.
The new road "makes that land tremendously attractive," he said. "We're actively working with prospects who have the ability to look over the horizon, to look at the road's completion" and what it will mean for that huge tract.
Carroll County
One of this year's prime directives will continue to be economic development efforts that induce Carroll residents to work in their home county, said Jack T. Lyburn, Carroll County's director of economic development.
Carroll enjoyed some success last year in that department, creating more than 1,000 jobs, Lyburn said. But since 60 percent of its work force of 82,000 leaves the county each day to go to work, there's substantial room for improvement.
The county views that as an opportunity, according to Lyburn.
So do a lot of developers, who continue to construct so-called "spec" buildings -- facilities well-suited for factories, warehouses or even offices, which don't already have tenants in place when the buildings are constructed.
Developers are finding it fairly easy to sign up tenants, one reason those buildings continue to get built.
"We have space available -- not a lot, but some," Lyburn said.
Such projects as the Westminster Technology Park and the West Branch Trade Center will continue to move forward.
So, too, will the redevelopment of the former Springfield Hospital Center into a business-and-academic complex -- a project some estimate could bring more than 1,000 jobs to the county.
Land prices and lease rates in Carroll County are often less than half of what developers can charge in other parts of the region, a factor that is inducing many of Carroll's corporate residents to expand, Lyburn said.
In recent years, firms such as Lehigh Portland Cement Co. in Union Bridge have forged ahead with expansion plans. And late last year, Jos. A. Bank Clothiers Inc., the men's clothing chain that has grown in the face of an economic downturn, announced that it will expand its headquarters and distribution center in Hampstead.
The $1.6 million expansion is necessary to support the company's plans to grow to 500 stores in five years.
All the growth in the county is fueling the housing market, which is seeing the addition of high-end houses selling for $500,000 or more, according to Lyburn. Senior-living facilities are being built, and Carroll County General Hospital is undergoing an $80 million expansion.
Harford County
During 2002, Harford "continued its emphasis on the diversification and growth of technology-related industry, and of industry in general," said J. Thomas Sadowski, the county's director of economic development.
Those same initiatives remain in place in 2003, he said. Some of the areas being targeted include advanced and engineered materials, automotive design and testing, information technology, materials testing, biotechnology scale-ups, and technical services.
"Technology is definitely an area of focus," Sadowski said.
One of the hooks Harford continues to use in its fishing for technology is Aberdeen Proving Ground, the military test and evaluation facility that has seen its allocations increase since the terrorist attacks of September 2001.
There are still discussions about whether the proving ground will house a new School of Counter Terrorism facility. The answer to that question may well come this year, officials said.
One problem that has faced Harford is the scarcity of developable land, so the county is continuing with a project to modernize the U.S. 40 corridor, Sadowski said.
U.S. 40 saw its worth improve in 2002 with the opening of Ripken Stadium, the splendid new minor league ballpark, which is to be followed with other construction. According to Sadowski, three hotels have been built in the general area within the past 18 months, as development starts to gel in the region.
Elements of the award-winning Water's Edge residential and commercial real estate project in Belcamp have come to fruition, giving further credibility to the U.S. 40 revitalization.
Howard County
"There's going to be a lot going on" in Howard County in 2003, said Richard W. Story, chief executive officer of the Howard County Economic Development Authority.
One key initiative is a comprehensive rezoning project, which includes taking a look at new land use -- including along the tired U.S. 1 corridor. That activity, which could take much of this year to complete, will guide development in Howard for most of the decade.
The county will be dealing with a vacancy rate in its top-tier office-space market that is much higher than usual because of the economy's downturn of last year, Story said.
While the normal vacancy rate is about 8 percent to 9 percent, it's now running around 25 percent.
"We're well above our historical average," Story said.
While a higher-than-usual vacancy rate is something of a problem, it also presents an opportunity, since Howard will have available office space it can use in its economic development recruiting.
"It's a mixed blessing," Story said. But "inventory [of available space] is the key to selling" the region to prospective new companies, Story said.
During 2002, it became clear that the downturn in the telecommunications-equipment market was going to cause pain in Howard -- as it has elsewhere in the region -- as the hoped-for emergence as a "photonics cluster" was, at best, delayed.
The pullback didn't merely create vacant space. It also meant that future office space wouldn't be absorbed, as had been expected.
For instance, Bookham Technology PLC said in July that it was shutting down its U.S. operation, which was in Columbia, and cutting the 45 workers there. When the British company first said in 2001 that it was coming to the county, it envisioned creating 1,000 jobs.
But late last year -- underscoring Story's contention that vacant space sometimes presents opportunities -- Columbia was able to land a tenant in the former Bookham site.
In announcing the lease late last month, Corporate Office Properties Trust declined to name the tenant, though sources said it was a U.S. government entity. The federal government is the largest tenant for Columbia-based COPT, one of the largest office landlords in the Baltimore-Washington corridor.