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Land for Jobs in the I-270 Corridor

Montgomery County, December 1995

Inventory of Land for Jobs along Interstate-270

This inventory of land for jobs was taken from the Maryland Tax Assessor's Property File and other, internal, sources maintained by the Research Division of the Montgomery County Planning Department. Properties along I-270 that have current or recommended zoning to support office or Research and Development (R&D) land uses comprise the inventory. The study area is one traffic zone wide on either side of I-270 from Clarksburg to North Bethesda except around Shady Grove where the area is widened to include the Traville site to the west and the King Farm to the east. The campus of the Shady Grove Life Sciences Center is virtually built out and is not included in the inventory. In all, 120 parcels, both vacant and redevelopable, two acres and larger, are included. Their total area is over 3,000 acres with capacity for 190,000 additional jobs. Over 80 percent of the acreage and remaining job capacity are on vacant sites.

The inventory of sites is shown in maps and tables at the end of the printed report. Copies are available from the Research & Technology Center.

Summary

• The approved development pipeline in the study area is 41,000 jobs. Another 16,000 jobs worth of transportation capacity is now available for new pipeline approvals. This 57,000 jobs represent the supply of land for development in the short term.
• In total the supply of vacant land for jobs in the I-270 study area will accommodate 163,000 jobs. An additional 26,000 jobs can be accommodated on redevelopable land.
• Demand for new job sites is light now but is expected to be heavy in the coming decades as the biotechnology sector moves into its strong growth phase and small companies grow.

As businesses and government employers look for sites for expansion, consolidation, or relocation along Interstate 270 in Montgomery County they will find a variety of choices. The potential development of these sites may be viewed in three ways:

• Timing of development
• Size of site
• Type of development

Timing and ability to move ahead

The ability of land to proceed to development, from the public sector's point-of-view, depends on the capacity of infrastructure such as sewer, water, and transportation facilities. From the land owners and developers' points-of-view, market and financial considerations predominate in the timing of development.

1. The Public Sector - Adequate Public Facilities and the Supply of Land
   1. Immediate through the Next Five Years
      There are many sites now available for development along the corridor. They are currently in the pipeline of approved development indicating that there is, or soon will be, infrastructure capacity to support them. Sixteen projects are in the pipeline with capacity for 41,000 additional jobs. There is also capacity to accommodate an additional 16,000 jobs beyond the pipeline, primarily in Germantown and the Shady Grove R&D Village. The total currently available capacity of 57,000 jobs is enough to accommodate 14-23 years of growth, based on past and forecast growth rates.
      
      This does not mean that all employers or developers seeking a site along the corridor will find one that meets their needs at a price that they can afford. At any given time, some sites, although available for development according to public sector rules, are not offered for sale or development by the owners. Many are being held either for further development by the businesses that own them or in anticipation of a stronger market that will make development more profitable in the future.
   2. City and "Loophole" Properties
      "Loophole" and city properties can develop under less stringent Adequate Public Facilities tests. They may add capacity beyond the current pipeline for the next few years. "Loophole" properties are those lots recorded prior to 1982 and registered with the Planning Board by July 1, 1990. They only have to pass Local Area Review tests and not Policy Area wide tests for traffic congestion. Therefore these properties are freer to develop if the traffic in their vicinities can be brought within standard levels with modest transportation improvements. This loophole provision expires in July 2001.
      
      The inventory contains 16 "loophole" properties in the inventory. Four are now in the pipeline with a total of 3,950 remaining jobs. The IBM site in Rock Spring Park (map tag #128) accounts for 3,500 of these and the others are in Germantown. The other 12 "loophole" properties could accommodate 12,000 additional jobs. Three-fourths of this job capacity is at the COMSAT site in Clarksburg.
      
      There are 36 parcels in Rockville or Gaithersburg with the capacity for about 38,500 remaining jobs. Most of these jobs are concentrated in two places. About 13,000 are in the northern part of Gaithersburg on or near the Casey property between the railroad and I-270 and 16,500 are on the Thomas Farm in the Shady Grove area of Rockville. They can presumably develop at any time that they pass the respective municipalities' equivalent of local area transportation review (LATR) and will not have to pass the Policy Area wide review.
2. Long-Term Supply of Land
   1. Other Land Resources: Redevelopable Sites

      Properties with the capacity to develop at higher floor area ratios provide additional potential development capacity for the long-term future. These redevelopable sites have capacity to support 26,000 more jobs. Although they have capacity, they are not necessarily available on the market because of incompatibility with present uses or future expansion options. However, as present uses become obsolete, leases expire, or land values increase, redevelopment becomes a greater possibility. Therefore, the full capacity of these sites needs to be considered in an evaluation of the full long-term development capacity of the corridor's land.

   2. Added Capacity from Future Infrastructure Construction

      In the longer term, additional infrastructure capacity will be built to support development. Major infrastructure additions, focused around Clarksburg and Shady Grove, will increase future development capacity. Development capacity in Clarksburg will be increased by additional and improved I-270 interchanges, expanded sewer and water service, and a transit way extending from the Shady Grove Metrorail station through Clarksburg.

      The Shady Grove area already has many important transportation resources. These include I-270 interchanges at I-370 and Shady Grove Road, MD 28, Route 355, and the western terminus of the Metrorail Red line. There may be two major additions in the next 20 years, the Inter-County Connector (ICC) and the transit way through Clarksburg. If built, the ICC will connect I-270 with the I-95 corridor near Laurel. The ICC would provide additional access to the central I-270 corridor from eastern Montgomery County and the I-95 corridor between Baltimore and the Washington beltway. It remains to be seen how much additional job capacity the ICC would provide for the I-270 corridor. The transit way connecting Shady Grove with Clarksburg will also provide additional transportation capacity within the corridor. This infrastructure will make jobs in the I-270 corridor more accessible.

3. Summary, Short and Long Term Supply of Job Sites

   Sites along I-270 can accommodate expected job growth for the foreseeable future. Many are available today and others can reasonably be expected to become available in the future. There will also be a great need for sites, even though demand is slight now, if expanding businesses are to find locations here well into the next century.

   However, the size of the available inventory of sites for jobs may be reduced by owners who want to change their zoning from job to residential uses. This unusual occurrence, which would normally be considered a down zoning, comes from the currently stagnant commercial real estate market and the desire of owners to generate a positive cash flow sooner. The owners of two major sites in Germantown have requested that their sites be approved for MXPD zoning so that they may develop portions of them for housing. Likewise, the Thomas Farm, a 266 acre property in Rockville, with capacity for over 16,000 jobs on R&D zoning, is being considered for predominately residential development which would substantially reduce its job capacity. The needs of developers to find a ready market for their products during this slack commercial market may threaten the long-term supply of economic development sites in the County.

4. The Demand Side
   1. Market Conditions and Job Growth
      While we do not know the future, we can use several methods to estimate a range of years it may take for the real estate market to develop these sites. Past growth gives some indication of future growth. Between 1980 and 1995 we had the recession of 1982, the great boom years of the mid to late-eighties, the recession of 1990-91 and the slow growth, restructuring period since. This mixture of fast, slow and negative growth periods in jobs provides one estimate of future growth. It should be noted that during the boom market period in the mid-eighties some development that could have occurred was held up by infrastructure capacity constraints. If the boom had been unconstrained the growth rate would have been higher and absorption periods correspondingly shorter. The 1980-1995 growth in the I-270 corridor was 61,000 jobs (4,100 jobs per year), 36% of the Countywide growth. If this same rate of job growth were to occur in the future, the land along I-270, identified in this study, would be fully absorbed in about 46 years assuming average FARs.

      From 1979 through 1993, 520 office and R&D buildings were built in the County totaling over 33 million square feet of floor area. The I-270 corridor accounted for one-third of this development, 11 million square feet in 156 buildings. The development in these 15 years represents about one-fifth of the remaining capacity in the corridor. This rate of absorption implies that there are 72 years of remaining capacity if all of this land is used entirely for office and R&D buildings.

      According to the Round 5.2 Cooperative Forecast, the study area is expected to receive an additional 62,000 jobs over the next 25 years or 2,480 jobs per year. This forecast would use up about one-third of the remaining I-270 job capacity by 2020. Capacity for about 127,000 jobs would remain at the end of this period. At this rate the job capacity of this land would be exhausted in 76 years.

      Although the job capacity along the corridor will theoretically last a very long time before it is exhausted, the inventory of available sites must be sufficiently greater than expected growth to offer choices to companies moving into or expanding jobs in the County. Not all of these sites will become available for development at one time. Many are partially developed and then the remaining capacity of the land is tied up for many years before they are developed to their full potential, if they ever are.

      Although the demand for site development is now slow the long range prospects are strong. Market conditions affect timing of site utilization. Presently, it seems that the market for additional commercial sites and office space will be weak over the next few years. Federal government downsizing threatens to eliminate many government and government dependent jobs. There is uncertainty about how many jobs will be eliminated versus being privatized, as was done during the mid-1980s. The uncertainty has dramatically reduced the number of government and private employers making major space moves at this time.

      Speculative developments are rare in the 1990's. Financiers of commercial projects require significant preleasing before construction financing is provided. Many larger firms that might have been acquiring larger spaces for expansion or consolidation, have recently cut jobs by downsizing, restructuring, or divesting. Some sources, including an article in the July 1995 National Real Estate Investor, now consider corporate downsizing to be complete. Once downsizing is over, sublet space is absorbed, and some obsolete older buildings are taken off the market, the demand for office space will translate into the demand for new buildings. Leasable office spaces of 50,000 square feet and larger are in short supply and this is one indicator that office building may resume soon. However, there is a large supply of smaller spaces, particularly in older buildings, that may be suitable for smaller and startup firms whose numbers have been expanding rapidly in the County.

   2. Biotechnology as a Source of Growth
      The work of the biotechnology industry in Montgomery County is of worldwide importance. Much of the work of decoding the human genome, related genetic therapy applications, and other important research is being done here. A rich biotechnology agglomeration of private firms and public institutions are located in the County, mostly in the I-270 corridor. This group includes more than a hundred firms, NIH, NIST, the FDA, and the Shady Grove Life Sciences Center. The Life Sciences Center houses the Center for Advanced Research in Biology (CARB), and campuses of the Johns Hopkins University and the University of Maryland. As the number and size of these firms increase, the attractive mass grows.

      Biotechnology is starting to emerge from its basic research and early innovation phase. At this stage, it does not occupy nearly the space that it will some day. The biotech industry will grow to many times its present scale as it moves from basic research to product development and marketing. The rapid growth phase should be underway within the next ten years. Several important patents have recently been granted that should help genetic therapy technology move into its commercial phase. When this industry does take off, Montgomery County is likely to be one of its main focal points. The availability of land along the I-270 corridor will play an important role in accommodating this growth.

      Many of the more than one-hundred firms engaged in this work are, or will be, expanding beyond research into marketing and manufacturing in the coming years. Since research, by itself, does not generate revenue, these firms are always searching for funding. They may find funding in the venture capital markets to form their own manufacturing and marketing arms or they may be bought by large pharmaceutical firms which already have these facilities. Whatever their expansion path, they face choices of whether to expand here or locate these new functions and facilities elsewhere, as some have already chosen to do. The challenge to the County is to retain these firms as they move through the difficult period of expansion, restructuring and refinancing. The availability of a wide choice of sites here will help them choose to expand in Montgomery County. If these expanded functions do not locate in the County, biotechnology may never become a major employment sector in Montgomery County. If many research firms do expand their functions here, the biotechnology sector will need much more space along the I-270 corridor in the next twenty years.

      These labs are on the forefront of a revolution in technology which some believe will be as big as electronics in changing the world. Economic development agencies see these labs as valuable seeds for economic growth and they are being courted with strong incentives to relocate to other jurisdictions near and far. Biotechnology firms from Montgomery County are already exploring moves to Virginia and Ohio in response to lucrative offers.

      c. Small Businesses as a Source of Expansion
      Small businesses are the source for most job growth, especially during downswings in the business cycle. A recent special issue of Inc. Magazine, titled "The State of SMALL BUSINESS," revealed many characteristics of entrepreneurship.

      • At any time, about 4 percent of the adult population is starting a business.
      • Most entrepreneurs start businesses where they live.
      • Half the small businesses last at least five years.
      • Asset-rich individuals are most likely to become entrepreneurs.

      As an area with some of the highest education and wealth levels in the nation, the County has many workers with skills and knowledge appropriate to starting businesses in the information age. Workers that have been let go from large, restructuring employers are in good positions to start their own firms.

      In Montgomery County, among the business sectors that predominantly use office space, 89 percent have fewer than 20 employees and therefore need less than 5,000 square feet of office space. Spaces of this size are fairly abundant at this time and larger spaces can be split to accommodate smaller firms.

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Size of sites

The land for office and R&D jobs along I-270 comes in many sizes ranging from two acres ( the smallest parcel size considered in the inventory) to more than 100 acres. Twelve of these sites are over 100 acres (some of these are clusters of smaller parcels under single ownership). These 100 acre+ sites account for 63 percent of the acreage and job capacity in the inventory.

Most of the zoning along the corridor limits the density of development to low rise densities of about a 0.5 FAR (floor area ratio). This means that the gross floor area of buildings on the site cannot exceed one-half of the land area. Most of the buildings will be of moderate cost low rise construction, from one to four stories.

Buildings of between 70,000 and 100,000 square feet are considered by many to be the most economical to build. They offer moderate construction costs and efficient size floor plates which can support a reasonable level of core facilities such as lobby, elevator, restroom, hallway, and utility spaces. A 100,000 square foot building at a 0.5 FAR will require a site of 4.59 acres. Larger sites are often developed with multiple buildings of this size.

Sites of ten acres are often considered a minimum size to be "signature sites." A ten-acre site, at 0.5 FAR, will accommodate 218,000 square feet of office. A 10-acre site is large enough to accommodate 872 office workers at 250 square feet per worker, larger than most employers in Montgomery County. Among the private employment sectors that are apt to use office space there are only 15 establishments with 500 to 999 workers and 18 with more than 1,000 workers. Five-hundred workers typically require about 125,000 square feet, a modest size office building. Nearly 80 percent of the establishments in these sectors have fewer than 10 workers.

For reference, two well-known signature sites in the Rock Spring Park are the Lockheed-Martin and Marriott headquarters. The Lockheed-Martin building is 241,000 square feet on 26.5 acres, a FAR of 0.21. The nearby Marriott headquarters is 808,000 square feet on 33.65 acres, a FAR of 0.55. According to Land Use Digest, nationally, "the average corporate headquarters contains 350,000 square feet and allocates 285 square feet for each employee."

R&D uses more space per worker (350 square feet per worker are usually assumed) so a ten-acre site will house about 623 workers.

Large sites, of 100 acres or more, provide opportunities for major campus developments which become focal points for the economic structure of the County. Today, the Shady Grove Life Sciences Center, Rock Spring Park, and the National Institute of Standards and Technology are campuses which provide this type of focus in the I-270 corridor. Their importance goes beyond the number of jobs on their sites. Smaller sites develop in relation to these focal points. Within the past decade, the Marriott headquarters in Germantown and the FDA consolidation in Clarksburg were near misses in attempts to develop additional focal points in the corridor. When the County has a chance to host another such major economic development, it would be a missed opportunity if no suitable sites were available at the time.

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Type of Use

Two types of land use, office and R&D are considered in this inventory. The land use characteristics of low-rise office and R&D are not drastically different. Either use can locate by right on most of the zones in this study, with the following restrictions: The I-4 zone allows general office only by special exception. The R&D zone limits general office to 50 percent. The O-M zone limits R&D uses to 30 percent and does not allow manufacturing.

Office space development usually uses land more intensively than R&D space but at these low densities the two uses will probably be similar. Office buildings typically have more stories, higher floor area ratios, and accommodate more workers per 1,000 square feet. However, the zoning in this study does not support very high FARs. O-M is the highest with 1.5 allowed. I-4 allows up to a 1.0 FAR. I-3 allows up to 0.5 or 0.6 with a traffic plan. R&D allows 0.3 or up to 0.5 with the Optional Method of Development. MXPD allows up to 0.75 FAR on the portion of the development plan designated for commercial and industrial uses. No development densities approaching those of the central business districts are expected.

Office space will probably favor sites adjacent to the I-270 highway where they have greater visibility and transportation access. Office space can probably support higher land prices than R&D because of the higher rents generally charged and the higher intensity uses of the space. For these reasons we expect the office uses to generally locate up closer to the highway and the R&D uses to be clustered further away.

In Frederick County, south of the City of Frederick and the interchange with I-70, there are extensive industrially zoned sites which are now starting to develop as warehouse and distribution centers. As of now, there are no known plans for development of office or R&D parks on these sites. At this time, these industrially zoned sites are a complementary resource to the office and R&D sites in this inventory.

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