Montgomery County Wants To Chase Boston In Life Sciences. Elrich: 'We Punch Below Our Weight'
“Montgomery County has, admittedly, a really bad reputation for handling development. We are working overtime to change that,” Elrich said at Bisnow’s Mid-Atlantic Life Sciences & Biotech summit on Tuesday. “We punch below our weight, and so my goal is to start punching at our weight.”
The life sciences market’s growth in suburban Maryland and the I-270 corridor has few peers: CBRE tracks it as the third-fastest-growing hub in the country. That’s thanks in part to 358K SF of ground-up, leasable space delivered last year, the most in nearly two decades, according to JLL.
But as tenants become increasingly sophisticated and demand better space not only for their operations but for their employees’ quality of life, the county and its biggest partners are looking for more ways to compete against the nation's largest markets.
“Life sciences and healthcare real estate is certainly the shiny new penny in terms of the suburban Maryland market,” said Adam Schindler, an executive vice president at Colliers. But he said the market is “roughly half — an order of magnitude — of the Boston and the Bay Area.”
Data from CBRE backs this up: Both the Boston-Cambridge and San Francisco Bay Area markets have development pipelines that will bring their life sciences inventory to 30M SF or greater, compared to the roughly 15M SF of current or planned inventory in the D.C.-Baltimore market.
Elrich has been targeting those two markets as he aims to push Montgomery County to be No. 1 in the sector. He said he has intervened when life sciences companies want to leave the county to convince them to stay, keeping the talent and venture capital in place.
One of Montgomery County’s biggest flaws when it comes to life sciences development is permitting, Elrich and others said at the event. The process can be more difficult for lab or biomanufacturing spaces, which have significant energy demands in addition to requiring complex approval for things like chemical storage and live animal testing facilities.
To solve that, Elrich said he is working with the planning office to begin pre-meeting with developers before they submit projects in order to provide them with tips that will reduce friction in the permitting process.
“Permitting is an art form, and sometimes art is really bad,” Elrich said. “We're trying to get them to understand the goal of permitting is to say yes, not to say no.”
Elrich’s pitch occurs against the backdrop of a challenged office market in suburban Maryland. The overall market saw 233K SF of negative net absorption in the first quarter of this year, and it is experiencing a record high vacancy rate at 17.7%, according to CBRE.
Some of that is due to the delivery of new trophy space, namely the Avocet Tower at 7373 Wisconsin Ave. in Bethesda. But the area, which includes the I-270 corridor from Germantown south and east to Silver Spring, Laurel and other markets in Prince George’s County, has seen four straight quarters of occupancy loss, CBRE reports.
The renewed emphasis on lab, biomanufacturing and other related spaces offers a means for developers and county leaders to turn the story of office decline into life sciences growth.
“With the softening of the office market … we really have seen an abundance of capital flow into the market,” Schindler said. “What we're seeing on a day-to-day basis is basically any suburban Maryland office building is now a target for life sciences.”
Raising the profile of the suburban Maryland life sciences market isn’t just a local problem, said Brad Stewart, senior vice president at the Montgomery County Economic Development Corp.
He said other states like California, Texas, Massachusetts and North Carolina have all invested big money into the industry, while Maryland has done comparatively little, relying instead on the National Institutes of Health and other federal funding to prop up the industry.
“The talent pipeline, that's quite honestly an area where the state of Maryland is far behind many other states,” Stewart said. “There's a lot that has to be done here in Maryland to try and catch up.”
Currently, Montgomery County has one submarket in particular where it is directing state and county investment. Elrich said he is partnering with WMATA and the state of Maryland to develop 11.5 acres around the North Bethesda Metro station, formerly White Flint, joining buildings like 935 Prose Street to create a mixed-use life sciences hub.
That kind of urbanized development convinced Maryland Gov. Larry Hogan to “put skin in the game for the first time,” Elrich said, with a $16M investment to improve transportation and other infrastructure needs near North Bethesda.
It will also attract companies used to the more densely urbanized centers in places like the Bay Area and Massachusetts, said Amritha Jaishankar, executive director of the Maryland Stem Cell Research Fund.
“We see this in Boston, Cambridge ... and we're beginning to see it more here,” Jaishankar said. “It definitely is one of the ways that we can catalyze innovation in this space.”
In addition to amenities, prospective life sciences employers are also looking at what the suburban Maryland market is doing to invest in its workforce, particularly through higher education, said Annica Wayman, associate dean for Shady Grove Affairs at UMBC.
Wayman has been working to grow the talent pipeline in the University of Maryland system at its Shady Grove location through graduate degree programs and workforce development programs alike for nontraditional learners, with an eye toward diversity as well.
She said that life sciences companies have told her “one of the greatest pinch points they have” is entry-level employees. Wayman is working to fulfill her end of the bargain with education, but she said those workers won’t stick around if their employer isn’t located in a place where they can afford to live.
“We have to make sure if we're building these spaces that there's affordable housing nearby so that they can get to work,” Wayman said. “These are students that may not have those things ... if we really want to commit to DEI, we have to think about that as well.”
That talent pipeline is crucial to life sciences employers and the region as a whole: Life science job openings increased 71% during the pandemic, and the sector is expected to add more jobs than any other in Maryland over the next several years, according to Transwestern’s Elizabeth Norton.
“Basically, if you build it, they will come,” Norton said at a Bisnow event in December.
That makes more clustered, urbanized spaces with a variety of uses more attractive for tenants.
CORRECTION, MAY 5, 4:50 P.M. ET: A previous headline on this story incorrectly spelled Marc Elrich's last name. This story has been updated.
Mark Boyce, a senior vice president at Transwestern, said just as the office market has shifted toward more highly amenitized locations for workers, life sciences companies want to locate in the same kinds of live-work-play communities to attract and retain talent.
“We always say scientists are people, too,” Boyce said. “The competitiveness to get this talent for companies is real … So how do you differentiate? By putting something in a location that offers something to your employees.”