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Maryland Passes Bills To Ease BID Creation, Target Office Vacancies

Commercial property owners in places like Rosslyn, Capitol Riverfront and NoMa all have the advantage of being part of a business improvement district, allowing them to jointly promote the neighborhood and host community events. Montgomery County property owners have not enjoyed the same benefits, but that could be about to change. 

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Aerial shot of Bethesda and North Bethesda

The Maryland legislature passed a bill on the final day of its session Monday making it easier to form BIDs in Montgomery County. The bill lowers the threshold of property owners' signatures needed to create the district from 80% to 51%. The legislature also passed a bill to help incentivize small businesses to lease office space and bring down the vacancy rate. 

The BID measure, which passed with a near-unanimous vote and is expected to be signed by Gov. Larry Hogan, lowers the requirement just for Montgomery County. A statewide bill that would have lowered the threshold in all counties from 80% failed last year. By comparison, DC requires 51% of property owners (25% in the CBD) and Arlington County requires 50% of property owners to sign on to form a BID.  

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Bozzuto Construction's Mike Schlegel with Washington Property Co.'s Charlie Nulsen at a ULI event in 2014

Washington Property Co. president Charlie Nulsen said property owners in Bethesda, Silver Spring and Wheaton — all submarkets where WPC holds assets — have been discussing starting a BID. 

"There is a general consensus that this is the right direction to go among property owners," Nulsen said. "Everyone has been anxiously awaiting this state legislation, which enables it to happen, and now we need to take the next steps to move it forward. We have pretty widespread support in the central business district."

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Then-Montgomery County economic development director Steve Silverman at his desk in 2014

Steve Silverman, the former Montgomery County economic development chief who now runs his own lobbying firm, helped push the bill through the legislature and expects it will take about one year for BIDs to form in the county. He also pointed to Bethesda, Wheaton and Silver Spring, adding in White Flint and Gaithersburg, as areas he expects could create BIDs.

He said there has been a strong appetite among property owners to form the private partnerships to help create neighborhood identities. He said the county's limited marketing budget focuses on promoting the county as a whole and is rarely able to market individual submarkets. 

"That has historically been a challenge for these submarkets," Silverman said. "There is a place there, but people don’t know about it. We’re very fortunate to get this passed to help creation of these BIDs in the county."

Now that Montgomery County has lowered its threshold to 51%, Silverman said he expects Prince George's County, which supported the previous statewide bill, will soon follow suit. 

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The 101K SF office building at 9600 Blackwell Road in Rockville where REGENXBIO leased 10K SF as part of the MOVE program

The Maryland legislature also passed a bill Monday aimed at reducing office vacancies. Dubbed the Make Office Vacancies Extinct (MOVE) program, it would provide matching funds to counties that incentivize small businesses to lease office space.

Montgomery County is the only one with such a program in place, which it launched in December 2014. The program has since provided $1.25M in grants to 48 companies that either moved from outside the county or signed their first office lease. The program targets small businesses by providing grants only for those leasing 10K SF or less. 

"Companies like Marriott and Lockheed Martin are wonderful, but they’re so large they have the leverage to negotiate their own deals," said Del. Jeff Waldstreicher (D-Montgomery), the bill's sponsor. "That’s great for them, but small businesses don’t have that same leverage."  

The businesses that have taken advantage of the program so far include Regenxbio, a biotech company that relocated to a 10K SF Rockville office; L-Soft, an IT company that moved from Prince George's County to a 5K SF Bethesda office; Targeted Microwave Solutions, a tech company that signed for 7,500 SF in Gaithersburg; and Kalibri Labs, a startup that opened its first office in a 6K SF Rockville space.

The grant gives companies up to $8/SF toward the space, so a company signing a 10K SF lease could receive an $80K check from the county. 

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Maryland Gov. Larry Hogan at the MGM National Harbor grand opening

Hogan still has to sign the bill and allocate the funding for the matching grants in his budget, since the bill was passed as discretionary and not mandatory spending.

Silverman, who created the MOVE program when he led Montgomery County's economic development, and lobbied on behalf of the state bill, said he is sure the governor will sign the bill, since it passed nearly unanimously. But it will be a challenge to convince him to set aside state money for the program. 

"It's going to require an effort," Silverman said. "He’s been focused on manufacturing jobs in challenged communities like Western Mayland and Eastern Shore ... Nobody is focused in on this office vacancy issue, which will only be solved by more small and medium-sized businesses taking space."

If the state does match the county's grants, county economic development official Lily Qi said it will greatly boost the number of small businesses that lease space in the county. Montgomery County currently has a vacancy rate of 17.2%, according to Cushman & Wakefield's Q1 office report. 

"It will help tremendously," Qi said. "It will make us much more competitive. This is an increasingly competitive market ... We have a lot of residents who want to start their own businesses. This is a way to incentivize them to take their businesses to the next level by taking real office space instead of running it in their basement."