As director of economic development in Montgomery County since April 2009, Steve Silverman has focused much of his attention on how to fill the empty office and retail space in his suburban jurisdiction.
At the end of 2010, the county had an overall vacancy rate of 15.8 percent, according to Cushman & Wakefield. That’s down from 16.3 percent at the end of 2009, but still too high for Silverman’s liking.
While he expects incremental progress on bringing the number down, the county is trying some things to move along the recovery.
Silverman was a member of the Montgomery County Council from 1998 to 2006, serving twice as its president and chairing the Planing, Housing and Economic Development Committee. In 1998, he was co-chair of the Silver Spring Redevelopment Steering Committee, which played a key role in revitalizing that city’s downtown.
Prior to his appointment, Silverman was the director for aging, healthcare and special projects in the Office of Maryland Attorney General. He recently spoke with The Daily Record about market trends and his view of his neighbor to the south.
TDR: What are Montgomery County’s biggest challenges in commercial real estate?
Silverman: When you get past the federal tenants, which are a major player in the Washington suburbs, there are not that many private sector companies or organizations looking for brand new buildings. There’s a significant amount of Class A and Class B space on the market now in the region. To use a good example of what’s going on, the Henry M. Jackson Foundation, which is a nonprofit organization, was in the market for 95,000 square feet of space. They moved into a vacant building in Bethesda, so it doesn’t add to the property tax values. It’s doesn’t spur the construction business and it doesn’t broaden the commercial tax base.
TDR: What kind of role does Northern Virginia play in those challenges?
Silverman: Competitively they’ve got a lot more opportunities for tenants to move into a vacant office space in Northern Virginia. We just know that it’s going to be harder for us to lure companies from across the river because there’s so much vacant space. We think we can be very competitive but, at the end of the day, if landlords are offering incredible discounts on buildings in Northern Virginia, there is not going to be anything that Montgomery County or the state of Maryland can do to compete with some landlord or lender that is below market.
TDR: What is Montgomery County doing to deal with its commercial real estate challenges?
Silverman: We just changed the rules to now allow hotels to have an easier opportunity to be built in our central business districts. We’re providing incentives to landlords and companies to help buy down rents.
TDR: How much do you expect vacancy to go down this year?
Silverman: It will be incremental. Not enough tenants are out there looking for space. The tenants that are out there are smaller users. If you’re a 25,000 square foot user, you’re suddenly able to get deals that used to be reserved for somebody who had 75,000 or 100,000 square feet.
TDR: Where are the trouble spots in the county in terms of vacant space?
Silverman: There’s no high vacancy rate in one area that’s creating challenges. The Bethesda market is getting gobbled up because the feds have come in and chosen to do some things. The federal government has taken 150,000 square feet of space. At the end of the day that’s still a drop in the bucket compared to what the market has available.
TDR: Is Maryland business-friendly compared to Virginia?
Silverman: Businesses have been growing and thriving in Montgomery County and in Maryland for years. Our unemployment rate is comparable to that of Northern Virginia. When you set aside everything, the Board of Supervisors in Fairfax has been willing to allow far more development to occur, creating massive traffic congestion throughout Northern Virginia because they need the commercial taxes. We think it’s important to support the expansion of the commercial tax base but not to jeopardize people’s quality of life. Northrop Grumman decided to go to Virginia because they got an opportunity to buy a building at the size they wanted to buy. And at the end of the day, Northrop Grumman is 300 employees. We have 485,000 employees in the county. You never want to lose but you shouldn’t overemphasize one corporate headquarters.