2017 | Real Estate

State Reinforcements Could Be Headed Into County’s Fight Against Empty Office Space

Bill to launch business rental assistance program cleared the state legislature

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Delegate Jeff Waldstreicher

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Montgomery County’s lonely office parks could get a boost with the passage of legislation creating a state grant program for businesses locating or expanding in the area.

Under the “Make Office Vacancies Extinct Program,” the state would give a boost to county initiatives aimed at drawing tenants into empty commercial space. So far, Montgomery County is the only Maryland county to run one of these programs, according to state legislative analysts.

“Montgomery County has had an office vacancy crisis for the past couple of years as businesses large and small seek more urban locations,” said Del. Jeff Waldstreicher, who sponsored the bill.

For instance, Marriott International Inc. recently announced it will move its corporate headquarters from a suburban Bethesda office park to downtown Bethesda in 2022.

Waldstreicher said other jurisdictions are suffering from similar trends.The city of Annapolis and Prince George’s County are having trouble filling storefronts, and the MOVE program could help them tackle retail vacancies, Waldstreicher said.

A legislative analysis estimates that running the new program and providing grants will cost the state $800,000 in the first year and $1.7 million by the fourth year.

To qualify for a state grant, a business must be a start-up moving into its first commercial space in the county, relocating from another state or significantly expanding its operation. The tenants must also sign leases of three years or more.

Initially, the bill excluded stores, restaurants, independent financial brokers and insurance providers from eligibility, but this restriction was removed. Instead, Waldstreicher said counties will design their assistance programs based on their specific needs, and the state dollars will follow the local criteria.

Under the proposal, the state’s Department of Commerce will decide how much assistance funding to award each year, and the grants will be available on a first-come, first-served basis.

The proposal by Waldstreicher (D-Bethesda) is modeled after a “successful Montgomery County program,” the legislative delegation reported in a press release. The county’s rental assistance program gives new businesses $8 per square foot of leased space, up to 10,000 square feet. The county started its program in 2014 and so far has issued 44 grants totaling $1.14 million for an average of $26,000 per grant, the legislative analysis showed.

County Executive Ike Leggett said the program was designed to curb the county’s office vacancy rate, which was 13.5 percent at the time it was started. Those rates have now climbed to 15 percent and have topped 22 percent in the Rock Spring office park where Marriott is currently located, according to a drafted master plan for the North Bethesda area. 

In the county, efforts are under way to revitalize office parks through redevelopment, and Waldstreicher said the MOVE program will work in tandem with these initiatives.

“The bill is not an attempt to sustain an outdated model. The bill is an attempt to bridge to a more modern model, so as those areas redevelop, the remaining office space can be fully occupied,” he said.

Waldstreicher’s bill still needs the governor’s signature to go into effect Oct. 1. However, he noted that the proposal gained bipartisan support and passed the Senate unanimously, so he doesn’t anticipate Gov. Larry Hogan will oppose the measure.