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Biotech companies leave Montgomery
By Tom Ramstack
THE WASHINGTON TIMES
Montgomery County is having trouble holding on to its place as a
biotechnology mecca as high real estate prices push small companies out
of the market.
The proximity of the I-270 Technology
Corridor to the nation's capital and the National Institutes of Health
(NIH) makes it a hot spot for biotech companies seeking government
contracts, but also an expensive place to do business.
"Lease rates are too high here," said
Kirk Renaud, chief executive officer of BioBrite Inc., a Bethesda
company that produces lights to treat depression and seasonal affective
disorder.
"We have already moved most of our business
activities out of the county and only maintain a small operation here
in Bethesda," he said.
BioBrite has been in Bethesda since 1989,
when the company was paying about $22 per square foot per year for
office space.
Office rental rates are running at $29.20
per square foot per year in Bethesda now, according to Delta
Associates, an Alexandria real estate research firm.
In suburban Maryland, top-quality office
lease prices have increased about 38 percent in the past 10 years.
The cost of leases is taking on greater
importance for biotech companies as the competition to attract them
increases among states.
Montgomery County ranks 16th in costs
among 50 of the top North American and European biotechnology centers,
according to a 2004 study by the Princeton, N.J., consulting firm the
Boyd Co. Inc.
Boyd estimated costs of skilled labor,
leases and other expenses for a 100-employee biotech company occupying
75,000 square feet to be $10.2 million per year in the county.
By comparison, Sioux Falls, S.D., which
is emerging as a biotech hub, costs $8.5 million per year for an
organization of the same size.
"Certain states are more aggressive with
respect to incentives," said John Boyd Jr., a consultant with the Boyd
Co.
The most aggressive states, such as
Florida, North Carolina and Massachusetts, often offer property-tax
abatements and tax credits.
Montgomery County has a reputation for being less generous in giving out the incentives, Mr. Boyd said.
"It doesn't need to be aggressive," he
said. "Montgomery County is attractive for its intellectual capital and
recruiting abilities. It has, in a sense, become a victim of its own
success."
County officials say the characteristics
that always have attracted biotech companies will continue to attract
them, regardless of higher rent costs.
"There are more people with advanced
degrees and Ph.D.s than any other place in the country," said Joe
Shapiro, Montgomery County Economic Development Department spokesman.
"You can be right down the street from the NIH and right next door to
the FDA [Food and Drug Administration]."
Montgomery County is home to nearly half
of Maryland's more than 300 biotech companies, including industry
giants MedImmune, RegeneRX Biopharmaceuticals and Celera Genomics.
"Firms that already have set up shop in
Montgomery County will stay," said Sandy Paul, a Delta Associates vice
president. "I think the issue is whether it will continue to draw new
start-up firms."
The kind of office space typically used
by biotech companies in Montgomery County averages $28 per square foot
per year in 2005, making it some of the most expensive in the nation.
In 1996, the same space averaged $20 per square foot per year.
The county has several incubator programs designed to help start-up companies get on their feet.
Office-lease rates in Raleigh-Durham, N.C.,
a major biotech center, are running slightly less than $20 per square
foot per year.
Northern Virginia rates average $22 to $24 per square foot per year outside the Beltway.
Patrick Crist, vice president of marketing
for medical instrument maker Crist Instrument Co., said Montgomery
County's property values forced the expanding company to move to
Washington County in 1998.
DNA testing company Orchid BioSciences
gave similar reasons last month for its decision to "streamline"
operations by closing its Germantown laboratory.
"Yes, lease prices were a factor in our
decision to leave Montgomery County," Chief Executive Officer Paul J.
Kelly said.
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