Wasn’t the economy supposed to pick up a head of steam when the recession ended a couple of years ago? Wasn’t that how it was supposed to work?
Maybe, but that’s not what happened. And since it ended (or supposedly ended, depending on who you listen to or what you’re reading), we’ve gotten better news in fits and starts … that has been offset by other reports of stagnation and various other wrenches in the recovery, with the occasional report that another recession might have been looming.
The current issues are governmental financial deficits, a (still) flat job scene and a continually tight, but improving, loan market that casts a pall over whatever good news that we might hear. Still, various industries have their own circumstances and news, and it ain’t all bad. Read on.
Business in Maryland
Kathy Snyder, president and CEO, Maryland Chamber of Commerce
Having traveled throughout Maryland, visiting our members and those of local chambers through the fall, I am cautiously optimistic about 2012. While housing sales are slow and unemployment remains high, economists and business owners alike are hopeful for some economic recovery by mid-year.
In Maryland, we have many challenges, and opportunities, ahead. Federal budget cuts will certainly impact spending in Maryland. Its revenue estimates were decreased recently to reflect continuing sluggish retail and property sales.
But Maryland prides itself on its entrepreneurial spirit. If we use this spirit of innovation while prudently managing our resources, we can overcome these challenges and help create more jobs — and therefore, more retail sales and income tax growth.
Among the means to that end are investing in our failing infrastructure; Franklin D. Roosevelt did just that during the Great Depression, putting hundreds of thousands of people to work on projects that had a life value of 50 to 100 years. Investing in our tourism industry: On the 200th anniversary of the War of 1812 and Francis Scott Key’s penning of the Star Spangled Banner, why not spend money to attract people to Ocean City, Deep Creek Lake, Bladensburg, Antietam and St. Mary’s City, as well as Baltimore? And avoid imposing any new taxes or workplace regulations on business, since they’re the drivers of our economy.
Banking
Kathleen Murphy, president and CEO, Maryland Bankers Association
Generally, banks in Howard and Anne Arundel counties are working under the assumption that the two counties are positioned to outperform the more broad Central Maryland market as a result of the BRAC influence, particularly in the Fort Meade area.
That said, our members believe the rest of the Central Maryland market will continue to show steady, but slow, improvement relative to 2011. It is important to remember that banks reflect the communities that they serve, so the growth expectations enable banks to respond to and address lending and other financial services needs for businesses and individuals.
At least this was the industry’s assumption until the Super Committee was unable to make progress with the budget deficit. While Maryland and Maryland banks are well-positioned, the expected economic improvement could be tempered with the mandatory spending cuts now in place. The federal budget challenges could disproportionately impact Maryland’s economic recovery and jobs, given the heavy influence of federal spending in our state.
Commercial Real Estate
Dianna Wilhelm, president, NAIOP Maryland
Last month’s opening of the Inter-County Connector (ICC) marked the debut of the long-awaited and much-debated (nearly) 20-mile highway that provides rapid connections between the I-95 Corridor near Laurel and the I-270-/I-370 regions of Montgomery County.
From a commercial real estate perspective, the ICC is designed to alleviate traffic congestion, reduce commuting times and stimulate economic development. But the regional commercial real estate road to recovery has been filled with many detours and potholes; does the ICC symbolize a smooth, clear path ahead? Although the storm clouds appear to be parting, we suggest a cautious approach entering 2012.
According to the year-end Market Report prepared by NAI KLNB, net absorption for Class A office space approached approximately 435,000 square feet of in the BWI Corridor, with total vacancy decreased from just less than 17% to approximately 11%.
Those are impressive numbers that few submarkets around the country can emulate. The relative lack of new commercial office construction projects in 2011 significantly impacted the perceived softness of the leasing environment.
Developers and landlords are still signing new office and industrial leases, but also seem to be gaining vacancies from tenants that are downsizing or ceasing business operations. With the fruits of the Base Realignment and Closure seemingly behind us, we are anxiously awaiting the next economic stimulator; cybersecurity initiatives and activities could be the answer.
Cybersecurity
Ellen Hemmerly, executive director, UMBC Research Park Corp.
Despite the continued sluggish economy and the spending reduction pressure in the Nation’s Capital, the outlook for cybersecurity business opportunities remains solid in 2012; reliance on the Internet is rapidly increasing, as well as the recognition of the vulnerabilities of cyberspace.
The leading industry sectors focused on cybersecurity include energy, health care, finance and defense. Low-cost cloud computing and virtualization technologies are being increasingly used for key business functions, and we will see more interest and activity in attacking and defending assets to these new infrastructures.
Financial services have been hurt in the recession, but still need to invest resources into ensuring network security; the need for cybersecurity solutions in health care and defense will be especially beneficial for Maryland.
On the defense side, cyber is increasing being seen as a viable weapon and will continue to attract investment. The federal government is becoming more vocal in acknowledging foreign government involvement in major breaches and intrusions, and will continue to fund and adopt technologies to thwart attacks.
The shortage of cybersecurity workers will continue. Specialized certficates and advanced degrees in cybersecurity will be in demand, and universities producing high quality science, technology, engineering and mathematics (STEM) students will be seen as critical partners by corporate and government leaders. The pressure on our leaders to innovate will grow, and will be facilitated by research collaborations with universities and public/private business development programs.
Education
Clara Floyd, president, MSEA
In 2012, educators, parents, policymakers and community members must unite to protect the right that all children have to a great public school education.
Fixing a broken Maintenance of Effort (MOE) school funding law is at the center of the agenda for education advocates. Last-minute legislative changes in 2011 to the MOE, long at the heart of protecting school funding, have allowed local governments to dramatically lower their funding — thus threatening the delicate state/local funding partnership and the continued high quality of our schools.
A broken MOE law puts our children’s education at risk by opening the door to $2.6 billion in local education cuts statewide. Due to variations in how education aid is calculated, the potential impact varies from county to county, but it could mean drastic cuts no matter the zip code. In Howard County, potential cuts could amount to a drop of more than $5,400 per student and $3.7 million per school; Anne Arundel County could see a drop of $3,400 per student and $2 million per school. The MOE must be repaired to ensure that our students do not suffer from such deep cuts.
Health Care
Dr. Joshua Sharfstein, secretary, Maryland Department of Health and Mental Hygiene
2012 will be a pivotal year for health care — a year that will help determine whether we can control health care costs through innovation and implementation of the Affordable Care Act or a year when health care costs wind up controlling us.
This year, the O’Malley/Brown administration will continue to promote cost control through innovation in care delivery and payment, emphasizing reimbursement for the value of health services, instead of volume. The rapid expansion of health information technology will help facilitate this trend. Maryland has moved aggressively toward establishing a statewide Health Information Exchange, the infrastructure that will allow physician practices, hospitals, labs, radiology centers and other health care institutions to share information.
Maryland also will continue to implement critical provisions of the national Affordable Care Act, including establishment of the Health Benefit Exchange, which will provide affordable coverage options to hundreds of thousands of Marylanders.
If we do not use all of these available tools to address rising costs in health care, we will see the public and private sectors struggle further to pay the bills. Addressing cost is a critical challenge for the future of Maryland’s economy.
Manufacturing
Dr. Mike Galiazzo, executive director, Regional Manufacturing Institute
2012 will be the year of Next Generation (NextGen) Advanced Manufacturing, and there are many elected officials getting the bandwagon. President Obama is promoting advanced manufacturing and Gov. Martin O’Malley added it to his list of future industries at his recent jobs summit.
In August, the Regional Manufacturing Institute (RMI) hosted the “Making It in Maryland” manufacturing rally. More than 600 people attended the event, including concerned political leaders, including such as Congressmen Steny Hoyer and John Sarbanes, Gov. O’Malley and Baltimore Mayor Stephanie Rawlings-Blake, among others. Also noteworthy is that Howard County Executive Ken Ulman has spoken with me about advanced manufacturing and innovation.
Last October, Senate President Mike Miller, Comptroller Peter Franchot and others spoke at RMI’s Manufacturing Town Hall; coming up on Feb. 2, Paul Reed Smith, president of PRS Guitars on Kent Island and a leading Maryland manufacturer, will be “Playing a New Tune for Maryland Manufacturing” at an Annapolis reception for legislators and manufacturers.
Manufacturing is back and for good reasons. It is needed to grow jobs. Manufacturing promotes research and development, reduces national debt through exports and expands the middle class. In the BWI Corridor, NextGen Advanced Manufacturing will be created by a highly-educated workforce and entrepreneurial leadership.
Nonprofits
Duane St. Clair, executive director, Association of Community Services
The Association of Community Services (ACS) of Howard County will be working in the upcoming year to address the need for affordable child care and education and training programs for workers who struggle to have an income [sufficient] to live in Howard County.
These two issues came out of the ACS issued report called “Making Ends Meet in Howard County.” The report explained how many low income workers lose public benefits before they have a livable wage to live in Howard County.
As the report states, “Making Ends Meet researchers demonstrate a strong correlation between public assistance support and self-sufficiency — the ability of low income households to feed, clothe and house themselves, get medical care, pay taxes and travel to work. As low-wage workers increase their income, however, they begin to exceed low federally-determined income caps and lose benefits.
“According to the report, Howard County families are particularly vulnerable to financial risk because of our county’s high cost of living. They see their household income reduced because of a loss of benefits, even as their wages increase.”
Residential Real Estate
Patricia Terrill, president, Maryland Association of Realtors
In many ways, 2011 was a repeat of 2010. The year was associated with volatile financial markets, slow job growth, stubbornly high unemployment, concerns regarding European sovereign debt, policy uncertainty emerging from Washington and various state capitals, falling home prices and cautious consumers.
Therefore, we expect that Maryland’s housing market will continue to struggle, for the most part, next year. Though Montgomery (5.1 months of inventory) and Howard (6.7 months of inventory) counties have now reached supply-demand equilibrium (or are at least on the verge of doing so), much of the state remains associated with eight months of housing supply or more (Anne Arundel stands at 8.8 months of inventory).
Unit sales in Anne Arundel rose in October slightly from the same period, with average price declining 9.5%. In Howard County, unit sales declined by 12%, with an average price decline by 6.3%.
For the pace of recovery to accelerate, a few things must occur. First, job growth must accelerate significantly. This will help support both the first-time and move-up buyer markets. Secondly, asset prices must continue to rise, including equity prices. Better stock market performance would both boost confidence among prospective buyers and would also create greater resources available for down-payments. Finally, lending conditions and appraised values must stabilize.
Retail
Pat Donoho, president, Maryland Retailers Association
Retailing has always been the proverbial “canary in a coal mine” in forecasting economic activity in Maryland. Retailers are the first to experience decreases in sales as consumers pull back in an economic downturn, but also see increased sales as the economy recovers as the consumers re-enter the market. So it has been since 2008.
2010 saw small increases in sales and has been followed by continuing sales growth in 2011. The difference has been that, from week-to-week and month-to-month, those increases cannot be easily predicted.
But the economy in Maryland is slowly recovering. As a predictor of this recovery, jewelry and men’s apparel have seen positive sales growth in 2011. Not strong growth, but positive numbers. The uncertainty of federal and state budget cuts on consumer confidence and income for Marylanders could adversely impact this trend.
However, Howard and Anne Arundel counties are still better situated to withstand this problem than many other counties in Maryland, due to BRAC adding new income and revenue to the area; and two, the ensuing strengthening of established shopping patterns.
Area retailers will have to continue to compete with each other, neighboring areas and the Internet. Current law requires consumers to pay the sales tax (actually use tax) quarterly for online purchases, but very few do. We’re hopeful that Congress and the Maryland General Assembly will level the playing field.
Tourism
Hannah Byron; assistant secretary; Tourism, Film & the Arts, Department of Business & Economic Development
Two once-in-a-lifetime commemorations will propel heritage tourism in Maryland to new heights during 2012. The bicentennial of the War of 1812 and the sesquicentennial of the Civil War are expected to generate significant economic impact — especially in Central Maryland. These major stories in American history resonate well in both Howard and Anne Arundel counties, where there is a wealth of related history and sites.
The June international maritime festival in Baltimore, which launches Maryland’s three-year bicentennial period, creates an ideal time for visitors to explore attractions and destinations throughout the region. Many will stay at accommodations in Howard and Anne Arundel counties, particularly those who combine trips to the festival with visits to Annapolis, Ellicott City, Columbia or perhaps, the Nation’s Capital.
Certainly, investments in tourism by local jurisdictions are apt to generate local tourism revenue as the number of visitors to Maryland continues on the upswing with the boost in heritage tourism.
Howard County, for instance, will benefit from the increase in the county’s hotel room tax, which went into effect last year. Moving from 5% to 7% could double the county’s tourism budget of $423,000. And in Anne Arundel County, tourism moves forward with major retail expansion at Westfield Annapolis (the mall) and the Annapolis Towne Centre, and the scheduled summer opening of the Maryland Live! gaming and entertainment complex near Arundel Mills.
Technology
Rob Rosenbaum, president and executive director, TEDCO
A new chief innovation officer for the state of Maryland; new leaders at Greater Baltimore Tech Council, Howard County Tech Council and the Tech Council of Maryland; Startup America Maryland; two new business accelerators; creation of the regional Bio-Health Initiative; sale of multiple Maryland tech startups; and the University of Maryland’s regents’ strategic plan, which calls for 35 university startups per year.
What does all that have to do with technology trends? This is all evidence that Maryland’s entrepreneurial ecosystem is alive and growing.
Dozens of federal research facilities and two prestigious universities producing hundreds of inventions annually in fields ranging from genetic engineering and cancer cures to cybersecurity and virtual reality, innumerable entrepreneurship and innovation courses, certificates and degrees educating the next generation of entrepreneurs, and a shrinking federal budget creating the potential for thousands of Marylanders looking for their next career.
What does that have to do with technology trends? This intellectual and human capital is the fuel that will feed the entrepreneurial ecosystem. That fuel will boost a thriving startup and innovation economy with companies predominantly focused on capital efficient technologies and markets. This includes mobile applications, cybersecurity, data and database technologies and, to a lesser extent, medical devices — all of which will accelerate Maryland’s economic recovery in 2012.
Transportation
Linda Greene, executive director, BWI Business Partnership
What’s the outlook for transportation in 2012? “Unclear” is the best word to use, if you focus on funding for highway, transit and other projects.
A major topic at the upcoming 2012 General Assembly session will be the need to increase transportation funding, and what (and how much) state officials can add to the list of needed transportation projects will be dependent on the outcome. Whatever the funding mechanisms may be, there is no doubt that more is needed. Until then, system preservation is the focus.
But there are some bright spots, notably BWI Thurgood Marshall Airport. Maryland’s airport continues to set traffic records and is a positive economic engine for the state. 2012 will bring new international service, first to Cuba and then to Frankfurt, Germany — a big boost for international travelers connecting through to destinations worldwide.
The Southwest/Air Tran merger is opening new domestic markets. A new $100 million project soon will be underway to connect Concourses B and C beyond the security checkpoints so passengers can easily connect to flights, or stop and take advantage of food and shopping options on either concourse.
On another very positive note, the Port of Baltimore is showing real competitive strength nationally in its tonnage moved and the dollar value of that cargo, and is experiencing record cruise passengers totals as well.
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