- The Washington Times - Wednesday, January 26, 2005

Homeland Security spending continues to transform the region’s commercial real estate as government contractors announce a series of new office expansions and projects.

Recent examples include plans by the technology company, Windermere Group, to expand its offices in Anne Arundel County by building twin 11-story office towers as well as a new sales office for PC Guardian Technologies, a software company.

Historically, each square foot of new office space used by government agencies, such as the Homeland Security Department, generates about 1 square foot of new office space used by contractors, said Kurt Stout, senior vice president of real estate firm Grubb & Ellis.

“That’s the relationship that tends to establish itself over time,” Mr. Stout said.

Annapolis-based Windermere’s revenue has grown quickly since it was formed in 1998 as an information-technology company that makes encryption equipment to scramble light signals transmitted over fiber-optic cable.

The 500,000 square feet of premieroffice space would be on a 36-acre site near Route 50.

PC Guardian Technologies, a San Rafael, Calif., company that sells encryption software, said last week it has opened a sales and service office in Annapolis to be near its government clients in the Washington area.

“We need to be in the Beltway to help them understand the services we’re offering,” spokesman Steven Lerner Wright said.

The company chose Annapolis for the convenience of its employees who live in the area.

Some of the company’s software protects critical infrastructure, such as computers that contain sensitive information on electrical grids and water systems, both of which the Homeland Security Department has identified as potential terrorist targets.

Although the Windermere Group and PC Guardian Technologies do not contract directly with the Homeland Security Department, some of their customers do. They are exactly the kind of companies local economic development officials say they are trying to attract to the area’s office complexes.

“Federal spending that relates to homeland security has been a tremendous boost to our economy,” said Bill Badger, chief executive officer of the Anne Arundel Economic Development Corp.

The Bush administration organized the Homeland Security Department in March 2003, merging the efforts of 22 federal agencies.

In 2004, its first full-year annual budget was $38.9 billion. It grew this year to $40.7 billion.

“I think you’ve got a lot of shuffling that has to occur to make all these agencies work together,” Mr. Stout said, referring to changes and additions to the Homeland Security Department’s office space. “I think it’s going to be quite a lot of change.”

The Homeland Security Department is working with an $11 billion contract-procurement budget for fiscal 2005.

Eight of the nation’s 10 largest defense contractors have offices in Anne Arundel County, including Northrop Grumman, Raytheon and General Dynamics.

Procurement of defense contracts in Anne Arundel County rose 31 percent between 2002 and 2003 for a $276 million increase, county officials said.

The county also is home to the National Business Park, near the National Security Agency off the Baltimore-Washington Parkway.

The business park, operated by Corporate Office Properties Trust, already leases about 1 million square feet to government contractors and others and is expanding by another 600,000 square feet.

“They plan to continue their expansion of this contractor park as long as the demand is there,” Mr. Badger said.

Officials in other counties report similar growth from government contractors.

In Montgomery County, which includes defense giant Lockheed Martin Corp., corporations have been expanding along the Interstate 270 biotechnology corridor.

“We have communications companies that have won contracts,” said Joe Shapiro, Montgomery County Department of Economic Development spokesman.

“Some of our biotech companies are working on field tests to see whether an area has been exposed to a virus. We have others that are working on vaccines.”

Among the county’s government contractors is Thales Communications, which makes lightweight, hand-held radios for the military and Homeland Security Department.

In October, the company opened a 26,000-square-foot software-development facility at its headquarters in Clarksburg, Md., which already operated in 116,000 square feet of office space.

“The increased demand for secure interoperable communications equipment has become very strong because of Homeland Security and military requirements,” said Steve Nichols, Thales Communications business development manager. “And that’s what we build here.”

Fairfax County officials say new government contracts for local employers helped the county avoid some of the economic downturn after the September 11 terrorist attacks.

“Homeland Security spending helped Fairfax County add more than 60,000 jobs, most of them high-paying professional services jobs,” said Gerald Gordon, chief executive officer of the Fairfax County Economic Development Authority.

Government contractors expanding in Fairfax County include Unisys, which consolidated its offices in Reston, and Booz Allen Hamilton, which is opening new offices in Herndon.

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