- The Washington Times - Wednesday, May 11, 2005

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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