- The Washington Times - Monday, February 19, 2001

Falling crime rates and improving schools are bringing businesses back to Baltimore, including some firms that are choosing the city over the D.C. area.

Last week, a 32-story hotel opened in Baltimore's Inner Harbor and a downtown architecture firm announced it was moving to Fells Point, a historically gritty neighborhood where developers are turning abandoned warehouses into funky, high-technology offices.

Businesses say they have new confidence in the city, which was plagued by drug abuse, a high murder rate and failing schools for much of the 1990s.

Although Baltimore has the highest level of heroin abuse in Maryland, its violent crime rate dropped 15 percent last year, and the number of murders committed in the city dropped below 300 for the first time in a decade.

Meanwhile, the number of Baltimore third-graders who met the state's reading standards in 2000 increased 20 percent from the previous year, one of several key areas of improvement in city schools.

"Our employees have young children, so the quality of the schools and the safety of the city is vitally important to us," says Harold J. Adams, chairman of RTKL Associates Inc., the architecture firm that announced last Monday it will move from downtown Baltimore to Fells Point in 2002.

RTKL, which employs about 230 people in the city, flirted with the idea of moving to the suburbs or Washington, where it has an office with about 150 workers, Mr. Adams says. It decided to stay because it believes Baltimore is reversing its years-long decline, he says.

Also last week, the $130 million, 750-room Marriott Waterfront Hotel opened near Little Italy, the first major hotel built in the city in 10 years.

Mayor Martin J. O'Malley, a Democrat, says the relocation of RTKL and the opening of the Marriott are only the start of Baltimore's new beginning.

"The city has confidence in itself again, and that makes all the difference in the world when you're trying to attract new business," Mr. O'Malley says, citing state figures that show Baltimore gained 8,200 new jobs last year after losing 100,000 during the 1990s.

The Baltimore boom is good for the District because both cities feed off each other, according to Anirban Basu, the senior economist for RESI, Towson University's research arm.

As the technology boom in the D.C. area continues, there will be more "spillover" into Baltimore, Mr. Basu says. Already, rising tech firms like Columbia-based Web designer G1440 Inc. and Advertising.com Inc., an on-line ad agency, have chosen to expand in Baltimore rather than the D.C. area.

Also, some Washingtonians are keeping their jobs in the District but moving to Baltimore neighborhoods like Bolton Hill and Union Square because the area has less traffic and cheaper housing, Mr. Basu says.

In addition, the federal government is considering building the nation's first magnetic levitation train between Baltimore and the District. A "maglev" train could travel as fast as 240 miles per hour, making the commute between the two cities 17 minutes.

"The relationship between Baltimore and Washington is going to become more pronounced over the years, and that is good for both cities," Mr. Basu says.

Expanding downtown

Nowhere is the Baltimore turnaround more evident than in its expanding downtown, which is creeping beyond the city's traditional boundaries into its waterfront area.

In addition to Fells Landing, the new six-acre project in Fells Point that RTKL will eventually call home, developers are turning old factories and warehouses along the waterfront into offices for high-tech companies.

The old American Can Co. factory in Canton has been transformed into 280,000 square feet of technology office space, and an abandoned power plant in the Inner Harbor has been turned into a retail complex with a Barnes & Noble book store and a Hard Rock Cafe.

Meanwhile, the city's largest anchors, Johns Hopkins University in the city's east end and the University of Maryland in its west end, are planning campus expansions that are expected to fuel more private office and retail development.

One such project, a 3 million-square-foot retail complex planned in the Inner Harbor's east end, is scouting for tenants, according to Madison Retail Group, the D.C. brokerage handling the leasing.

"A lot of people look at Baltimore with envy now," says C. William Struever, a founding partner and chief executive of Struever Bros. Eccles & Rouse Inc., the Baltimore-based development firm behind the Fells Point and American Can Co. projects.

Although some developers have trouble financing office projects in Baltimore unless they have tenants lined up, Mr. Struever says the falling crime rate is giving investors more confidence in the city's real estate market.

"I'm a big believer that the challenge for Baltimore has been a spiritual one, and we seem to be moving in the right direction now," he says.

Commercial brokers say Baltimore needs the office space that developers like Mr. Struever are building.

The city is home to 5 million square feet of premium office space, of which 259,000 square feet, or 5.7 percent, is vacant, according to Delta Associates, an Alexandria-based real estate research firm.

The District, meanwhile, has 32.6 million square feet of premium space and a 2.5 percent vacancy rate, Delta says.

"Tenants have to pick and choose, because they don't have the options they did five or six years ago. If you're a tenant, you have to always think two years ahead," says John P. Blumer, the executive vice president and chief operating officer of KLNB Inc., a Baltimore real estate brokerage.

Digital Harbor

Baltimore's growing base of technology companies is helping drive the need for more office space, business leaders say.

The city had 382 technology companies that employed 8,527 workers in 1999, according to the most recent statistics available from the Maryland Department of Labor, Licensing and Regulation.

By comparison, the District had 332 tech companies that employed 7,200 workers in 1999, according to a study this month by DC Agenda, a local civic group. In Northern Virginia, an estimated 5,902 tech companies employ about 237,000 workers, making it one of the largest tech regions in the country, according to a study by Chmura Economics and Analytics done in August for the Virginia Center for Innovative Technology.

Baltimore, which some economic development officials have dubbed the "Digital Harbor," has benefited from a spillover of tech firms from the D.C. area, Mr. Basu says.

"For some companies, Baltimore presents a nice alternative to places like Northern Virginia," he says.

R. Matt Goddard, president of G1440's Baltimore office, says his company, which is based in Columbia, Md., chose to expand in the city because there is little traffic and more housing than in surrounding areas like Washington.

In January, G1440 opened its Baltimore office in a building developed by Mr. Struever's firm in Canton, another waterfront neighborhood in the city. The company employs about 140 workers.

G1440 has many clients in the D.C. area, primarily in Northern Virginia. Still, the company wanted to be in Baltimore because it believes its employees about 40 percent of whom walk to work would be happier in the city, Mr. Goddard says.

"Once you've walked to work, you can't go back to sitting in traffic on [the Beltway] for two hours. You wouldn't last five minutes," he says.

To get its workers to live near the office, the company pays the first month's rent for employees who rent in the Canton area. If a worker wants to rent a house that is only available for sale, Mr. Goddard and G1440's senior art director, Dave Taub, will use their own money to buy it and then lease it to the employee.

So far, three G1440 workers have taken the two up on their offer, Mr. Goddard says.

Penny Lewandowski, executive director of the Greater Baltimore Technology Council, says the city's tech companies are diverse.

According to the state data from 1999, Baltimore's tech base included 190 information technology companies, 129 research firms and 16 biotechnology businesses.

"The diversity is one of our strengths," Ms. Lewandowski says, adding that it helps shield the city economy from a slowdown when one sector such as the Internet industry hits hard times.

Parking problems

The development taking place in downtown Baltimore will not continue if the city does not invest in new infrastructure, such as sidewalks, parking garages and transit systems, Mr. Basu says.

A lack of parking is the city's biggest infrastructure problem, according to Frank P. Bramble, chairman and chief executive of Baltimore-based Allfirst Financial Inc., the regional banking chain that has 6,000 employees in the city.

Businesses might think twice about expanding in Baltimore if there are not enough parking spaces for their employees and clients, Mr. Bramble says.

"I think it could retard our progress," he says.

Officials say several private parking garages are planned, but developers often have trouble financing for the projects because it takes them several years to make money.

Although Mr. O'Malley agrees parking is a problem, he says the city must also concentrate on building up its waterfront area. He has asked the state for $300 million over five years to help complete an eight-mile public promenade including sidewalks and bulkheads along the waterfront.

The mayor also has high hopes for the 40-mile magnetic levitation railroad that would link the Camden Yards baseball stadium in Baltimore to Union Station in Washington.

"Anything that gets Baltimore closer to Washington is a huge help to us," Mr. O'Malley says.

The region is competing with Pittsburgh for the train, which could receive as much as $950 million in federal aid. A spokesman for Transportation Secretary Norman Y. Mineta says it is possible both areas could receive funding, but a decision will not be made for another year.

The mayor says battling the city's social ills remains his top priority, though.

He says the state has promised Baltimore $41 million over the next two years for drug-treatment programs. The city has also been awarded a $26 million federal grant for 200 new police officers.

Mr. O'Malley is wise to focus on the drug problem, according to Donald P. Hutchinson, president of the Greater Baltimore Committee, the city's largest business group.

"The drug issue dims all of our other achievements. It's a 90-square-mile city, so no matter where you are, you're not far away from what is our biggest problem," Mr. Hutchinson says.

The O'Malley factor

The popular Mr. O'Malley is key to getting the state and federal money needed to solve the city's infrastructure and social problems, according to the Baltimore business leaders and politicians who lavish praise on the mayor.

At the announcement of RTKL's move to Fells Point last Monday, speaker after speaker including fellow Democrats Parris N. Glendening, Maryland's governor, and Benjamin L. Cardin, who represents part of the city in the U.S. House fawned over Mr. O'Malley.

Mr. Cardin compared the mayor to the Ravens, its championship professional football team, which is known for its solid defensive line.

"We thought we had a great defense in Baltimore? We have a great offense in the mayor," Mr. Cardin said.

Voters seem to agree.

A poll in January found Mr. O'Malley's job approval rating in Baltimore is 88 percent. Statewide, 51 percent of voters approve of Mr. O'Malley's performance, the poll by the Baltimore Sun and other media groups said.

Political wags say Mr. O'Malley, who previously served as a city councilman and an assistant state's attorney, would be a strong candidate for Maryland governor next year a prospect that makes the city's business leaders uneasy.

David S. Cordish, a Baltimore developer who is planning an Inner Harbor complex with a comedy club, a piano bar, a steak house and other restaurants, hopes Mr. O'Malley will stick around City Hall for at least a few more years.

"We need him here," Mr. Cordish says.

The mayor won't say whether he has gubernatorial ambitions in 2002. "The only plans I have are to make Baltimore City the best it can possibly be," he says.

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