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Annual Report of the Comptroller, 2000
Volume 363, Page 19   View pdf image (33K)
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The manufacturing sector decreased 0.6% in 1999 and is expected to rise by a small amount in 2000.
Thereafter, employment in this sector is anticipated to be unchanged. The manufacturing sector continues to be
a tale of two diverse and differing subsectors. Core manufacturing, including GM and Bethlehem Steel, have not
participated in the growth of employment that the Maryland economy has enjoyed over the last several years.
However, an increase in productivity due to the incorporation of new technology has actually enhanced revenues
at these facilities. High technology and, to a greater degree, biotechnology firms will likely drive any growth that
occurs in the manufacturing sector in the coming years.

Employment growth in the construction sector increased at a rate of 6.6% in 1999, behind only the finance
sector and more than double the rate of Maryland employment growth. A number of factors spurred this sector
forward in 1999, including record low mortgage rates in 1998 and the early part of 1999 and an extremely tight
market for office space, with low vacancy rates which haven't been seen since the mid-1980s. Vacancy rates for
office space in downtown Baltimore have increased slightly through mid-2000 to 10.4%, although the rate for
class A office space has declined from 4.5% to 3.9% over the first six months of the year. Rental rates for class A
space have exceeded $30 per square foot along Pratt Street and other downtown areas for the first time. The
market is so tight that firms looking to expand are having to consider suburban locations.

The area around the Baltimore-Washington International Airport (BWI) is booming. Industrial space is
increasingly in demand, with much of the new construction in the State occurring in this area. Speculative
construction of both office and industrial space continues. The Maryland Aviation Administration recently
announced a variety of improvements to BWI itself, including improving vehicular and pedestrian access to the
airport, expanding the terminal by 243,000 square feet, building a 7,000 space parking garage, consolidating rental
car activities to one facility, and potentially adding an intermodal transportation center. Along with the airport
improvements, the influx of employers to the area and the opening of Arundel Mills Mall will result in a continuing
development of shopping, eating and other establishments, transportation improvements, possibly even including
an extension of light rail, and other ancillary development. Even if the construction sector in the rest of the State
slows substantially, activity in this region will ensure continued employment growth over the next several years.

Although mortgage rates have increased to around 8% from their record lows near 6.5% over the past eighteen
months, housing construction remains at relatively high levels. Housing starts, which increased by over 20% in
1998, declined by 0.9% in 1999 although single-family starts actually increased by 2.1%. Much of the new
construction is in the luxury range, with homes of up to 24,000 square feet being built. With the economy
showing some signs of slowing, reducing the likelihood of further interest rate hikes, housing starts are expected
to remain at around 30,000 annually. It is possible that this sector will be less affected by interest rate changes
than in the past since adjustable rate mortgages are now widely available.

Employment in the transportation sector grew by almost 5% in 1999, double the growth rate for the entire
Maryland economy. So far this year employment growth has continued to be above average. Transportation
employment is expected to grow about 3.5% in 2000 and slow thereafter. The strong growth in 1999 and 2000
is heavily influenced by developments at BWI which continue to enhance the airport's popularity compared with
other airports in the region. In August, BWI set the fourth consecutive monthly record for passengers traveling
through the terminal, qualifying it as the nation's fastest growing airport and surpassing Dulles International
Airport earlier in the year.

Introductory Section 19


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Annual Report of the Comptroller, 2000
Volume 363, Page 19   View pdf image (33K)
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