Commercial Real Estate: Getting in the zone Print E-mail

By This e-mail address is being protected from spam bots, you need JavaScript enabled to view it | Corridor Inc. Staff Writer
Originally published October 2007

Image     Real estate professionals far and wide love to repeat the mantra, location,
location, location.
     But what happens when an area just isn’t that appealing?
     In an attempt to attract businesses to distressed areas — rural and urban — the Small Business Administration (SBA) operates a program designed to give companies a contracting edge if they locate in a historically underutilized business zone, or HUBzone.
     In the Baltimore-Washington Corridor, where government contracting reigns supreme, and where an influx of companies is expected to converge thanks to the Base Realignment and Closure (BRAC) process, the HUBzone program has serious potential.

     In Baltimore City, that’s something the Baltimore Development Corp. (BDC) is counting on to bring new businesses in.
     “There are literally millions of square feet of office space in the next three years that are in HUBzones,” said Chris Moyer, senior economic development officer for BDC.
     While the city is just getting acquainted with the program, Moyer said it plans to start directly marketing the city’s zones to contractors in the future.
     That’s something that will make the SBA happy.
     “We’re trying to get the word out, we think this program becomes a powerful leveraging tool if you tie it with tax incentives,” said Michael McHale, director of the SBA’s HUBzone program. “It can be a very powerful economic development tool.”
     The program adds a useful incentive to grow small, minority and disadvantaged businesses, particularly with BRAC contracts, said Robert McGlotten Jr., an assistant secretary at the Maryland Department of Business and Economic Development (DBED). 
     There are over 12,000 qualified HUBzone areas across the country.
     There are 30 designated HUBzones in the Baltimore-Washington Corridor counties of Anne Arundel, Montgomery and Prince George’s. Washington, D.C. has 103 and Baltimore City has 110.
     That sheer number of locations in Baltimore gives the city an advantage.
     BRAC contractors coming into the area are among BDC’s target audience and they are well aware of the HUBzone program.
Image     “I’ve gotten direct questions about it,” Moyer said. “It gives us a strength [other jurisdictions] don’t have.”
     And, in Baltimore City, the zones are in thriving areas. Westport, off the Middle River, Canton Crossing, Gateway South, by the stadiums, and Harbor East are all located in HUBzones.
     “These are dynamic settings that will easily attract a workforce,” said Moyer, noting the proximity to housing for potential workers, particularly in mixed-use projects like Westport and Harbor East.
     This is important because in order for companies to take advantage of the HUBzone program, 35 percent of employees must also reside in a HUBzone.
     The program was enacted in 1997 as part of the Small Business Reauthorization Act. Its overarching goal is to help promote economic development and employment growth by providing more access to federal contracts.
     It’s important because it’s expanding the base of qualified suppliers for the federal government — more competition means better pricing in the future, McHale said.
     Participating federal agencies like the U.S. Department of Defense and NASA are responsible for meeting an overall federal goal of awarding three percent of contracts to HUBzone companies.
     In 2006, the actual number was just over 2 percent, said McHale, though he notes $7.1 billion was awarded, up from just $6.1 billion in 2005.
     McHale admits the numbers are low, but said the SBA is doing more training for federal contracting agencies so they can take advantage of the program, and local district offices are exploring ways to get the word out.
     DBED plans to do its part by increasing its involvement in the program in the future.
     “We’re going to do two things,” McGlotten said. “Promote general awareness of the program and help the business community see the value.”
     The idea of the program was to provide an opportunity to vet certain contracts set aside for HUBzones, McHale explained.
     “We’ve always felt the key building block in community-based economic development is the ability to create jobs,” he said.
     According to a SBA database, there are over 500 certified HUBzone companies in the Corridor, plus Baltimore City and Washington, D.C. In the United States, there are a total of about 13,000 certified companies, said McHale.
     Consulting firm Severn TechSources is a HUBzone company with offices in Anne Arundel County and Washington, D.C.
     The 16-person business has been certified since 2003, but has not obtained any contracts because of the designation, said Willie Mitchell, president. Despite the program advantages, he pointed out much of government contracting has to do with who you know.
     “That hasn’t changed and we didn’t know anybody,” Mitchell said.
     Patti McCarty, vice president of Severn, said the program has definitely given the small company a chance to get their foot in the door.
     “There have to be more ways to win business against the giants – anything helps, even a call back,” she said. <
 
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