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Fall 2011 Edition - OPPTY

OPPTY Fall 2011

In This Issue

Survey Offers Business Leaders’ Outlook

Optimism among Greater Washington’s business leaders has fallen, but they still hold a much brighter outlook for this region than for the rest of the country.

In the Business Outlook 2012 Survey, sponsored by the Board of Trade and performed by Clarus Research Group, 200 business owners and executives answered questions about the recent past, present, and future of regional business. Overall, the Business Outlook Index, based on questions about current conditions and future expectations, stands at 80, or three points down since the last index in November 2010. This is the first time the index has dropped since the first survey in February 2009. Two-thirds of the leaders surveyed said current conditions are mostly good, but less than one-third believe they will improve in the next six months.

However, Greater Washington’s business community still views the region more than three times more positively than they do the rest of the country. Only 22 percent said the nation’s conditions are mostly good, compared with 67 percent for the region.

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Leadership in the Debt Debate

On the heels of spring’s showdown over a possible government shutdown, the federal government again had the nation — and Greater Washington’s businesses — wondering about future financial security during the debt ceiling debate of July and August.

The Board of Trade helped the region prepare for the fallout by convening a special event to address the potential impact for companies and state and local governments. With the help of expert panelists, including District of Columbia CFO Nat Gandhi and Arlington County CFO Michelle Cowan, the Board of Trade discussed a wide range of implications: the borrowing difficulty local government would face in case of a downgrade in credit ratings; the reduction of the federal workforce and what it means for a region that relies greatly on that workforce; and the dangers of reduced funding for crucial infrastructure projects, such as rail to Dulles, HOT Lanes, and Maryland’s Intercounty Connector.

The program also offered advice to the contractors who form a major part of the region’s economy, including setting money aside for payroll, keeping in constant contact with government liaisons throughout such a crisis, and ensuring that bills are accurate and ready for payment at the appropriate time. These tips will apply during future times of uncertainty, as well, and the Board of Trade will continue to track the federal policy issues that affect its members and Greater Washington as a whole.

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Preparing for Uncertainty

Change is fine. This region deals with change all the time. A good deal of work is done to plan for change and then help others understand and comply with change.

Uncertainty is what we have now — and it is not fine. In fact, it is the single most-cited reason business leaders give for not hiring, not expanding services, not leasing new space, and not undertaking new initiatives. Though they have the resources, executives are intensely reluctant to make commitments until a level of stability returns to the marketplace.

Unfortunately, events in the world around us add to the uncertainty every day. In Greece, a restructuring deal was on one day and off the next, and now there is a new government. The markets roller-coasted throughout the turmoil, and now that turmoil spreads to other national economies (see Italy). Here in the United States, there are super-committees, special commissions, purported deadlines, and fallback plans all surrounding debt reduction. Most of the discussions reflect the gridlock stifling our ability to advance. The whipsaw back-and-forth of deliberations signals more uncertainty ahead for a while. In the balance are projects such as St. Elizabeths as a home for the Department of Homeland Security or the Purple Line rail extension, long purported to connect vibrant centers of commerce and growth in Maryland.

Of note, many skeptical executives say they are “waiting until 2013” when asked about plans for investing or growing. When pressed, they note that the delay is less about the coming elections and more about a reasonable expectation that the current uncertainty will eventually be outweighed by needs, opportunities, and hopefully some decisions that will stick. Between now and then, there will be opportunities to plan for and situations to assess. The Greater Washington Board of Trade will continue to develop the research, convene the meetings, deliver the programs, and publish the insights to provide you with the competitive advantage during these uncertain times, however long they last.

— Jim Dinegar
    President & CEO
    Greater Washington Board of Trade

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The New Gold Rush


Less than three hours away in western Maryland, Pennsylvania, West Virginia, New York, and other states sits a massive resource ready to reshape the nation's energy supply, reduce our dependence on foreign oil, and significantly boost the Greater Washington economy. The Marcellus Shale formation, along with similar formations around the country, could provide as much as a century's worth of natural gas.

"The phrase game-changer gets thrown around a lot, but I think it's appropriate in this case," says Paul Allen, senior vice president of corporate affairs and chief environmental officer for Constellation Energy. "Shale gas not only means more abundance and lower prices, but particularly in the case of the Marcellus Shale, it's also much closer to where it can be consumed."

Shale gas provided a mere 2 percent of domestic natural gas 10 years ago. Now, it supplies 30 percent, and it could go as high as 45 percent by 2035, according to the Shale Gas Subcommittee of the U.S. Secretary of Energy Advisory Board.

New drilling techniques and hydraulic fracturing (fracking) — pumping a mixture of water, sand, and chemicals into the well to release the gas — have made it possible to tap this huge resource. However, New York and Maryland have both stopped drilling to assess environmental concerns about the fracking process. Meanwhile, Pennsylvania has become the leader in drilling.

Shale gas already is supporting 60,000 jobs in Pennsylvania, says John Felmy, chief economist for the American Petroleum Institute (API). There is more on the horizon, too; the Utica Shale layer beneath Marcellus Shale may contain even more gas than its neighbor.

The implications for cash-strapped governments are impossible to ignore. "When Pennsylvania solves their budget crisis because of all the royalty money from Marcellus Shale," says Terry McCallister, CEO of Washington Gas and WGL Holdings Inc., "the states around them who are not willing to go forward are going to scratch their heads in this economy and say, 'Why aren't we doing that?' "


Could Greater Washington become a hub for shale gas activity, much in the way San Francisco supplied the gold rush?

» Supplies and Infrastructure A new network of pipelines will be needed throughout the Marcellus Shale region, which currently does not have the capacity to transport the gas, Felmy says.

"I expect that processing plants will need to be closer to the action, too," he adds, because the gas needs to be processed before it can be moved into pipelines.

The opportunities don't stop at pipes and plants. Pittsburgh will be a hub, given its location and manufacturing history, but there will be plenty of business to go around, McCallister says. "Trucking companies, steel companies, valve companies, electrical equipment companies — all those types of suppliers will have the chance to do business, and they can come from here."

» Jobs of All Types The greatest opportunities in Greater Washington may come from its well-educated workforce. Financial experts can help support the large capital needs of an emerging industry, and legal services, consultants, and policy experts will certainly have roles to play.

"For people who make their living in public policy and regulatory debates — and a lot of people in Greater Washington do that — this is going to be one of the big issues," Allen says.

Communication firms may find opportunities, too, because one of the Shale Gas Subcommittee's recommendations is to improve public information. Greater Washington Board of Trade member Nemacolin Woodlands Resort has sponsored one such effort in its nonprofit Nemacolin Energy Institute. The resort, which has two shale gas wells on its property, wants to serve as an example of how the process can be done properly while preserving the land.

Professional services is not the only sector that would benefit. API estimates as many as 280,000 new jobs could come from Marcellus Shale — especially jobs for the region's skilled workers.

» Environmental Opportunities Shale gas also dovetails with other clean technology. Solar and wind farms rely on gas when the sun is not shining or the wind is not blowing. As prices come down, the idea of operating small fleets of cars or trucks on liquid natural gas becomes more viable, too, as does the idea of powering buildings with natural gas fuel cells — as Washington Gas will be doing in a new facility in Springfield, Va.

As for the hydraulic fracturing process, the environmental concerns center on wastewater. There will be opportunities for companies who offer solutions for shipping and storing the wastewater, recycling it properly, and measuring and monitoring it for safety.

"The execution itself is a real opportunity," Allen says. "We should all be very pleased to have this natural resource, but we need to use it in a thoughtful and sustainable way."

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A New Platform for Growth


Five years from now, the area surrounding Union Station will look completely different. Views of a railyard will give way to 3 million square feet of residential, retail, and office space, and divided neighborhoods will be connected.

Akridge's Burnham Place project — named for Daniel Burnham, architect of the 104-year-old Union Station — will be built atop a platform directly above the train tracks north of the station, a creative example of the "air rights" approach to building over unsightly urban infrastructure.

In part, the Burnham Place project is designed to take better advantage of Union Station as a transit hub. With Credit F intercity rail, commuter rail, Metro, bus service, and future streetcar service all coming together in one place, the locational advantages are clear for the region's businesses. On top of current benefits, Amtrak aims to at least double intercity and commuter rail capacity in the next 20 to 30 years.

"Union Station is the most multimodal point in the city," says Harriet Tregoning, director of the District of Columbia Office of Planning. "There are few places in the U.S. that have so many transit options coming together. It's a really important node of economic activity for the city and the entire East Coast."

Akridge expects infrastructure construction to start by 2014, says David Tuchmann, vice president of development, who leads the project. Zoning was approved in June, and Akridge is involved in a two-year master planning process, working with renowned architect Shalom Baranes and collaborating with Amtrak. That process will take place alongside other upgrades: reconfiguration of Columbus Circle, short-term concourse improvements within Union Station, and Metro's improvements to its station.

Perhaps most important, the Burnham Place project will build upon the results of Amtrak's own master planning. "We are looking at how we can develop the station and get the most out of the limited footprint we have," says John Bennett, assistant vice president with Amtrak.


From short-term design and building to long-term economic activity, opportunities abound around Union Station and Burnham Place.

» A Billion in Build-Out The opportunities over the next couple of years will be for design, engineering, construction, and related support services.

"We're employing some of those today," says Matt Klein, Akridge president, "but the work will grow exponentially as we get further into the design and planning process. The scale could well exceed a billion dollars in total build-out."

Keep an eye on Amtrak's plans as well. Between the company's current master planning process and long-term vision for high-speed rail — including the muchtalked- about 220-mph trains that could go from Washington, D.C., to New York City in 94 minutes — contracting opportunities in the coming years and decades will continue to grow.

» An Anchor in Transit Union Station has 32 million pass through yearly. An average of 13,300 people get on and off Amtrak trains at Union Station daily, and those numbers approach 30,000 on a peak day. Five commuter lines for both VRE and MARC come to Union Station. Even though it has only one Metro line, it is the busiest station in the system, with 68,000 people entering and exiting daily. Add the District's plans for a streetcar line on H Street, and the appeal of the location is clear.

With limited space for retail, restaurants, and other amenities in Union Station now, the air rights approach creates new space that those types of businesses should watch closely. Klein notes that despite the large scale of the project, it is essentially infill in an underused location.

Being so close to so many critical locations — downtown, Capitol Hill, the Supreme Court, and more — makes a difference, too, especially for firms who do business with the government.

» Knitting the Fabric Transportation development over the past 100 years made huge gashes in the city, Tregoning says. "A challenge of the 21st century is to reknit the urban fabric of the city back together."

Air rights projects offer one way to accomplish this. Currently, the H Street Bridge over the railyards is a physical and visual barrier separating neighborhoods. Designed properly, Burnham Place could erase that barrier and increase business opportunities in areas that show great promise. "H Street is already one of the hottest real estate corridors in the city," Klein says. "I can't help but think that our project will further secure its status, as well as NoMa's [north of Massachusetts Avenue]."

Tuchmann points out the added value of increased traffic in and out of Union Station. "Consider how much traffic flows through Union Station now, then imagine the economic development impact that would come from doubling it."

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What BRAC Looks Like


By next year, 18,300 additional employees will go to work every day at Fort Belvoir and in surrounding locations. These moves — part of Base Realignment and Closure (BRAC), the Department of Defense's (DOD's) process for closing, consolidating, and relocating operations — put $4.5 billion into Greater Washington's economy through construction alone.

But the business of BRAC has just begun.

"We're seeing a shift of the defense core from the area surrounding the Pentagon down to Fort Belvoir, to Springfield, and to Mark Center. The whole corridor is shifting," says Stephanie Landrum, senior vice president of Alexandria Economic Development Partnership.

In addition to new military personnel at Fort Belvoir, located off Route 1 in Fairfax County, Va., BRAC moved employees and contractors into Fort Belvoir North, site of the National Geospatial-Intelligence (NGA) headquarters, and the DOD offices at Mark Center. These workers are part of the nearly 85,000 defense-related employees located within a few miles of I-95 and I-395, a workforce big enough to more than fill FedEx Field.

"The growth opportunities are tremendous," says Jerry Gordon, president and CEO of the Economic Development Authority in Fairfax County. "And I think there will be even more growth in the future, maybe with another BRAC round to come. Fort Belvoir has room."


From infrastructure needs to spin-off technology, BRAC’s moves bring business in a number of industries.

» Traffic as an Opportunity Media coverage about BRAC has focused on heavy traffic. The moves have strained roads around each location, but infrastructure upgrades are in the works — and that means opportunities for firms who work in transportation.

"We could be talking about a quarter of a billion dollars' worth of design-build projects in the next year or two," says Tom Fahrney, the Virginia Department of Transportation's (VDOT's) BRAC coordinator. "We will reduce delays and safety issues, but we will also make it a more attractive corridor for businesses."

Both VDOT and the Federal Highway Administration on behalf of DOD will have projects out for bid next year, Fahrney says, and VDOT has received federal BRAC funding to widen Route 1 near Fort Belvoir. That's a heavily commercial stretch of highway that could become even better for businesses.

There will be other opportunities for moving people to and from Fort Belvoir, too. Military post spokesman Travis Edwards points out that private companies could run shuttle service from masstransit hubs to supplement what the county already does. And Landrum adds that Alexandria and Arlington are looking at new transit corridors to relieve stress on the roads. Private firms with innovative approaches should take heed.

» Opportunities Away From the Base The "contractor tail" for Fort Belvoir may not be as big as with some other BRAC moves, Edwards says. But in the future, as firms that work with DOD see their leases run out, they may want space closer to the source of business.

Developers have ample opportunities to provide that space. In southeast Fairfax County, there are only 75,000 square feet of vacant office space right now, Gordon says, but as much as 10 million square feet of office space could be spun off of NGA alone. There is a big gap between present reality and future potential.

Office space may be the first opportunity, but it won't be the last. "Route 1 has a lot of potential," Edwards says. "With all these extra employees coming to main post, that's a lot of civilians with good salaries who want to go out and have a nice lunch or shop. We spend money when we leave work."

Further north, Alexandria already approved zoning for new and redone development at Landmark Mall, about a mile southwest of Mark Center, including 5.6 million square feet for hotel, office, residential, and retail space.

"If I had money to invest, I would look at the Landmark-Van Dorn area," says Val Hawkins, president and CEO of the Alexandria Economic Development Partnership. Despite Alexandria's net loss of jobs through BRAC, Hawkins and Landrum are looking at how the city's central location in this new corridor can be a boon to business.

» Technological Breakthroughs In the long term, Gordon sees opportunity in the type of work taking place at these locations.

The Fort Belvoir Community Hospital in Fairfax County, along with its counterpart in Bethesda, Md., could offer a model for better medical databases and innovative treatments and prosthetics for the injuries modern soldiers face. Likewise, despite the classified nature of the geospatial work in Springfield, advancements in satellites and mapping will inevitably find their way into civilian use.

"The private sector can learn a lot from the type of work they're doing," Gordon says, "and what they learn can eventually make its way to the larger marketplace."

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Big Ships Bring Big Opportunity: What a wider Panama Canal means for Greater Washington


In less than three years, a wider, deeper Panama Canal will open to cargo ships nearly twice the size of most ships today. Ports around the world are scrambling to build berths and cranes big enough to accommodate these megaships — but the Port of Baltimore will be ready.

Because of a partnership between the state of Maryland and the private company Ports America, a new berth and new cranes will be ready by August 2012, nearly two years before the $5.25 billion Panama Canal project is complete. Being ahead of the game is no accident; leaders know what the Port of Baltimore means to the region, Greater Washington, and the entire East Coast.

"Between the Baltimore-Washington corridor and the Baltimore-Philadelphia corridor, that's 14 million consumers," says Jim White, executive director of the I What a wider Panama Canal means for Greater Washington Big Ships Bring Big Opportunity Maryland Port Administration. "It's the third-largest consumer group in the country." The size and wealth of Greater Washington's consumer group makes it attractive to manufacturers the world over.

Traditionally, most freight from Asia has gone to the West Coast for shipping by rail across the country. Bigger ships moving through the Panama Canal make shipping straight to the East Coast more cost-effective. Stephen Flippin, director of federal affairs for rail company CSX Corp., says CSX's international freight has already shifted from about a 55-45 percent split in favor of the West Coast just two years ago to the opposite split today.

Just how big are the megaships? As of August 2011, the largest ship ever to dock at the Port of Baltimore was 9,200 TEUs (twenty-foot equivalent units, referring to the size of cargo containers). The new berth and crane will handle ships up to 14,000 TEUs, or 52 percent larger. With this increased capacity, the port is poised to be an even bigger world player.

Meanwhile, other ports face obstacles. In New York, the Bayonne Bridge would have to be raised to provide more clearance. Philadelphia and Charleston, S.C., would need costly dredging to handle large ships. Baltimore will have advantages over all of these ports.

"Once the Panama Canal project is completed, we'll be ready to compete with New York for first port of call," White says.


For Greater Washington, a growing shipping industry brings new and enhanced opportunities.

» Distribution Close to Home "There's a great opportunity for local distribution and warehouses to service the new volume," says Mark Montgomery, president and CEO of Ports America Chesapeake.

Large companies such as Wal-Mart, Home Depot, and IKEA may need to expand their distribution centers, especially regional ones, and there will be more opportunities for trucking and other offdock work. There is plenty of room for growth, especially off-site, since space at the port is limited.

As part of its larger National Gateway project — which the Greater Washington Board of Trade has supported — CSX plans to build the BWI Intermodal Facility near Baltimore/Washington International Airport. Right now, rail freight is limited by the height of the Howard Street Tunnel in Baltimore. The BWI Intermodal Facility would bypass that problem. Single-track trains and trucks would make the short trip from the Port of Baltimore to the new facility, and then CSX would load trains with "double-stack" freight, literally doubling capacity.

"It's a hole in our network that we're going to fix," Flippin says. Once it's fixed, shipping opens up all the way from the Greater Washington region to Chicago and the Midwest markets.

» Bigger Markets and More Products Baltimore already is the No. 2 port in the country for automobile shipping, behind only New York, and automobile shipping brings a great number of jobs with it. As increased capacity makes the port even more appealing to other businesses, the automobile industry could grow, too.

So could "forest products," in which the Port of Baltimore ranks first in the country. Because of environmental concerns and aging manufacturing plants, most pulp now comes from Brazil. It ships through Baltimore, then by rail to plants in the Midwest, where companies such as Kimberly-Clark and Procter & Gamble turn the pulp into everyday items, including diapers, napkins, and paper towels. The economics of larger ships could make Baltimore and Greater Washington appealing for new plants closer to the source, White says.

Baltimore also has a relatively balanced import-export ratio at roughly 55 percent and 45 percent, Montgomery says. Ships can offload their cargo here, then leave with raw materials or used automobiles. And there are other areas for export growth, including grain going to China.

» The Future of Logistics The greatest opportunities may not come directly from the port, but from the activity that surrounds it.

Flippin points to a big change in the transportation market. Companies are now less likely to survive by being just a rail company, just a trucking company, or just a distribution company. It all fits together under the heading of logistics, and there will be ample business for firms that can handle varied work efficiently and effectively.

"There's a future in growing the port and the logistics chain around it," Montgomery says. "Everything grows together: the port, the shipping network of trucking and rail, the distribution, everything."

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Your Board of Trade

Annual Meeting to Feature Dr. Henry Kissinger

Since 1889, the Greater Washington Board of Trade has gathered the region's business community to advance an agenda that is good for business and the community. The Annual Meeting features both business and elected leaders, convening to recognize the year's accomplishments. No one has quite the perspective of Dr. Henry Kissinger on the growing importance of China. There are countless opportunities (and many real concerns) for business leaders contemplating relationships with the East. On Dec. 7, as the Annual Meeting's keynote speaker, Dr. Kissinger will participate in a conversation about his years in Washington, his extensive experience as a diplomat, and his new book, On China. Registration includes a copy of On China.

Dec. 7, 12:00–1:30 p.m.
Location: Capital Hilton
16th and K streets, NW, Washington, D.C.

Members Reconnect at Fall Business Classic

On Oct. 5, more than 800 senior business, association, and civic leaders gathered for a night of networking and celebration at the invitation-only Fall Business Classic. In keeping with the Board of Trade’s tradition of convening in interesting and classic venues, this annual event was held at the United States Institute of Peace, an impressive LEED-certified building completed in March 2011.

Attendees enjoyed an elegant reception catered by Ridgewell Catering, and the event was presented by Capital One and sponsored by Bank of America, BB&T Bank, Comcast, Hickok Cole Architects, Pepco, SunTrust Bank, Wells Fargo Bank, PNC Bank, the Washington Nationals, and the Washington Business Journal.

Breakfast With Tom Brokaw

Comcast Business Class and Comcast Spotlight presented Tom Brokaw, one of the most trusted and respected figures in broadcast journalism, at the Newseum on Nov. 3. Brokaw has been a steady guide through the most tumultuous of times. At the event, he discussed the rapid pace of change in our nation. He also addressed work ethic, leadership, economic expectations, and what it has been like to have a front-row seat to the most dynamic years in American history. Attendees received a copy of Brokaw’s new book, The Time of Our Lives: A Conversation About America.

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Opportunity Talks

Joshua Foer Offers Tips Worth Remembering

In Greater Washington, memory matters. Whether you're a business leader trying to finish a critical deal with clients or a lawmaker trying to make an impression on constituents, you can't rely on Google to help you remember names and information when you're face to face with people.

Fortunately, says journalist and bestselling author Joshua Foer, our brains are built to remember — with practice. Foer's book Moonwalking With Einstein: The Art and Science of Remembering Everything chronicles his journey from average memory to victory at the 2010 U.S. Memory Championship. He shared his own experience and advice with Board of Trade members during an Authors Series event at the Madison Hotel on July 19.

Foer — a fourth-generation Washingtonian who still carries a 202 area code and loves the Redskins despite living in Connecticut — interviewed a wide range of characters along the way, from a total amnesiac to a man who remembers too much. He also explored memory-sharpening tips and techniques that date back to ancient cultures. Even if most of us have lost them along the way, it is not too late to get them back.

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