Around the Beltway in 1985, many of the region's businesses set records for sales, profits, employment and dynamic growth.
And so far in 1986, the trend continues. Employment is up, unemployment is down. Real estate developers, bankers and defense contractors are reporting good gains. Regional bank mergers are changing the face of the industry.
In the housing market, sales of new homes are soaring as falling interest rates make homeownership more affordable. Building permits for single-family homes in the Washington area, which reflect the pace of construction, grew by 21.9 percent between the first three months of 1985 and the same period in 1986. Resales also have been setting a torrid pace.
At mortgage companies and lending institutions, loan officers find themselves swamped as homeowners rush to refinance their old high-rate loans.
For many firms, especially those with heavy vehicle costs, the free fall in oil prices has cut the cost of doing business and improved the bottom line.
"The Washington region is in the best shape it's been in my lifetime," declared Peter F. O'Malley, president of the Greater Washington Board of Trade.
On the downside, retailers say competition is tougher and sales are sluggish.
And one storm cloud, in the shape of the Gramm-Rudman-Hollings anti-deficit law, threatens to disturb the local economy. If federal budget cutters have their way, it could cost the Washington area $1.8 billion, experts believe. That's almost 6 percent of the $31 billion the feds poured into the Washington economy in fiscal 1984.
Revenue and profits for the leading 100 publicly owned, nonfinancial corporations in the Washington region hit new peaks in 1985. The Top 100 tallied $36.4 billion in revenue, up 11.7 percent from $32.6 billion in 1984.
Profits, which fell in 1984, rebounded strongly in 1985, moving up to $1.9 billion from $1.3 billion, a 46 percent boost.
The top 100 firms also are wealthier, with their assets rising to $40.4 billion from $35 billion. And the number of people working for Washington-area firms grew, too, moving up to 525,342 from 434,622, a gain of 20.9 percent.
The Top 10 remains a highly exclusive club where it takes at least $1 billion in revenue to qualify for admission.
The companies listed in the Top 10 remain unchanged this year, although some have shifted positions. MCI Communications Corp. vaulted from seventh to fourth place by increasing its revenue from $1.9 billion to $2.5 billion.
That pushed Giant Food Inc., with $2.2 billion in revenue, down to fifth place. The previous holder of fifth place, Primark Corp., an energy and financial-services holding company, slipped to seventh place as its revenue dropped from $2 billion to $1.8 billion.
Martin Marietta Corp., a giant in the aerospace and communications business, once again held onto first place in the Top 100, though its grip may be slipping. Martin Marietta is being challenged by second-place Marriott Corp., the food and lodging company, whose business has been expanding rapidly. Both companies went over the $4 billion mark in 1985, setting records for Washington-area companies.
The 100th company on the list is Systems Technology Associates Inc. of Sterling, Va., a $2.5 million computer hardware and software firm, which issued stock to the public last year.
Jobless Rate Continues to Fall
One key indicator of the health of the Washington economy is the unemployment rate, which continues to fall. The District rate dropped to 7 percent in March, below the national average, according to the D.C. Department of Employment Services. A year earlier, D.C. unemployment stood at 8.9 percent. The national unemployment rate in March was 7.2 percent.
In the Washington area, which includes the District and the suburbs in Maryland and Virginia, the unemployment rate stood at 3.5 percent in March, compared with 3.9 percent a year earlier.
Federal employment in the Washington area, always a key indicator, has been declining slightly. It stood at 297,560 in 1984, dropped to 296,249 in 1985 and fell off to 293,991 in 1986, according to the Office of Personnel Management.
Under the goals of Gramm-Rudman-Hollings, the Washington area could lose 8,000 federal jobs, "although this does not necessarily mean layoffs," according to a study by Philip Dearborn of the Greater Washington Research Center. The jobs would be lost by attrition, he said.
Federal spending remains a key component of the stability and power of the Washington economy. In fiscal 1984, Dearborn said, the federal government spent almost $31 billion in the Washington area, of which $12.7 billion was in salaries. Dearborn estimated that the Gramm-Rudman-Hollings budgetary changes would cost the region at least $1.8 billion.
If the current budget-trimming goals had been applied to the actual 1983 and 1984 budgets, Dearborn said, "local businesses selling defense goods and services would have experienced an increase in sales in 1984, but those selling to civilian agencies would have experienced more than $800 million less business."
Meanwhile, federal spending has been increasing in Virginia faster than in the District or Maryland. From 1983 to 1984, federal spending in Virginia went up 13.3 percent, compared with 7.8 percent in the District and 1.2 percent in Maryland.
The Top 100, like any list of "ins" and "outs," welcomes new companies and says goodbye to others.
The largest addition to the Top 100 list this year is Danaher Corp., a corporate umbrella for an Ohio rubber company and a Texas vinyl siding firm that also owns and manages real estate. Danaher listed revenue of $305 million for 1985.
Brothers Steven M. Rales and Mitchell P. Rales, corporate takeover specialists who live in the Washington area, established the headquarters of Danaher here.
Other new faces include:
*American Resources Corp. of Springfield, Va., a $12.2 million organization created through the merger of Colburn Energy Corp., an energy investment company in Springfield, and FP Industries Inc. of Honolulu, which has both agricultural and energy interests.
*Presidential Airways Inc., a new low-cost airline that began operating from Washington Dulles International Airport last year.
*Rowley-Scher Reprographics Inc. of Beltsville, a 63-year-old graphic reproduction company that offered stock to the public for the first time last year.
*Sporting Life Inc. of Alexandria, an eight-year-old mail-order catalogue firm that specializes in women's apparel. It, too, went public last year.
*VM Software Inc. of Vienna, a five-year-old company that made its first stock offering last year. The firm develops and markets software for IBM's widely known VM operating system.
*Verdix Corp. of Chantilly, a three-year-old company that specializes in ADA-language software and secure computer systems.
Gone from last year's Top 100 listings are:
*International Bank, which was a European-style "merchant bank" with varied interests. International Bank was taken over by USLICO Corp., a holding company for five life insurance companies. USLICO previously had been a subsidiary of International Bank.
*Cordatum, which develops computer software and educational video-disc systems for the federal government and private industry. It slipped off the Top 100 list when its $2 million revenue figure proved to be too small to beat out other firms.
*American Fuel Technologies, which produced and marketed ethanol, a gasoline octane enhancer. The firm has closed its production facilities and moved its headquarters from Maryland to Delaware. The drop in oil prices seriously hurt the company's ability to make ethanol competitive.
From where he sits, the defense procurement business looks strong to Earle C. Williams, head of BDM International, a major professional-services firm. The other companies in his industry seem to be doing well, Williams said. "They are going up at different rates, and I don't see anyone falling back. At the worst, they are staying stable with inflation , but everybody is moving up." Williams noted, however, that the procurement process is taking longer these days. Cost-conscious government officials are "crossing every 'T' and dotting every 'I,' " he said.
One area of the Washington economy that is considered "soft" is the office building market, where supply has outrun demand. Martin K. Alloy, president of Stanley Martin Cos., a home-building firm, said that the home-building business is good, and he cited a "huge demand from people moving from out of town."
Eighty percent of home sales in Fairfax are being made to people moving in from out of town, he said, compared with only 20 percent in Montgomery County.
Many out-of-towners are coming here to work for companies moving to the Washington area or opening branches here, he said, adding that the companies appear to be heavily oriented toward defense work.
Alloy was less optimistic about office building construction. Currently, when buildings go up in the city, they are 40 percent to 50 percent leased. But in the suburbs, he said, builders assume it will take 12 to 18 months to lease a new building.
Stephen Goldstein, senior vice president of Julien Studley, a national commercial-leasing firm, said that 41 million square feet of office space in the Washington area is being offered for occupancy in the next 2 1/2 years. Of that, 12.5 million square feet will be available in the District and 28 million square feet in suburban Maryland and Northern Virginia.
Office building has been especially heavy in Northern Virginia. From 1984 to 1985, the amount of office space rented in Northern Virginia doubled from 3 million to 6 million square feet, Goldstein said.
Our Smokestacks Are Cranes
The sight of buildings continuing to rise in the District prompted Stephen D. Harlan, managing partner of Peat Marwick Mitchell & Co., to observe: "The smokestacks of our town are really the construction cranes." The oversupply of office space, he said, is temporary. "Builders tend to build when there is money around."
If the builders have been busy, so have the bankers. Fundamental changes are taking place in the Washington-area banking picture as large regional banks gobble up smaller banks at lofty prices that are two and three times the book value of the institutions being acquired.
Among the mergers: Sovran Financial Corp. of Virginia took over Suburban Bank of Maryland and D.C. National Bank; United Virginia Bank acquired NS&T Bank and Bank of Bethesda; Bank of Virginia is buying Union Trust Bank of Baltimore and Security National Bank of Washington; and Dominion Bank is taking over State National Bank of Rockville and National Bank of Commerce of Washington.