For developers and real estate brokers, getting a lease with a government agency can almost guarantee a long-term tenant in your building. In Montgomery County, that federal agency is often the National Institutes of Health, the medical research arm of the federal government. The NIH has a huge presence in the office market around the 320 acres of its main campus in Bethesda. It is the largest government-run medical research facility in the country.
Leonard Taylor Jr. heads the NIH's real estate division as acting director of the Office of Research Facilities Development and Operations. He was interviewed last week about the NIH's real estate plans.
QWhat is NIH's strategy on space?
AHaving a balance between owned and leased space makes sense. If you use leasing properly, it gives flexibility. I've got a lot of space, but if my needs change, I can buy my way out or not renew when the lease runs out. It is also much faster than building something from scratch because that process can take years.
Has your strategy shifted?
Since 1996, we've had a master plan that said that as we grew as a campus, we would use the space here to focus on research and development and the administrative functions would be moved into leased space [off campus]. Because we have limits on our growth here at the Bethesda campus, because of the traffic, air pollution, amount of green space and the density we are allowed, we made a decision to focus the campus on research and development. Science buildings are expensive and so are the machines we need so we find that owning them works well. There's specialized and expensive labs we need here and we like to have the synergy between researchers on campus. Also, people want to be able to get to patients. And it's better if they can have access by foot rather than by car or bus.
Is it hard to find the kind of lab space NIH needs in the market?
The real estate market is much happier to step up and provide general space rather than more expensive and more risky space like you need for labs. Lab space is more of a niche.
How do you decide how much space the agency needs?
There is a lag from the time we get the money until it actually gets used in the science we do. We have to make decisions like 'Do I buy tools, like a new imaging system, or a CAT scan or MRI machine or a new genetic probe system?' Each science director of the  institutes can choose to add staff, equipment and facilities and which to bring on when. Depending on what the director decides to add could lead to us needing a new facility. The director of NIH has worked with the science directors on a "road map" of where he thinks the agency could really have breakthrough discoveries.
How much space does NIH lease in Montgomery? And what goes on there?
About 3 million square feet. Most of it is in the Rock Spring Park area, Rockville and around Executive Boulevard. Our strategy is to concentrate on leasing in those zones. We do our information technology in leased space, plus process grants. And we do the administrative side of equipment purchases there.
What new construction has NIH done on campus recently?
We've got a new hospital with 1 million square feet opening in September and two labs. We're also completing a neuroscience center and another lab is coming so we can expand our infectious disease research.
How have your space needs been affected by the agency's budget?
Our budget went up very rapidly [in the late 1990s] because Congress and the American people decided to double it, so that increased our leased space. [But now, as more federal spending goes to defense, the growth of the NIH budget is slowing.] When the rate of growth for your budget slows, so does the rate of growth of your staff. And since the staff and the money drive the need for space, our need for space is slowing. But it's not grinding to a halt.
What's the budget outlook?
The double-digit increases we saw, we don't expect to see in the near future. We're working through to deploy all of the resources we have. Homeland security is having an impact across all government agencies. But people like NIH.
So developers will see fewer leases of space off NIH's Bethesda campus?
People might be seeing fewer leases coming out of NIH. We're not packing up our tent and going. We're a huge economic engine in this region. We're trying to be prudent. We're still growing, but we're just not growing as fast.
How much space will the NIH need in the future?
We know what our appetite is. We don't know what our ability is because it depends on the budget. And this year's hasn't passed.