The coronavirus pandemic has devastated our region’s economy overall, but it has also triggered explosive growth in a pair of critical technology industries on either side of the Potomac.
In Loudoun and Prince William counties, a sharp increase in Internet usage by homebound residents has led to a dramatic jump in construction of data centers that house the computers that create the Web. The giant warehouses springing up along highways in the outer suburbs spin off enormous tax revenue but also prompt some residents to worry about loss of natural landscape.
Neither industry added anywhere near enough jobs to offset the losses in the hard-hit hospitality, retail and service sectors. But the jobs they do create tend to be high-paying.
The booms have also strengthened our region’s position in the intense competition with other U.S. metropolitan areas for high-tech investment. They bolster our long-term transition from a primarily government town to a region with a vibrant private sector. That change was highlighted by Arlington’s 2018 victory in the nationwide contest to host Amazon’s second corporate headquarters. (Amazon founder Jeff Bezos owns The Washington Post.)
“There are bright spots in our economy, and we should celebrate that,” said Jeannette Chapman, an economist and director of George Mason University’s Stephen S. Fuller Institute for Research on the Washington Region’s Economic Future. “That doesn’t make the negative parts disappear.”
In Maryland’s Montgomery County, the federal government’s all-out push to develop a coronavirus vaccine was the primary source of funds that flooded the biotech industry. The federal Operation Warp Speed (OWS) accounted for $5.5 billion of $7.7 billion in total investment in the sector in 2020, according to the Montgomery County Economic Development Corporation. In OWS, a public-private partnership, contracts went to private companies to develop and produce vaccines, which the federal government then would own and distribute.
One of the beneficiaries was Novavax, based in Gaithersburg, which is in the final stages of developing a coronavirus vaccine. The Coalition for Epidemic Preparedness Innovations (CEPI), an international partnership, provided $388 million a year ago to start the vaccine work. OWS supplied an additional $1.6 billion in July.
Novavax’s workforce in Montgomery nearly quadrupled to 450. Many of the jobs are for highly educated, skilled workers, paying between $150,000 and $200,000 a year. It was possible to recruit them quickly, partly because the proximity of the National Institutes of Health and the Food and Drug Administration helped create a pool of talent.
“The beauty of the Montgomery biotech community is the resources and availability of people,” chief commercial officer John Trizzino said. “We’ve been able to leverage that.”
Another company, Germany-based Qiagen, has added about 100 people to its U.S. headquarters in Germantown, raising the total to 320. They are producing chemicals and other materials for coronavirus testing.
“We had a commercial test for covid within seven weeks” of the pandemic’s onset, spokesman Robert Reitze said. “That really did propel our business.”
The job gains, though welcome, are dwarfed by losses in other industries. Federal jobs data shows Montgomery and Frederick counties picked up about 200 jobs during 2020 in the scientific research and development sector, according to Chapman. Overall, however, the counties lost 43,200 jobs in the year.
But the influx of investment to fight the coronavirus has sped up the maturation of the industry, and helped it to compete with other biotech centers such as Silicon Valley and the Boston metro area.
“We’re seeing that final transition to having large-scale commercial companies here,” said Brad Stewart, senior vice president of business development at the Montgomery County Economic Development Corporation. “The transition was on the horizon. This certainly has pulled the horizon forward.”
Google will spend $7 billion on new buildings and data centers in the U.S. this year, doubling down on a return to the office.
It isn’t all happy news. One major Montgomery biotech company, Emergent BioSolutions of Gaithersburg, has proved to be something of an embarrassment. It owns and operated the Baltimore plant where a mix-up of ingredients spoiled enough raw vaccine for up to 15 million doses. As a result, it was agreed that Johnson & Johnson would take over full operations of the facility.
Across the river, Internet companies have rushed to build new data centers in Northern Virginia to accommodate increased demand for Web capacity. Computer use jumped as companies switched to telework, and households relied more on the Internet for shopping, school work, and communicating with family and friends.
Loudoun hosts data centers for a Who’s Who of high-tech giants, including Amazon Web Services, Microsoft and Google. The county’s “fast-track” program for building data centers, designed for 15 projects a year, doubled in the fiscal year ending June 30.
“It happened pretty quickly,” said Buddy Rizer, the county’s executive director of economic development. “We saw right away that we needed to work on our data centers in the same way that we worked with mission-critical hospital employees, because they have to be [available] 24 hours a day.”
The pandemic confirmed Northern Virginia’s position as the nation’s premier site for data centers. In 2020, the region accounted for about two-thirds of the total expansion of data center capacity of the top seven markets, which include Silicon Valley, Dallas and Atlanta.
The bulk of the new investment went to Loudoun, the established leader, with $6.8 billion in data center investments in 2020, according to the Data Center Coalition, a trade association. Neighboring Prince William is increasingly attracting projects as well, with $2.2 billion last year.
Local governments are thrilled with the tax revenue. Rizer said Loudoun data centers are projected to generate nearly $700 million in taxes in the coming fiscal year, which would approximately cover the county government’s entire budget apart from schools.
The industry has its critics, such as Prince William residents concerned that data centers will spoil the beauty of its western rural crescent. The buildings are frequently three times the size of a large Home Depot.
“You definitely see some pushback because of the pace of growth, and people just trying to understand what it means,” said Josh Levi, president of the Data Center Coalition.
The industry has responded, in part, by starting to dress up the data centers’ exteriors so they look more like office buildings.
Data centers and the biotech industry promise to help lead the region’s economy toward prosperity and a high-tech future as we recover from the coronavirus pandemic.