News & Events
Economic Barometer Newsletter
June 2004
New GWI Publications Focus on Region’s Economy, Government Business - GWI ’s flagship publication, Greater Washington Regional Report 2004, is hot off the press. The Report documents the current strength of the area’s economy and provides the latest, comparative demographic and economic data. Also, the new Business of Government publication, published by Washington Flyer magazine, provides helpful tips and resources for firms interested in selling a product or service to the U.S. government. Read more
Find it Fast: Re-organized GWI Website Launched - In addition to new print materials, GWI ’s website, www.greaterwashington.org, was recently redesigned to make it even easier to find comprehensive info about the region encompassing DC, Northern Virginia and Suburban Maryland. The site also sports a re-designed, contemporary look. Check it out!
Area Business Leaders Bullish on Area Economy - As we head into the summer months, 90% of Washington-area business leaders are quite positive about the region’s economy, according to a quarterly “Business Pulse” survey conducted this spring. More Info
Sustained, Strong Growth Projected for Washington Region
Report by Sigrid Zialcita, Cushman & Wakefield
The resumption of job growth in the first quarter was welcome news, sending a clear message that the labor market is finally turning the corner, and even leading to greater expectations for a solid economic expansion. In the Washington DC metropolitan area, employment climbed once again – thanks to significant stimulus from stronger defense spending and rebounding business investments. This job creation has aided the office sector. Net absorption surged in the suburbs, allowing sublease space to shrink once again to its two-year lows. As a result, overall vacancies contracted and rents even inched up in some submarkets in Northern Virginia . While demand has weakened, the District remained a source of stability for the DC Metro. Overall vacancies were still impressively low, and rents were just slightly down from their peak in the third quarter of 2003.
Cushman & Wakefield expects that the balance of 2004 and 2005 will be characterized by sustained strong economic growth that should clear the way for more jobs and augur well for the office sector in the DC metro. The suburbs will likely capture the lion’s share of employment gains, so expect declining vacancies to persist and fuel moderate rent appreciation.
Private Sector Job Growth Fueling Greater Washington ’s Economy Report by Nels Olson, Managing Director and Senior Client Partner, Korn/Ferry International
Hiring is escalating briskly in the Greater Washington area. For the first time since the slow-moving economic recovery began in 2001, increased openings in the private sector are a major driver. According to newly released figures from the U.S. Department of Labor, not only is the employment situation in our region consistent with positive national trends, but in many ways, it is superior. Our local economy has proven to be a major contributor to the national economy.
In March 2004, the Washington area:
- recorded the lowest jobless rate among all metropolitan areas surveyed (3.0%);
- boasted the largest over-the-year non-farm employment increase (+60,600); and
- tied for the second-largest over-the-year percentage increase in nonfarm employment (+2.2%).
It is no secret that federal spending was, in large part, the reason our regionfared better than others during the past several years. Local hiring by both the federal government and business & professional services firms (which rely heavily on government contracts) swelled. What is news, though, are the private sector industries that made sizeable contributions to the 60,600 non-farm jobs that were created in our region during the 12 months ending on March 31, such as: Retail (+10,800); Leisure & Hospitality Business (+8,300); and Construction (+8,000).
Nationally, the marketplace has seen a lift in demand from just about every industry sector across most geographic regions. In the coming 12 months, we expect to see several industries lead in terms of job growth, among them Healthcare and Consumer. Our firm is bullish about the creation of new jobsover the long-term – both here in Washington and nationally – and is already sensing greater levels of confidence from our clients, who are feeling cautiously optimistic in their ability to grow again.
First Quarter 2004 VC Investment In DC Area Exceeded $212 Million; 2004 Begins with Nearly 40 Deals
At the end of the first quarter of 2004, DC Metro venture capital finished on an even note, compared with the previous quarter, according to the PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association MoneyTree Survey.
Funding decreased slightly in the area from $ 218 million at the end of Q4 03 to $ 212 million at end of Q1 04. The $ 212 million was invested in 39 deals in the region, which is comprised of the states of Maryland , Virginia , West Virginia and the District of Columbia .
Nationally, venture capital kept up a steady pace in the first quarter; investments totaled $4.6 billion going into 618 companies. This figure is below the $5.2 billion invested in the fourth quarter of 2003, but well above the same period last year when investments in Q1 2003 totaled $4.2 billion. In addition, Q1 2004 was in the middle range of investment levels recorded over the past seven quarters, which have consistently been between $4.2 billion and $5.2 billion.
Sector and Industry Analysis
The Software Industry continued its dominance of the DC area venture market, with $ 68 million invested in 13 deals. Despite a 35% drop in funding from Q4 03, Software captured 32% of all Q1 investment dollars in DC. The Telecommunications sector captured 23% of all funding in the quarter, ranking second to Software. Telecommunications companies in the DC region garnered $ 48 million in five deals; Biotechnology placed third among area industries, with $ 32.7 million in eight deals.
Nationally, the Software Industry inched back into the top slot in the first quarter of 2004 as the single largest industry category after being pushed into second place the last two quarters by Biotechnology. Software companies garnered $ 956 million going into 162 companies, down slightly from the prior quarter. This quarter, Biotechnology comes in a close second, with $ 943 million in 71 deals.
First-Time Financings
Nearly 14% of deals were first-time fundings. First-time financings represented only 1% of regional funding in DC, with $ 2.2 million collected in 5 deals. This is a significant decrease from last quarter’s 17% of regional funding, as $ 37 million was collected in 13 deals. Notably Q1’s decline in area first financings may indicate a shift toward maturity in the local venture market.
Nationally, first-time financings were essentially flat, despite anecdotal buzz of a resurgence. A total of 158 companies received their first-ever round of venture capital in Q1 2004, down from 186 in the prior quarter. However, they represented 26% of all companies receiving funding in the period, about the same proportion as in the prior quarter. Similarly, they accounted for $886 million in first quarter or 19% of all dollars, about the same percentage as in the fourth quarter of 2003.Stage of Development
Expansion stage companies in DC Metro continued to receive strong funding support. About 62% of area investments were made to companies at this stage. Expansion stage investments surpassed $ 132 million. Notably Later stage companies collected 25% of total funding. Early stage investments accounted for only 12% of the region’s total, or $ 26 million, decreasing from the previous quarter.
Nationally, Expansion stage companies garnered almost $ 2.5 billion, with Later stage companies coming in second with about $ 1.4 billion. Expansion stage funding decreased this quarter from quarter four of 2003, while Later stage funding remained consistent.
About the PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association Money Tree Survey
The MoneyTree™ Survey measures cash-for-equity investments by the professional venture capital community in private emerging companies in the U.S. The survey includes the investment activity of professional venture capital firms with or without a US office, SBICs, venture arms of corporations, institutions, investment banks and similar entities. MoneyTree Survey results are available online at www.pwcmoneytree.com, www.ventureeconomics.com, and www.nvca.org.
The National Venture Capital Association (NVCA) represents over 450 venture capital and private equity organizations. For more information, visit www.nvca.org.
The PricewaterhouseCoopers Private Equity & Venture Capital Practice is part of the Global Technology Industry Group, www.pwcglobaltech.com. PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services for public and private clients.
Thomson Venture Economics, a Thomson Financial company, is an information provider for equity professionals worldwide. For more info about Venture Economics, visit www.ventureeconomics.com.
Did you know the Greater Washington region led the nation’s largest metro areas with nearly 20,000 net new jobs created in 2003? (This is just one example of the data you’ll find in GWI ’s 2004 Regional Report, available at www.greaterwashington.org)
GWI is the region’s economic development marketing organization providing research and assistance to site selection consultants, real estate professionals, corporate and association executives. GWI’s confidential and complimentary services may help you.
The Greater Washington Economic Barometer is a quarterly communication from GWI for business professionals on regional economic trends and news. For more information on the Economic Barometer or to be added to the distribution list, email greaterwashingtoninitiative@bot.org. To opt-out of this list, please reply to this message with UNSUBSCRIBE in the subject line. For regional statistics and news, visit our web site at www.greaterwashington.org. GWI is an affiliate of the Greater Washington Board of Trade.
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