- The Washington Times - Monday, February 28, 2000

Shock absorbers get a workout on M Street SE nowadays, but D.C. planning director Andrew Altman doesn't mind. The ruts don't bother him because he knows freshly laid fiber-optic cable lies underneath, a sign of growth to come in the Southeast neighborhood.

"We've identified it as one of the most important development sites in the city," he said.

After decades of decaying, the neighborhood along the Anacostia River is seeing new development because of a massive $200 million construction project in the Navy Yard. Developers have broken ground and laid plans for sites outside the yard's walls. District, Navy, federal and private officials believe they can bring new life to the area by fixing up its run-down streets and improving access to its isolated waterfront.

"Not only is this an opportunity to renew the Navy Yard, it's an opportunity to redevelop economically and socially," said Rear Admiral Christopher Weaver, who oversees 11 U.S. Navy bases in and around the District.

Bounded by South Capitol Street on the west and the Southeast Freeway on the north and east, Southeast has the largest concentration of public housing in the city. But private and public officials are focusing on the development potential and trying to gauge its pace.

The U.S. Navy has been quietly consolidating agencies in the Navy Yard since 1997. However, by July 2001, the arrival of the Naval Sea Systems Command (NAVSEA) will more than double the former gun factory's workday population to almost 11,000.

Real estate brokers expect NAVSEA contractors will bring another 5,000 workers to Southeast along with up to a million square feet of office space.

"Leases indicate they're moving a substantial number of people," said Stephen Mutty, a broker with Grubb & Ellis. "It's telling as to the magnetism of the project."[

Beyond government

Among the developers active in the neighborhood, Potomac Investment Properties Inc. has broken ground on an eight-story office building at 300 M St. SE. Spaulding & Slye has just signed and broken ground on a seven-story building at 80 M St. SE, formerly the site of the Tracks nightclub.

A third developer, Lincoln Property Co., plans to build four offices and a hotel on the 12-acre Washington Gas site at 12th and M streets SE. Real estate officials said General Dynamics and Newport News Shipbuilding are negotiating leases, but Lincoln would not confirm it.

The activity has attracted a residential developer long active in the District. In January 2001, Robert Holland hopes to break ground on two 13-story apartment towers with some retail shops in a $36 million project at a site he owns, bounded by K, L, Second streets and New Jersey Avenue.

"If we build ours and if you build two office buildings, you're creating a neighborhood," Mr. Holland said. He's also negotiating a deal to build a limited-service hotel to serve government contractors at an undisclosed location, he said.

More are shopping the neighborhood for opportunities, brokers said.

The waterfront neighborhood, though dilapidated, has ingredients that developers like, said Harry Pfohl, a broker with Lincoln Property. It is anchored on the north by Capitol Hill and on the south by the Navy Yard. Besides NAVSEA, the Marine Corps has bought several rundown buildings on Virginia Avenue and plans to convert them into barracks for 300 enlisted men.

And there's tourism, too, with 400,000 people annually visiting the Navy Yard museum. Officials also view the waterfront as an underused asset.

"The fundamentals are very strong," said Brian Raher, a broker with Cushman & Wakefield, who mentioned the neighborhood's proximity to Capitol Hill and its access to Metro and roads.

It is also eligible for every economic development program in the District, said D.C. Council member Sharon Ambrose, a Ward 6 Democrat who represents the neighborhood.

While these conditions could set the stage for rapid growth, that's far from a sure thing and right now commercial developers are only pursuing what they feel are sure things, brokers said. Besides NAVSEA developments, only William Smith Corp. has struck a major deal recently. It bought the former Washington Star printing plant at 225 Virginia Ave. SE last year, with hopes that its fiber-optic cable access will attract one of the telecommunications companies moving into the city.

"There's a lot of people sniffing around there" but not buying, Mr. Raher said.

A key tenant

As most developers watch from the sidelines, the neighborhood is in the running for a major tenant that could bring the next surge in activity. The federal government is considering moving the Department of Transportation headquarters, now at 7th and D streets SW, as it puts the 1.3-million-square-foot lease out for bid. Two Southeast sites are under consideration for the lease.

One is the Southeast Federal Center, a 55-acre lot that used to be part of the Navy Yard. It is the largest unused piece of federal property in the District. Since 1968, the General Services Administration, which handles the government's real estate, has wanted to build an enclave of federal offices there. But the surrounding neighborhood always discouraged government agencies from moving in.

"We didn't pay much attention to what's outside the property," said Anthony Costa, assistant regional administrator for GSA.

Now the government has changed its tactics. It wants to build a community of offices, housing, shopping and hotel space on the site, and is working with city officials to coordinate development planning on M Street and on the waterfront two of the most crucial areas in the entire neighborhood. The DOT lease has the potential to jump-start the project. Federal officials also are taking unusual steps to start development.

A bill by D.C. Delegate Eleanor Holmes Norton, a Democrat, would allow GSA to develop the property through a public-private partnership an unprecedented step for such a large federal tract. This would give GSA tools it normally doesn't have, Mr. Costa said.

The other site in the running is the privately owned Florida Rock site at 100 Potomac Ave. SE, just downriver from the GSA property. The six-acre site has received approvals to accommodate up to 1.5 million square feet of offices. Some D.C. officials would rather see the project go there because, unlike the Federal Center, it would not be exempt from federal property tax.

Setting the stage

Whether DOT lands in Southeast or not, the prospect of future development has convinced city officials to make the neighborhood as attractive as possible.

The city is spending millions to repair the Southeast Expressway and the 11th Street Bridge, and to rebuild M Street SE with new asphalt, sidewalks, trees and benches.

"It's meant to be a grand boulevard to the city," said one D.C. official familiar with the streetscape project.

So far plans to beautify the neighborhood do not include tearing down or converting public housing into other uses, but that could change, said Mrs. Ambrose, the council member.

"I think there will be acquisitions," she said. This could possibly take place through either eminent domain by the District or private acquisition, she said.

Other officials discount the prospect of displacing the public housing, but agree its residents need help. They point to programs like "Bridges to Friendship," a coalition of 13 government, military and community agencies. The coalition helps neighborhood students learn life skills and job training.

City, Navy and private-sector officials acknowledge that residents need help, but they are more certain about how to tackle physical problems like the barriers isolating the neighborhood.

Making the connection

The trick is to reconnect the neighborhood with the rest of the city, said Mr. Altman, the D.C. planner. The Southeast Freeway has cut off the neighborhood from the rest of the city, private and public officials say.

Office builders plan to help their tenants by running shuttle buses from their M Street addresses up Eighth Street to Eastern Market on Pennsylvania Avenue. City planners have decided nothing, but are considering a variety of options.

One possibility is New Jersey Avenue, which ends at M Street pointing into the Southeast Federal Center, Mr. Altman said. This could be extended to the waterfront and formed into a grand public space. That's what city architect Pierre L'Enfant envisioned for all the District's avenues, he said. A line of three narrow blocks owned by D.C. Public Schools could be turned into public park space for the same effect.

The waterfront itself could become both a destination and a way of linking the neighborhood with the rest of the city. Federal, District and real estate industry officials are now exploring ways to take advantage of this. One idea is a "river walk" running from South Capitol Street to RFK Stadium, said John Imparato, a Navy Yard spokesman.

Development activity now boosts the chance of creating such a trail, long a goal of the National Park Service, said John Parsons, associate regional director. The Park Service owns the waterfront stretching from the Navy Yard to the expressway bridge, and will begin planning trails on both sides of the 1,100 acres of Anacostia waterfront property in the District within a month, he said.

Another tactic to reconnect the Southeast neighborhood with the rest of the city involves Eighth Street, where D.C. officials want to strengthen the shopping district. The program would involve spending $3 million over five years to upgrade the streets and sidewalks leading from the Navy Yard's ceremonial gate to Eastern Market and Pennsylvania Avenue on Capitol Hill.

The NAVSEA move has also prompted a high-speed ferry operator, Potomac RiverJet Inc., to propose carrying passengers to the Navy Yard from Occoquan and Fort Washington.

The missing link

One unanswered question is what retail development would arise to serve the 10,000 workers expected to arrive in the neighborhood. The Navy is relying on the private sector to do this job.

"We're not developers. We've got a McDonald's," Mr. Imparato said.

Retail developers have not yet focused their attention on the issue, brokers said.

"That seems to be lagging," Mr. Mutty said.

As much as developers and city officials see the potential of drawing workers, residents and tourists to this neighborhood, others see the development as ways to bring new business and jobs to surrounding parts of the city.

"The challenge is to reap the benefits of having all these people working there," Mrs. Ambrose said.

Eighth Street retailers are particularly interested.

"Our goal all along has been to try to encourage people working down there and come up and patronize businesses along that corridor," said Scott Sanger, executive director of the Capitol Hill Association of Merchants and Professionals, which claims 300 member businesses on Capitol Hill.

"A lot of these people are basically suburbanites. They tend to have preconceived notions about dining on Capitol Hill," even though the neighborhood has changed, he said.

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