- The Washington Times - Thursday, August 24, 2000

Capitol Hill has emerged as the District of Columbia's hot new office market, as space has filled up in other areas around the city.
The American Gas Association, a nonprofit group that lobbies lawmakers on behalf of the nation's natural-gas companies, is an example of one of several tenants that have moved to the Hill in the last 18 months. Its officials had grown tired of traveling every day from Arlington, Va., where the group was based for almost 30 years, to Capitol Hill.
So last year, the group pulled up stakes and moved to Congress' front stoop, leasing 35,000 square feet of office space on the Hill.
Spokeswoman Daphne Magnuson said the move has helped the association boost its visibility in Congress. Its lobbyists now can walk from their office to the U.S. Capitol, and the group is closer to the federal agencies that regulate the natural-gas industry.
"We achieved what we set out to do," Ms. Magnuson said, noting that more than 100 senators and members of Congress have dropped by in the last year to check out the new digs.
The gas association's move and others like it are helping make Capitol Hill the hottest office destination in the District.
The vacancy rate for office space on the Hill has dropped from 13.1 percent in 1995 to 2.4 percent today, the third-lowest rate in the city, according to Alexandria, Va.-based real estate research firm Delta Associates.
The neighborhood has the District's lowest vacancy rate for premium space, less than 1 percent.
Developers also have descended on the Hill, including one New York builder planning a 1.5-million-square-foot project near Union Station.
"Capitol Hill is a world-class location," said Eric H. West, a principal in West, Lane & Schlager Realty Advisors LLC, a D.C. firm that markets space on the Hill.
Mr. West said tenants are coming to the neighborhood because space has tightened in other areas downtown. But unlike the American Gas Association, most of the newcomers haven't set up shop on Capitol Hill to get easy access to lawmakers, Mr. West said.
Last year, Cleveland-based law firm Jones, Day, Reavis & Pogue moved its D.C. office from G Street NW to 51 Louisiana Ave. NW.
Gregory M. Shumaker, an administrative partner in the firm, said it doesn't deal much with federal lawmakers, even though its new building is within walking distance of the Capitol.
Instead, Jones, Day moved to Capitol Hill because "it was clear this was going to be the place to be," Mr. Shumaker said.
He said the firm's move was risky, but it has paid off. Sources said rent for premium office space on the Hill can go for as much as $65 per square foot, which is comparable to rental rates in the District's traditionally popular office markets, such as the East End.
Mr. Shumaker would not disclose the terms of his firm's lease, but said it "reflected people's view of Capitol Hill at that time."
Other new tenants on the Hill include the American Council of Life Insurance, which leased 160,000 square feet at 101 Constitution Ave. NW, and Metec Asset Management LLP, which signed a lease this year for 34,000 square feet on South Capitol Street SW.
Close on the heels of the new tenants have been developers, who are eager to provide new space in the tight market.
Louis Dreyfus Property Group of New York is planning a project near Union Station at the corner of 2nd and F streets NE that could generate as much as 1.5 million square feet of new space.
"Capitol Hill is the last area in town that can yield large development sites," said Audrey Zale Cramer, executive director of the local office of New York-based brokerage Cushman & Wakefield, which will market the Dreyfus project.
Another builder, Republic Properties, is planning a 700,000-square-foot project at the corner of North Capitol Street and Massachusetts Avenue NW.
Other developers already have started building projects on the Hill.
The United Brotherhood of Carpenters and Joiners of America began construction on a 500,000-square-foot building at 101 Constitution Ave. NW last year.
In July, Lowe Enterprises Mid-Atlantic broke ground on a nine-story building at 601 New Jersey Ave. NW that will feature 240,000 square feet when it is completed in 2002.
As the market heats up, brokers and developers are pushing the boundaries of Capitol Hill away from the Capitol itself.
Delta says the neighborhood encompasses the area west of 8th Street NE and SE, east of 3rd Street NW and SW, south of P Street NW and NE and north of the Anacostia River.
This definition makes the Hill home not only to the Capitol and Union Station, but also to a corner of the Gallaudet University campus in Northeast and a portion of "NoMa," the area north of Massachusetts Avenue NW and NE that the District has designated as the city's high-tech business corridor.
Michael S. Balaban, a senior vice president with Lowe, said the expanding boundaries, coupled with redevelopment in other areas downtown such as the MCI Center, "are going to make the Capitol Hill submarket seem much more central than ever before."

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