- The Washington Times - Monday, March 17, 2003

Cash-strapped nonprofits are getting squeezed out of affordable office space in the District as older, less expensive buildings are replaced by newer, more expensive properties.
With nearly 3 million square feet of new, top-tier office space expected to open in the District this year and another 8 million square feet on the way, nonprofits say the older, cheaper space they rely on is disappearing.
"It's absolutely, totally difficult to find affordable office space in the city," said Joyce Brown, senior vice president of the Global Initiative on AIDS In Africa. "For the small nonprofits, it's almost impossible."
In the last decade, the amount of available affordable office space also known as Class C space has been cut in half to about 7.6 million square feet. As the space has disappeared, vacancy rates for inexpensive unrenovated office space have spiraled downward from 19 percent in 1992 to 4.7 percent at the end of 2002, according to Spaulding and Slye Colliers. Asking rents for Class C space in the District have risen faster over the past three years than any other class of office space.
The Global Initiative on AIDS in Africa pays about $30 per square foot per month for a small office suite at 1776 I Street in the District, which it shares with several other charities and nonprofits. Things such as copier machines and computers are also shared, mainly because of a lack of space.
"You really don't have enough space, because you can't afford it," Ms. Brown said. "If we have special projects, we do it in someone's kitchen, or a church."
Real estate analysts said that a relatively healthy office market is to blame for nonprofits' struggles.
"It's a function of the lack of available land to develop, and therefore developers are looking for Class C buildings to demolish and renovate," said Manny Fitzgerald, a senior managing director with real estate broker Insignia/ESG, and head of the group's nonprofit real estate practice. "Nonprofits are going to go to the next Class C building and eventually be priced out of the market."
Small for-profit companies are also struggling to find affordable space, real estate analysts said, but are not handcuffed by restrictions on how they can spend their money. Many charities said that foundations that support them often contribute money based on the assumption it will be used to help fund the group's core function.
"As far as receiving money for administration and for space, the nonprofits usually have to do their own fund raising," said Debbie Tate, president of Grandma's House, a group that cares for HIV-infected orphans.
Real estate analysts said that for-profit companies are generally more able and willing to take cheaper office space in Northern Virginia or Suburban Maryland. Small nonprofits often insist on being located in the District, because it is easier to attract funds and lobby legislators. Also, many charities serve specific communities in the District, and therefore must be based there.
"You really need to be in D.C., because it's where everything is happening," Ms. Brown said. "Everybody is located in D.C."
Class C space, if it can be found, often goes for about $25 per square foot per month, but it's getting more expensive because landlords know the supply is shrinking.
Newly built and newly renovated space is nearly impossible to find for less than $30 per square foot per month unless the groups are willing to move out of centrally located areas of the District.
The landlord of the Federal Bar buildings located at 1815 and 1819 H St. recently told Peace Action and several other nonprofits to move out by June. The Federal Bar buildings will be demolished and rebuilt to accommodate the offices of a major law firm.
Peace Action, which occupies about 3,000 square feet, currently pays $19.50 per square foot per month, spokesman Scott Lynch said. But so far it has been unable to find another space in that price range. To make matters worse, the group is growing and may require another 1,000 square feet of space.
"Most of the stuff downtown is more expensive than what we're paying currently," Mr. Lynch said. "Any way we slice it, we're looking at doubling our rent. It looks like we may be in Van Ness or someplace like that."

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