- The Washington Times - Thursday, January 1, 2004

The D.C.-area office market finished best in the nation in 2003, and set a record with $5.4 billion in office building sales, Delta Associates reported.

Vacancy rates throughout the region fell to a national low of 11.2 percent, and investors gobbled up office buildings at a frenetic pace while paying record amounts.

The $5.4 billion in sales came from 106 transactions, which averaged a record $237 per square foot, an increase of 12.3 percent over 2002.

“The Washington market remains a very attractive option for institutional and overseas investors because of the stable nature of its tenant base,” Delta said.

Law firms and defense contractors were the big drivers of the market’s health. The Wilmer Culter & Pickering law firm leased 524,000 square feet on Pennsylvania Avenue NW and Dickstein Shapiro leased 417,000 square feet at International Square.

Defense firms Titan and Lockheed Martin combined to lease more than 500,000 square feet in Northern Virginia.

Meanwhile, construction of office space continued at a brisk pace, with 12.1 million square feet of space under construction last year, compared with 11.9 million square feet in 2002. About 65 percent of the space under construction is already leased, Delta said. Fewer buildings, however, were completed last year.

Revitalization urged

The Downtown Cluster of Congregations yesterday urged federal government officials to begin a competitive bidding process for redevelopment the Old Post Office building on Pennsylvania Avenue NW.

The nonprofit activist group wrote a letter to the Office of Management and Budget and the General Services Administration asking them to sell the building to a developer who will turn it into a driver of economic redevelopment downtown.

“Frankly, I believe the federal government’s ‘stewardship’ of this building is costing the public money, and contributing to the ongoing vacancy and decay of this site that should be a jewel,” said Terry Lynch, the Downtown Cluster’s executive director.

The GSA had mounted a push for revitalization of the historic building more than two years ago, but funding was unavailable after allocation of money toward homeland security and other defense-oriented projects.

It interviewed several development teams in March, but delayed making a decision. A Web site advertising for redevelopment of the building had been created in March, but has been removed.

“This may be the most prominent site on America’s Main Street, and it is certainly the most underperforming,” says Mr. Lynch. “This site should be generating far more jobs, revenues and visits by local residents and visitors alike.”

Sources close to the project said finding a developer could prove difficult, after Congress said the annex of the Post Office could be used to house the National Women’s History Museum.

Developers have argued that a museum will not bring in as much revenue as office space, or even a hotel.

The GSA purchased the lease on the building for $7.1 million in 2001, hoping to resurrect it from its status as a struggling mall and tourist attraction.

Property Lines runs Fridays. Tim Lemke can be reached at tlemke@washingtontimes.com or 202/636-4836.

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