DEVELOPERS GAMBLE ON GROWTH NEAR UNION STATION (2024)

driven from more expensive environs of the city or drawn toward Capitol

Hill will make the industrial corridor between North Capitol Street and

the train tracks a popular office frontier.

Within two blocks of Union Station, Rose and his partner, Stewart

Greenebaum, unfamiliar faces to some members of the local real estate

industry, have assembled enough land to build a 2-million-square-foot

office park, which would be one of the largest developments in the city.

The first stage of the development, an 11-story, 181,000-square-foot

glass and granite tower called 810 Union Center Plaza, is scheduled for

completion this month.

The remainder is still on the drawing board, to be built in

increments as the market demonstrates its strength, Rose said. As Rose

plays his hand, other developers are lining up to place similar bets.

Carter Cafritz has assembled properties along K Street NE, between

two of Rose's parcels, that could be developed into an additional 1

million square feet of office space, industry sources said. Further

north, several developers have expressed strong interest in buying

Woodward & Lothrop's outmoded central warehouse, which occupies about

seven acres and could be replaced with a 1.8-million-square-foot office

complex. Meanwhile, a number of investors have made smaller speculative

purchases.

Altogether, the partially blighted 10-block area that stretches from

the old main city post office on G Street north to N Street holds the

potential for 10 million square feet of office development -- roughly

equivalent to the size of Crystal City, real estate experts said.

"I really think it's going to be D.C.'s version of Rosslyn," said

Greg Weingast, an official at Stout & Teague Cos., a Washington

developer that has been talking to Woodward & Lothrop about buying the

retailer's warehouse on 1st Street NE.

Developers, brokers and other industry officials said several

features make the neighborhood, long ago designated as an urban renewal

district, especially ripe for commercial redevelopment. Chief among them

are its proximity to Union Station and Capitol Hill, the low cost of

land and the absence of major zoning constraints.

Union Station currently is undergoing a $160 million renovation that

is considered a major contributor to the area's future and a catalyst

for new construction. Gold-leafed ceilings and marble floors have been

restored, a five-level parking garage is being built and restaurants,

offices and stores are being constructed.

Because land in the Northeast urban renewal area is selling at a

fraction of the price of scarce downtown sites, developers there can

charge annual rents in the range of $26 per square foot, an average of

$10 less than rates in the central business district.

The area's zoning already allows major office construction, so

developers could be spared the costly, controversial and time-consuming

battles that projects elsewhere in the city often require. The D.C.

Zoning Commission recently granted several business groups' requests for

a zoning change that relaxes the parking requirement, the only zoning

provision that developers described as troublesome.

Another advantage of the former industrial enclave, developers said,

is that no neighborhoods stand in their way. The 10-block area includes

several government offices, the Greyhound and Trailways bus station, a

car wash and other assorted business headquarters as well as the parking

lots and warehouses. But it is devoid of housing.

Industry officials predict that when the area is fully redeveloped,

it will consist almost entirely of office buildings. If the market

follows the pattern Rose has established, they will be separated by

landscaped open spaces that bear closer resemblance to a suburban office

park than a traditional urban streetscape. Like parts of Rosslyn and

Crystal City, the office district would tend to fill with workers in the

morning and empty at the end of the day, real estate officials said.

Some community and industry officials say the D.C. government should

intervene before development runs its course, but their voices have

found no larger chorus. Although the District government has pressed for

retail, housing and arts activities to be interspersed through other

office areas, "the concentration of a commercial center right there

around the Union Station hub is not inappropriate," said D.C. planning

director Fred Greene.

Among developers, the question is not whether the area northwest of

Union Station will take on a new life, but when.

"To me it's as clear as a pregnant woman. I can see she's in her

ninth month," said Rose, who looks toward Union Station's grand opening

in September as a turning point. But, he acknowledged, potential tenants

remain skeptical about the location.

Weingast of Stout & Teague said, "It's still a leap of faith for

some tenants. You need someone who can see it not as it is today, but

what it could be in the future."

Rose said 30 percent of his first Union Center Plaza building has

been leased, mainly to trade associations and similar groups looking for

less expensive office space near the Capitol. Development of the second

building will begin when 50 percent of 810 Union Center Plaza is leased,

he said.

The last piece of Rose's 7.7-acre, $33 million assemblage was put in

place late last year, when Trailways sold him a parcel of land on 1st

Street opposite the bus station for $11.3 million.

As Rose waits for his investment to pay off, the meter is ticking.

Financing alone is costing him more than $3 million a year. However, the

federal government, which has bypassed chances to buy or lease Rose's

property in the past, is likely to become a major presence there within

two years, according to Paul Chistolini, assistant regional GSA

administrator for real estate and development.

One indication of long-term interest in this part of the city is the

unpublicized competition for the Woodward & Lothrop warehouse, which

industry sources said includes Linpro, a national developer that has

assets of $1 billion and offices in 22 cities, and the Kaempfer Co., a

major D.C. developer. The sources said Woodward & Lothrop has been

talking privately with several developers since it first "spread the

word" six months ago that it wants to sell the property.

Bruce Langmaid, a broker with Weaver Brothers Inc., said he

represents a developer that has offered more than $30 million for the

property, but declined to name the developer. Langmaid said the retailer

wants to find a developer who will sign a contract and make a deposit to

buy the property in five years.

Asked whether the property is for sale, G. Gerard Barnett, the

company's senior vice president for real estate, replied, "I don't think

I can give you an unequivocal yes or no."

A smaller lot that the D.C. Redevelopment Land Agency (RLA) has

offered for sale at the northeast corner of the urban renewal area,

where North Capitol and N streets intersect New York Avenue, has

attracted three bidders, including Edward R. Webster, who already owns

adjoining property that could be transformed into more than 800,000

square feet of commercial space. The D.C. Department of Housing and

Community Development and the redevelopment agency plan to move into

Webster's existing building at 51 N St. NE, which will begin a major

expansion next month.

Meanwhile, several projects are taking root south of Rose's land. The

Metropolitan Washington Council of Governments, the National Association

of Social Workers and the American Psychological Association each plan

to build new headquarters on RLA sites between G and H streets.

The American Psychological Association is negotiating with the RLA

for the right to develop a tower that also could become a permanent home

to WETA, the public television station that has offices and studios in

Arlington, said Michael Cunningham, WETA's senior vice president for

finance.

In addition, GSA and Congress are negotiating plans to redevelop the

former main city post office at the corner of Massachusetts Avenue and

North Capitol Street as a government office building.

Real estate experts said the northeast urban renewal area may

leapfrog redevelopment's steady eastward march through downtown, but

that the railroad tracks that head north out of Union Station pose a

barrier. Instead of proceeding east, they expect development to turn

north above New York Avenue, where they said parking lot magnate Dominic

F. Antonelli has been quietly buying property over a period of years.