Steven Pearlstein
Steven Pearlstein
Columnist

Can a Texas developer and Qatar investment make D.C.’s CityCenter a success?

Across most of the country, commercial real estate development has pretty much come to a halt. After a decade of debt-fueled overbuilding, there are too many hotels and too much retail space. With the economy generating precious few jobs, there isn’t much need for new office space, either. Debt financing has all but dried up.

But if you wander down to Mount Vernon Square in the heart of Washington and look in almost any direction, you’ll see a new center city under construction — several billion dollars worth of it.

Steven Pearlstein is a Pulitzer Prize-winning business and economics columnist at The Washington Post.

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(Neoscape/ Hines) - In a rendering of CityCenter, the interior courtyard of the residential part of the project can be seen — two condo buildings on one side, two apartment buildings on the other, with restaurants on the ground floor facing the plaza.

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To the east, in a rapidly gentrifying triangle known as NoMa, thousands of apartments and even a “spec” office building, built without any tenant commitments.

To the northwest, the beginnings of a monstrous 1,200-room, $600 million convention center hotel.

And to the southwest, you’ll see a four-square block hole in the ground from which will rise one of the most ambitious and exciting mixed-use development projects to come along in years. It will house nearly 700 residences, two glass-clad office buildings, a hotel and space for the kind of upscale downtown retailing that city planners have talked about for years but never really materialized. Total cost for the two-phase CityCenter development, including streets and utilities: $900 million, all of it private.

Planning for this project began 15 years ago, when the city decided it would build the new convention center on the other side of Mount Vernon Square, demolish the old one and lease the land to a developer who could help make good on then-Mayor Tony Williams’s vision of downtown. In his vision, downtown would not just feature offices and restaurants catering to weekday suburban commuters, while becoming deserted at night and on weekends. Instead, it would become a 24/7 place where people would live, work, shop, have fun and walk their dogs.

I admit that I always had more than a little skepticism when I heard my friend Rich Bradley, head of the Downtown Business Improvement District, talk about the “liveable downtown.” It seemed to me then a classic chicken-and-egg problem: Without the amenities, there would be no residents, and without the residents, there would be amenities.

But in the past decade, something has changed. As a result of the revivals along 7th Street, 14th Street and U St. NW and H Street NE, downtown Washington has become hot the way lower Manhattan has become hot and the old downtown has begun to take off in Los Angeles. Young and not-so-young professionals not only want to live in or near the city center, they are insisting on it, even if they have to reverse commute out to jobs in the suburbs.

In Washington, this demand is fueling a little apartment bubble; about 7,000 apartment units are under construction in or near the downtown area. With that, it’s a good bet that what was once a chicken-and-egg problem can be turned into just the opposite — a virtuous cycle in which an increase in the number of residents leads to more stores and amenities, which in turn leads to even more residents. The spectacular success of the Newseum project on Pennsylvania Avenue and Boston Properties’ new project on Washington Circle in the West End suggest that the tipping point may have finally been reached.

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