NoMa Gets Gentrified, Now Waits For Tenants

"Those savings are compelling," he said.

As students and workers scrambled up and down First Street NE and men in yellow NoMa Business Improvement District vests swept sidewalk trash and empty beer bottles into hand-held bins Friday morning, the drone of construction equipment punctuated the air.

Three high-end office projects on First Street alone are underway, including the future Justice Department site, which is being developed by Bethesda-based Stonebridge Carras. A 50,000-square-foot Harris Teeter grocery store will also be built in that area.

Two weeks ago, Brookfield Properties of New York completed 77 K St. NE, an 11-story building that shares a corner with First Street and now sits empty. Paul Schulman, senior vice president in charge of the Washington area for Brookfield, said that although the economy has slowed the company's leasing efforts, interest did pick up after the NPR and Justice Department announcements.

"There has not been as much leasing volume in the market that was expected," Schulman said. "There is still a perception that NoMa is lacking amenities, that it is very much a fringe location, but I think over the last year, a lot of those announcements have started to change those perceptions."

NoMa's development has been steady. XM Satellite Radio located its headquarters in the neighborhood at 1500 Eckington Pl. NE in 2001. The area got a Metro stop in 2004. And in 2006, the Bureau of Alcohol, Tobacco, Firearms and Explosives moved into an imposing headquarters across the street from the Justice Department's future site.

Mark Mallus, the senior vice president with C.B. Richard Ellis who helped broker the XM deal, said that although the development wave has been slowed by the downturn, leasing might pick up once a new president is in the White House. Leasing by government agencies has slowed at the end of the Bush administration.

"Don't forget GSA has been on the sideline for a long time," he said, referring to the Government Services Administration, the government's landlord. "It would be nice if the credit crunch never happened and the economy was still kicking along, but that is not the reality."

A similar situation is playing out near Nationals Park in Southeast Washington, where developers hope to market the cachet of the city's baseball team. There, Bethesda-based Opus East, District-based Monument Realty and North Bethesda-based Lerner Enterprises all have developments either completed or underway.

Monument plans to complete 50 M St. SE next year. The 275,000-square-foot office building is the first of a 1.9 million-square-foot mixed-use retail project that will line the entrance to the new ballpark.

Russell Hines, executive vice president of the firm, said that although the slow economy has made leasing the building more complicated, the company had seen interest from some associations and other private companies looking to escape high rents downtown.

"It's obviously been stronger, but developing an office building of this scale, it is a process of two to three years, and in any one point of time we don't spend a whole lot of time hand-wringing about where the market is," Hines said. "The types of tenants that we are looking for, they believe in the area, they have seen this before, they have seen areas in Washington, D.C., develop and change."

Others are more skeptical.

"The buildings in those areas that were built with a lot of leverage -- less equity and a lot of debt -- are going to be in trouble, and there are definitely a lot of buildings like that in the market," said Lipson of Studley. "Long term, that will be fine; these areas are going to be great. . . . It is just a question of exactly when; it is just a question of how long it takes."