Skanska Development to build office building in downtown Washington

Gerry Widdicombe, director of economic development for the Downtown DC Business Improvement District, said he doesn't expect construction activity to fully resume across the city until the office vacancy rate falls from 14.3 percent to below about 8 percent. And that won't happen, he said, until a significant number of jobs are added.

"We need 36,000 office jobs . . . 36,000 is a big number," Widdicombe said. "It's going to be a tough office market for two to four years."

Widdicombe said there are at least three office projects in the central business areas that are on hold, waiting for the market to improve.

In developing the site at 10th and G, Skanska is taking over a project launched by First Congregational United Church of Christ and builder PN Hoffman.

The church demolished its crumbling, 45-year-old building and opted to sell "air rights" for the property to Hoffman to finance construction of a new one. The initial idea was to construct a high-rise condo building, which would house the church on the first floors. But the condo market collapsed, church members said, and Hoffman proposed constructing an office building.

Then the credit market went bust in September 2008, church members said, and First Congregational lost its financing.

Meanwhile, Skanska, whose construction group built the 1.3 million-square-foot U.S. Census Bureau headquarters in Suitland in 2007, was interested in entering the Washington commercial real estate market. The company acquired the project last year.

"A year and a half ago, we ran into the buzz saw of the economy and financing fell apart," said Meg Maguire, head of the church's site-development task force.

"We were very pleased" that Skanska entered the picture, she said. "Skanska was looking for an opportunity, and we had the right opportunity for them," she said.

Skanska is modifying some of the designs. It has expanded the floor plan, parking garage and fitness center.

The church will occupy the first floor of the glass building, along with retail shops, and the second floor. The building is designed to be energy-efficient, with systems on the roof to capture rainwater and reflect sunlight to shield the building from excessive heat absorption.

Ward said he hopes the project will help revive the District's moribund commercial real estate market.

"A lot of development has to do with confidence. We feel very confident in this," Ward said. "We hope others will follow."