Photos of buildings at 21st and K streets and Connecticut and L streets were transposed in Wednesday's Business & Finance section of The Washington Post.
Washington's office buildings are the commercial couterparts of Detroit's automobile assembly plants. Milwaukee's breweries or the Pittsburgh area's steel mills - in terms of providing spaces where people earn their livelihoods.
For more than a year the new construction of private office buildings nd the leasing and preleasing of office space have been on an "upper" that is expected to continue through 1978 and into 1979.
In basic terms this part of the real estate market has been hot in 1977, with leasing rates rising into the $10.30-$11.30 range per square foot on new construction in top downtown locations.
Other rats for new and older buildings are moving up proportionately from lower bases. Existing downtown office space now is nearly 99 per cent leased and the overall share in metropolitan Washington probably exceeds 96 per cent. Some prime space in older downtown buildings brings $7 to $8 a square foot, about the price of most space in Rosslyn and in other Virigina or Maryland locations.
Privately owned office space accounts for about 70 per cent of the total 100-million-plus square feet being used in this metro area. Approximately 40 million square feet of privately office space is in the District, another 24 million square feet in nearby Maryland and 11 million in nearby Virginia.
Most important to Washington's booming office market is the federal government, which is essentially the keystone of the paperwork empire that pervades the nation's capital and its environs. In addition to owning about 35 million feet of office space in 175 buildings, Uncle Sam leases about 28 million sqare feet in 318 privately owned buildings - usually at long-term rates somewhat below the market average.
Much of the recent surge in the private office leasing market is attributable to increasing space needs of the Big Three As in space-taking - the associations, the attorneys and the accountants. Hundreds of trade associations here headquarters here and some even have their own buildings. Major law firms are proliferating and some take two or three floors in a building or all of a small building. Increasingly, major companies want "office windows in Washington" and some have opened their headquarters here.
With an intown inventory of less than 200,000 sqaure feet of existing new space currently available in about 10 buildings and leasing completed or pending for about one-third of new space to hit the market in 1978, leasing specialists are complaining that they are running out of product. However, there has been a noticable upturn in new or planned office building starts that will produce new space in 1979. Veteran leasing executives see the market continuing strong hrough most of 1979.
Yet, office building construction and leasing tend to run in cycles. There was a surfeit of both new and existing space in 1975 and it's possible, especially if the economy takes a downturn and federal leasing is cut back, that there could be an oversupply of private office space late in 1979 or in 1980.
But current high occupancy levels and increasing costs of leases (possibly averaging $12.50 in top locations by 1979) make developers and investors bullish about new buildings. In fact, there is increasing talk that several new office buildings will be started east of 15th Street NW. Much of the current new construction is west of the heart of the office leasing market which is generally placed on Connecticut Avenue, between K and L NW. That new brick building now well along at the northeast corner of Connecticut and L, over a Metro station and next to the Mayflower, is more than 90 per cent leased for occupancy next April.
Due to increased operating costs for energy and maintenance, office space leasing prices have increased nearly $2 per square foot this year. That's one reason some developers are looking eastward at lower land prices for new buildings.
Most of the permanent financing now comes from insurance companies or a consortium of thrift institutions or pension funds. Terms now are 9 1/4 to 9 1/2 per cent with a 25-year payout schedule, plus a chance to refinance in 10 years. Most new leases run for 10 years, if the space is 5,000 feet or more.
Upbeat: A report from the Washington Board of Realtors, which surveys area office space, show that 900,000 square feet of new space will be available in nearby Maryland through 1978 and that nearly half of it is preleased . . . However, another recent look at area leasing showed Prince George's County to be the softest market due a federal move from major space near Hyattsville.
Growing: In Northern Virginia, the market continues strong in the following areas: Crystal City, Rosslyn, Tysons Corner and Baileys Crossroads. The Charles E. Smith firm has two big office buildings ready for 1978 starts in Crystal and at Baileys Crossroads (now called Skyline because of tall buildings). International Devolopers Inc. recently started the 22-story, $22 million Rosslyn Center. And the Westgate-Westpark group, long active around Tysons Corner, has two smaller buildings started or planned.
Coming: One big new building is under way at 1333 New Hampshire Ave. NW., near Dupont Circle and you can look for others on 19th, 20th and 21st streets. Currently two new buildings are going up on opposite corners of 18th and L. The second phase of International Square will be started next month and its newly completed first building at 1850 K is only 2 per cent from being fully leased.
Finale: Look for height concessions for D.C. buildings to go higher than 12 stories because of economies and competition in Maryland and Virginia.