Cabot, Cabot & Forbes, Boston's biggest developer, began construction of a $38 million office building on Pennsylvania Avenue NW yesterday and D.C. Mayor Marion Barry said the city will try to lure more out-of-town businesses to downtown Washington.

"We welcome your money, we welcome your jobs," the mayor said as dignitaries sipped champagne and construction workers took a long lunch hour to watch.

The Cabot, Cabot & Forbes building is virtually across the street from Barry's office in the District Building, on property bounded by Pennsylvania Avenue, 12th and E Streets NW.

To be known as the Heurich building - with the name embedded in brass in the sidewalk - the building was purchased from the heirs of Christian Heurich, once a prominent local brewer.

The Boston developers paid $9.8 million for the tract, setting a record for downtown real estate prices after rival builders began bidding for the long-vacant land.

Designed by the Washington office of Skidmore, Owings and Merrill, the 585,000-square-foot building will be 16 stories high, the tallest now permitted in the District.

Faced in light granite and reflective glass, the building will have a 50-foot-tall entry arcade leading to a huge interior atrium reaching all the way to the roofline.

The lower two floors will have shops and restaurants beneath 14 floors of offices.

"We think this will be the Rolls Royce of Washington office buildings," said Gerald W. Blakely Jr., chairman of Cabot, Cabot & Forbes. Office rentals will be in the $15-to- $19 per square foot a year range, he estimated.

The building is expected to be ready for occupancy by early 1981.

It is the first Washington project for Cabot, Cabot & Forbes, which has built smaller suburban office buildings and industrial parks here. The Boston firm has offices in 10 other cities and will probably pursue other projects in Washington, Blakely said.

At yesterday's groundbreaking ceremonies, Mayor Barry said there's "plenty of room for more" outside developers to build downtown, saying the city will seek to spur construction east of 15th Street, between Pennsylvania Avenue and New York Avenue.

The CC&F building is the second major privately-financed office building in the Pennsylvania Avenue Redevelopment area. Quandrangle Construction Co. has begun construction a block west at 13th Street and Pennsylvania Avenue NW. CAPTION: Picture, Cabot, Cabot & Forbes' Gerald Blakely listens as D.C. Mayor Marion Barry speaks at groundbreaking. By Vanessa R. Barnes - The Washington Post