The District government last week completed a major step in its overall economic development program, which includes diversifying the business base.

In a symbolic groundbreaking, Mayor Marion Barry Jr. and officials of Chicago's Mart Center inaugurated construction on a $20 million design furnishings center that is expected to generate about $3 million annually in revenues for the District.

"This is only the beginning of economic development in this town," Barry declared as he signaled the start of work on the project, which will do business as The Design Center.

Patterned after Chicago's famous Merchandise Mart, The Design Center will house more than 200 showrooms of residential and commercial contract furnishings, establishing Washington as a regional market for the design industry.

More significantly, the facility being built at 4th and D streets SW represents a new industry for the District. And it could mark the beginning of what District officials hope will be a trend toward more major business moves here.

In addition to the federal government, the mainstays of Washington's economy have been retail trade, tourism and services. Government employment has declined in recent years and that trend is expected to continue.

At the same time, many old-line Washington firms, citing higher costs of doing business in the District, have joined an exodus to the suburbs.

Faced with rising job and revenue losses, the Barry administration has emphasized retention and attraction of businesses. The Design Center is the first major new business to be added as part of that program.

Indeed, it is the first major new business in years to be developed in the District. Although the city continues to ride the crest of an office building boom, demand for space in new projects has come largely from law firms, accountants and trade associations.

The office building boom has been important to the District's economy. Office buildings, however, "don't provide that much revenue and they don't produce that many jobs," observed an official in the D.C. office of business and economic development.

The District was able to wrap up the deal with Mart Center by offering to sell an old warehouse on the Design Center site at a fairly attractive price. The city's Redevelopment Land Agency, which had owned the warehouse for several years, could have demolished it and sold the land for about $4.7 million, according to one official.

The agency agreed to sell the warehouse to Mart Center for $3 million as an inducement to build The Design Center in the District.

The 250,000-square-foot warehouse, which had been owned several years ago by the Terminal Refrigerating Co., is located in the heart of what had been the city's wholesale food district. The area, just south of Independence Avenue, is dominated by federal office buildings, although new private-sector projects, including a major hotel, have been added in recent months.

Construction of The Design Center will provide more than 300 jobs, half of which will go to District residents, according to estimates developed by the office of business and economic development. The completed project will generate more than 1,000 jobs.

The Design Center, said Barry, is "the kind of innovative development this government is determined to attract to the District."

Barry played an active role in the District's bid for the project, going to Chicago earlier in the year to discuss it with Mart Center's management.

The first phase of construction on the center will be completed late next year with renovation of the warehouse. A 190,000-square-foot addition will be built the following year.

The Design Center is expected to attract more than a half-million customers each year to its showrooms for furniture, floor and wall coverings, lighting, fabrics and accessories representing lines of major manufacturers.