Despite a soft market that could lead to a glut of commercial office space in the District by the end of the year, experts believe development of the highly prized Metro Center at 12th and G Streets NW should proceed immediately.
The rationale they offer is that demand for space will be greater by the time the mixed-use project is finished.
However, developing a $300-million-to-$400-million project is a "crapshoot," according to Robert Moore, director of the D.C. Department of Housing and a member of the city's Redevelopment Land Agency board.
Moore was referring to the financial risks involved. But the long history of unsuccessful attempts to develop Metro Center, the current controversy surrounding it and unpredictable shifts in the market make it a highly risky venture for potential developers and, possibly, a costly one.
The RLA obviously agrees that the market is ripe, and the agency soon will designate one of three competing developers to prepare detailed plans for the project under an exclusive-rights agreement.
But given the uncertainty of the market and the state of the national economy, the development team that wins the exclusive-rights contract "has to be a crystal-ball gazer," Moore candidly admits.
He concedes that the softness in the current commercial real estate market "will slow down the completion of the project." A developer "certainly wouldn't be able to bring it to market now, due to the economic climate," he added.
Despite that assessment, Moore remains optimistic that a developer "can get in the ground in eight to 10 months" from now.
A timetable of such short duration would be remarkable considering that it's taken RLA nearly 10 years to get a developer to turn the first shovel of dirt at the three Metro Center parcels.
The history of the agency's attempts to dispose of the valuable city-owned property, which sits astride Metro's hub station downtown, is filled with endless red tape, bureaucratic bungling, political pettiness and the developers' inability to proceed after being selected.
In disposing of other property it controlled, the RLA negotiated its sale with individual buyer-developers such as Chicago's Merchandise Mart and Union Life Insurance Co. of New York.
Under the rules, the agency is required to seek bids for development of 12th and G because of substantial developer interest, Moore maintains.
Although there are those who dispute that claim, the RLA clearly blew a chance to dispose of the property by failing to offer incentives in a negotiated deal years ago when developers avoided that area of the city as though it were a lepers' colony.
"As I read the history, nobody wanted it," Moore recalled. "They couldn't give it away in 1972."
Only recently have developers shifted their interest to the old downtown area. Until four years ago, only Gerald D. Hines of Houston and, subsequently, Washington developer Oliver T. Carr showed any interest in picking up the pieces at Metro Center.
The RLA first selected a New York developer for the property in 1973, but he had to scrap his highly ambitious plans eventually when financing became a problem.
Hines entered into an exclusive-rights agreement with the RLA in 1976 but withdrew two years later when the city refused to sign a long-term lease for office space in a proposed Metro Center project.
Shortly after that, Carr let it be known he would be willing to add Metro Center to a long list of projects he has developed in the District. Carr won an exclusive-rights agreement only after the RLA chose to ask for bids.
After four years of planning and, ultimately, bitter negotiations, the RLA withdrew its exclusive-rights agreement with Carr and developer Theodore Hagans in a dispute over land prices.
A suit filed by Carr hasn't deterred the RLA from going ahead with plans to select another developer.
In the meantime, the RLA is paying "probably a couple one hundred thousand a year" in taxes on Metro Center property, according to Moore. Those payments are offset to some extent, however, by rent that current tenants pay.
How long the RLA is prepared to pay taxes on that property is anybody's guess.
Meanwhile, the Hecht Co., one of Washington's two major department store chains, is sitting on a bubble. With Carr out of the picture at Metro Center, Hecht's plan to relocate its downtown store is on hold.
Irwin Zazulia, Hecht's president, refuses to be more specific than noting that Metro Center is a "very important project" so far as a downtown store is concerned.
Moore says Hecht's "has to have a place by 1985," implying that the chain will close its 7th Street store in three years.
Although Moore thinks a department store could be built first in staged-development at Metro Center, agreement on a cost for retail space in an expensive project will be difficult.
What's more, by the time Metro Center offices are built, rents could range from $30 to $40 a square foot, some experts believe.