You can walk east of 16th Street in Washington's old downtown and see plenty of evidence of an oversupply of office buildings.

Signs for leasing agents are everywhere. You can see dark windows in office towers, vacant storefronts, whole buildings without occupants and -- if you look closely enough -- you can see the light at the end of the tunnel.

Behind the superficial signs of trouble is solid evidence that Washington's office oversupply crisis is over, or soon will be.

"The Washington, D.C., office leasing market is steaming ahead this year," proclaimed one of the nation's biggest commercial real estate firms in its most recent evaluation of market conditions around the country. Julian J. Studley Inc. reported that office leasing in the city is up 23 percent so far this year.

But the more important number is the amount of office space rented in new buildings, many of which had been embarrassingly vacant. Leasing of new buildings is running 40 percent ahead of last year.

Counting both the city and the suburbs, Washington is second only to New York City in the space leased in the first eight months of the year, the Studley company said.

The day that the downtown office market turned the corner is impossible to pinpoint. Probably sometime last summer, someone signed the lease that tilted the balance of the neighborhood from half empty to half full.

Virtually all the new buildings east of 16th Street are 70 to 80 percent leased, though many of the recently signed-up tenants have not yet moved in.

Where a year ago there were half a dozen totally vacant buildings, now there apparently are only two -- and both of them are about to be taken.

The massive and magnificent Daon building at 13th Street and New York Avenue is expected to become the new headquarters of the Inter-American Development Bank. Across New York Avenue, developer Dominic Antonelli is close to a deal with the General Services Administration for his vacant building at 1300 New York Ave.

Daon, a Canadian developer, dropped better than $10 million when it could find neither buyers nor renters for the biggest, most expensive office building ever built downtown.

The Bank of Nova Scotia foreclosed on the mortgage on 1301 New York a while back. Odds are the bank will get most of its $132 million mortgage money back when its deal is completed, but it may never recover the $50,000-a-day cost of carrying the huge white elephant.

Behind the marble post-modern facade by Skidmore, Owings and Merrill, the offices overlooking the 12-story atrium are nothing but raw concrete and conduit.

It will be at least a year before the Inter-American Development Bank can finish the space and move in, but the day the deal is signed, leasing agents all over town will order champagne for lunch. Daon's 750,000 square feet of unrented offices has been not only a symbol of downtown's distress, but also a depressing influence on rents throughout the metropolitan area.

One of the effects of overbuilding in east downtown has been to hold down rents in the west end and even in the suburbs. To unload their inventory, landlords have been wheeling and dealing like used car hucksters, promising no-money-down, free-rent, free-finishing offers-you-can't-refuse.

The law of supply and demand did its duty, and, as prices came down, rentals picked up. More than a few of the renters came from west of Connecticut Avenue, causing the office vacancy rate in that neighborhood to climb and rents there to soften.

One of the ironies of the office glut is that it has helped downtown Washington remain competitive with suburban sites. Because of the deals being offered to lure long-term tenants, the gap between old downtown and new downtown rents and between District and suburban occupancy costs has narrowed and, in a few cases, vanished. There are people in Crystal City paying higher rent than they could get downtown.

The result has been to fuel job growth in the city and boost D.C. tax revenues. In the neighborhood around Franklin Square (13th, 14th, I and K streets NW) there are 7,000 people working today who weren't there two years ago and several million dollars a year in new taxes flowing into the District.

The most certain signs that downtown office vacancies have turned the corner are two new buildings that are about to break ground adjacent to Franklin Square.

Around the first of the year, Rouse Properties of Philadelphia will start a new building at the northwest corner of 13th and K streets.

Just south of Franklin School, at the northeast corner of 13th and I streets, the John Akridge Co. is preparing to begin work on a building that will be the new headquarters for the National Corporation for Housing Partnerships. With the NCHP lease already signed, the building will be the first downtown project in a long time to be mostly leased before construction starts.

Those two buildings will be the first major office construction starts in the old downtown in many months. Because of the oversupply, developers simply put their projects on hold.

As a result of those delays, some office developers and leasing agents say old downtown could face an office shortage a couple of years from now.

Today's vacant space will be leased up by then, and because so many projects have been delayed, no new buildings will be ready.

If that happens, of course, the feast and famine cycle will almost certainly repeat itself. New buildings will sprout faster than they can be rented, the market will go soft, and developers will argue about whether things are as bad as they were before the market turned around in 1984.