Now that Bloomingdale's has turned down a $2.5 million incentive bonus to build a store in downtown Washington, perhaps it is time for the D.C. government to review the policy that encouraged developers to pursue Bloomies at such great length.

It's possible that some other fashionable, trendy retailer with the kind of cachet that the District and developers desire will take the $2.5 million, or even less. It's also possible that other big-name retailers will agree with Bloomies that the rent for space in the complex is too high to operate an economically viable store.

To be sure, Bloomies' decision to spurn the $2.5 million sweetener is only a temporary setback for the developers involved and the city government.

If other major department store operators should balk at paying similar rates for space downtown, however, then the implications are far more significant in terms of the city's plans for revitalization of the retail core.

Small, independent merchants have contended for nearly three years that spiraling land costs and assessments are pricing them out of the market. And now -- granted, the experience with Bloomies may be an isolated situation -- there is a distinct possibility that operators of other major chains may find it economically unfeasible to lease retail space downtown.

It's possible that the D.C. government and the developers (Nathan Landow and John Akridge) who courted Bloomies so heavily may have unwittingly created a climate in which the retailer made what Landow described as "unreasonable offers and demands" for concessions. The District's desire to land Bloomies was an open secret long before formal negotiations began with the New York retailer. The campaign to bring Bloomies to the District made downtown a buyer's market, so to speak, putting the retailer in a position to demand further concessions.

Under the plan to lure Bloomies to Washington, the District offered Landow and Akridge extra construction rights -- permission to build an additional 110,000 square feet of retail and office space -- if the developers would pay the chain at least $2.5 million to build a store in the project.

Several factors currently at work suggest that the plan was flawed.

Suburban malls obviously have stripped the old downtown retail core of its importance as the region's primary shopping center. The F Street NW retail corridor is rapidly regaining some of its lost vitality, however. Consider Exhibit 1: The Shops at National Place urban mall has been a huge success since it opened last year. Exhibit 2: Downtown's leading department and specialty stores -- refurbished Woodward & Lothrop, the new Hecht's store and Garfinckel's continue to do well. Exhibit 3: Pedestrian traffic on the streets and in smaller stores, particularly during the lunch hour and on weekends, indicates that other merchants, too, are benefiting from relatively strong consumer demand.

Retail centers in several cities have declined in importance because department store operators closed their doors and followed shoppers to the suburbs. Fortunately, for the District, the major department stores that were downtown 20 years ago (excluding Kann's and Lansburgh's, which are no longer in business) are still there, even though all have branches in major suburban shopping centers. The presence of those department stores as anchors in the old retail core has provided continuity and has generated sufficient traffic for smaller stores to remain viable.

The District, after experiencing several years of declining retail sales, saw a dramatic turnaround between 1980 and 1983 as sales grew 27 percent, the fourth-largest gain in the region, according to the Greater Washington Research Center.

The outlook is even more promising as a boom in commercial building spurs revitalization east of 15th Street NW. A growing cadre of office workers, a sizeable population with substantial disposable income, greater spending by tourists and an expanding convention business should greatly enhance retail trade in the city's central business district.

Aggressive marketing should enable the District to capitalize on those strengths. Besides being the nation's capital, Washington is the center of commerce in the region.

A glaring inconsistency in the District's strategy is its apparent unwillingness or lack of interest in pushing for subsidies for existing retailers. Many of them can't afford space in new retail-office complexes once they are forced from old buildings to make way for new developments. At the same time, the D.C. government has given no indication that it is prepared to offer extra development rights to developers as inducements to accommodate retailers that want to remain downtown.

Finally, there is little evidence that the District is interested in creating the kind of balance of big and small retailers that shoppers -- many of them District residents -- find at most regional shopping malls.