As recently as a decade ago, much of downtown Washington was sparsely built, pockmarked with overgrown gravel parking lots and emptied-out 19th-century government buildings in desperate need of renovation.
Now, it's bursting at the seams with gleaming new edifices. Those parking lots have given way to massive office and retail developments. The Tariff Building, for decades one of downtown's most beautiful derelicts, is now a luxury hotel charging $249 a night.
Buildings cover nearly every square inch that zoning authorities will allow, and the skyline is dominated by construction cranes building on top of those square inches that are left. There's such demand for office space that developers are putting buildings over other buildings: Tishman Speyer is constructing a six-story office building on top of the Hecht's department store at Metro Center.
Downtown Washington, in fact, is nearly built out. Developers can't build up (height restrictions); can't build to the west (the Potomac River); can't build to the south (the Mall); and can't build north of Massachusetts Avenue or east of Union Station (residential neighborhoods). Something, developers say, has to give.
"It's like a hand squeezing on a toothpaste tube with the top on it," said John E. "Chip" Akridge III, a Washington developer. "Development pressures are building and the question is where it's going to squirt out. I don't know if it's up North Capitol Street or down South Capitol Street or up New York Avenue. But that's the question that everybody in my business is trying to answer right now."
If demand for office space in Washington continues along the same modest growth rate it has for decades -- growing by a million to 1.5 million square feet of space a year -- tenants and developers will soon be forced to look beyond the traditional perimeter of downtown to consider neighborhoods they once would never have imagined as places to do business.
The shift is already underway to some degree, with office buildings in place or under construction north of Union Station and along the Southeast and Southwest waterfronts. But so far these efforts to expand the traditional boundaries of downtown have been piecemeal. In the years to come, however, the shortage of space downtown could spawn changes that remake the very face of Washington, said developers and others who closely follow Washington's growth.
"The question is where do you go next," said Gerard C. Widdicombe, director of economic development for the Downtown D.C. Business Improvement District. "And the answer will determine how Washington looks down the road."
But the speed with which this development boom will happen largely depends on job growth in the city, which is essentially flat. While builders might stay busy renovating older, already occupied buildings downtown, that work won't create room for the District to add office jobs. And with several large buildings under construction, there could be a lull in D.C. development a few years from now, say some in the market. But long-term, as companies' desire to expand hits constraints in every direction on downtown real estate, they will have to make some kind of historic leap.
Indeed, many developers who wish to be long-term players in building Washington are placing bets on which of the several potential commercial areas is most likely to accommodate the next wave of growth, securing development rights along the Anacostia River and in the corridor from Union Station to New York Avenue NE.
The big question, therefore, is which of several potential areas for growth will most capture downtown's overflow in the years ahead.
Some argue that the logical next step for growth is NoMa, the nickname dreamed up by those who market the city for the area north of Massachusetts Avenue between Union Station and Mount Vernon Square. It is adjacent to downtown, the area's advocates say, and is already anchored by office buildings around Union Station and a cluster of development -- including the headquarters of XM Satellite Radio and future headquarters of the Bureau of Alcohol, Tobacco, Firearms and Explosives -- at the intersection of New York and Florida avenues NE.
Yet wide swaths of that area are uninhabited. To train passengers coming into Union Station from the north, it looks like a vast post-industrial dystopia. And that is the quality most attractive to some of the more foresighted Washington commercial land barons.
"Based on the way developers have tied up properties north of Massachusetts, I think that's the next wave of expansion," said Jeff Sherman, a managing director for development at Trammell Crow Co.
Much of the available land in NoMa is now empty lots or covered only by small, unused buildings. Because there are few residents in the zone, and the administration of Mayor Anthony A. Williams is strongly advocating development there, the path to new office space looks smooth to some.
The other place developers look to for the next wave of office development is the Anacostia waterfront. Commercial projects there already have a toehold, with several buildings constructed along M Street SE to accommodate government contractors serving the Naval Sea Systems Command at the Washington Navy Yard.
Growth there may only accelerate with a planned redevelopment of the 44-acre Southeast Federal Center next to the Navy Yard. The Federal Center has already snagged the Department of Transportation as a massive occupant for part of the site, and the General Services Administration is now picking a developer -- from a gaggle of interested parties -- to build the rest of the complex.
"The Navy and DOT may be just enough to cause people to leapfrog all the way over to the waterfront," said Akridge.
Regardless of where the strongest push for commercial development is in the decades ahead, it is likely to follow an established pattern in Washington real estate, said veterans of the industry. It is the same pattern that drove the construction of new buildings just west of Union Station and in Southwest Washington in the past decade, zones that are occupied largely by government agencies.
As developable sites in downtown become increasingly scarce, rents will keep rising, these people say. That would first drive the most price-sensitive users of space away from downtown -- government agencies, nonprofit groups and the like.
"The first to move won't be the people that are inelastic on price, like lobbyists and lawyers," said Mitchell Schear, president of the downtown developer Kaempfer Co. "The people who move will be the ones that need to be in the District but have to keep costs low."
The big question is what happens after those price-sensitive pioneers move in, as has already happened in Southwest and will soon be happening in Southeast. In the dream scenario for landlords, those big buildings occupied by bargain-hunters would attract restaurants and hotels -- the things that in turn make an area acceptable to law firms and other top-dollar tenants.
"Once someone has gone in and pioneered a new area for commercial development, and said, 'This works for me,' you can convince other people to go there," said Trammell Crow's Sherman.
And without many choices for big blocks of space downtown, some of those high-dollar law firms might choose to locate somewhere other than in the traditional corridors of Washington influence. Exhibit A for this theory is Wilmer, Cutler & Pickering, the top-flight law firm that recently seriously considered moving to the Portals, a building site in Southwest, something that would have been unthinkable not long ago.
But many in the market are skeptical that NoMa, Southeast and Southwest will become premier locations like, say, K Street anytime in the foreseeable future.
"I think [downtown] rents would have to increase considerably before associations and law firms would continue going to these neighborhoods," said Jeffrey T. Neal, a principal of Monument Realty LLC. "They might have to save 50 percent on rent to leapfrog."
Indeed, even faced with a dearth of big enough sites in downtown, a big law firm might go to considerable lengths to avoid having to give up a prime address.
"What you'll see more and more is a dual operation where a law firm leases most of its space downtown, but has a significant operation with its back office in Reston or somewhere like that," said Raymond A. Ritchey, executive vice president for Boston Properties Inc.
And indeed, for those developers that hope to see areas like NoMa and the Southeast waterfront grow, the biggest hurdle may be the cachet of a prime Washington address, and persuading would-be tenants to give it up.
Wilmer, after weighing a space in Southwest with amazing views of the city and all the space it could need, chose instead to lease much more expensive, much more complicated space in three buildings from four landlords on Pennsylvania Avenue, two blocks from the White House.