Despite the recent decline of residential real estate sales in this area, office construction and leasing in the District continues to show remarkable vitality.

The downtown currently has a vacancy rate of less than 1 percent, and unbuilt office space is currently being "preleased" at an annual rate of nearly $20 a square foot, double the rents of five years ago.

As new buildings go up in the downtown, the 400-room Ambassador Hotel at 14th and K streets NW is being razed for construction of an office building with 150,000 square feet of rentable space. Closed for nearly a year, the 50-year-old hotel was built by the late Morris Cafritz in 1929.

The property is owned by JBG Associates, a group that includes attorneys Ben Jacobs, Donald Brown and Josephy Gildenhorn. The American Psychiatric Association, currently at 18th and R streets NW, is reported to be negotiating for a third of the space.

The John Akridge Co. is razing a 50-year-old building at 918 18th St. NW to build a 10-story, $12 million office, designed by Weihe, Black, Jeffries and Strassman. Akridge said that tenants are being offered leases at $19.50 a square foot.

Three other large office buildings on Vermont Avenue NW south of Thomas Circle are in the initial stages of construction, as is another at 15th and L streets. Akridge said a structure he is building at 1090 Vermont Avenue is already 90 percent leased.

However, there are several downtown and suburban sites where office construction may be delayed this year by increases in the cost of borrowing money. Lenders who give construction loans are charging 21 percent for them, and many are unwilling to make commitments for long-term financing of buildings.

While a number of old hotels are being torn down in the downtown, the 50-year-old Annapolis Hotel at 1111 H St. NW, may be rehabilitated. Next to the site by the convention center planned by the District, the 400-room hotel was sold recently for $8 million by Annapolis Associates and Thomas Enterprises (with Jerome Golub as a major investor) to Mahareshi International University, Littin Inc. was the broker.

The university, which operates transcendental meditation and study centers in this country and elsewhere, plans to rehabilite the hotel and use it for students participating in a "world plan council of the age of enlightenment," a spokesman said.

The Mahareshi group has a facility now at 2127 LeRoy Pl. NW. Several years ago it bought Parsons College in Fairfield, Iowa, and opened a university there.

The Annapolis Hotel, where 94 illegal aliens were caught by immigration officials last year, has recently been operating more an apartment building. It has commerical space on the first floor.