The steadily increasing cost of downtown office space here has pushed some trade and professional associations to the point of no return.
A growing number are telling landlords they will not renew leases and instead are building their own offices. At least four major groups now located in midtown Washington plan to construct facilities in the downtown area east of 15th Street NW and in the rundown neighborhood around the site of Washington's convention center, now under construction at 11th Street and New York Avenue NW.
Leasing agent Duke Brannock says he know of two other associations planning to build downtown who are not yet ready to make announcements. He added that still more trade and professional groups are looking for land in the convention center area, where land costs are comparatively lower and zoning is favorable for nonprofit groups.
Brannock suggests that another factor is adding momentum to the associations' desertion of the high-rent office district in midtown: It is the unwillingness of developers to give associations equity positions or partnerships in real estate projects.
At the same time, large development firms such as the Oliver T. Carr Co., along with smaller companies such as Wilkes and Plumley Development Corp., are buying land from 15th Street NW to Union Station, where they envision a variety of mixed-use projects, including hotel, office and retail space.
One major association relocating to the area east of 15th street is the American Medical Association, which is constructing a 12-story building at 14th and L streets. Based in Chicago, AMA represents more than 200,000 physicians and currently has offices at 1776 K St. NW.
Its Washington staff will occupy the top two floors of the new building. Other medical and health-related groups, such as the Society of Internal Medicine, will lease remaining space. Facilities on the lower floors will be leased for commercial purposes.
Brannock, who is handling the leasing for the AMA, estimates that 50 to 60 other medical or health-related groups will follow the association to its new location.
A parking lot at 14th Street and New York Avenue NW, which was auctioned off recently for a record price of about $530 a square foot, will be the new home here of the National Food Processors Association.
The association, which represents more than 600 companies in the canned-food industry, plans to occupy a fourth of the space in the new building. Its 100 employes here will move from 1133 20th St. NW in about two years.
The trade group representing the interests of about 25,000 psychiatrists, the American Psychiatric Association, will construct a 12-story building at 1400 K St., site of the old Ambassador Hotel. APA gave up plans to build on land near Dupont Circle after local neighborhood and citizens groups objected. APA now has office at 1700 18th St. NW and 1333 New Hampshire Ave. NW.
Meanwhile, the National Food Brokers Association, now located at 1916 M St. NW, will construct a six-story office building at 11th Street and Massachusetts Avenue. The association is made up of more than 2,400 firms and individuals who represent manufacturers and sell wholesale food and grocery products for commission.
It will occupy two floors of the building, and expects to start construction this spring.
Howard Price, assistant secretary of the District's Zoning Commission, said that while the area around the convention center is going to "flourish," he believes that lenders may "feel it out before sinking in big bucks."
"The convention center will compete with other complexes in surrounding Prince George's and Montgomery counties and Fairfax County as well as other cities with facilities capable of accommodating large groups," Price observed.
While the city's zoning commission has approved incentives to encourage downtown hotel development, Skip Plumley, of Wilkes and Plumley Development Corp., expects that associations will be the "greatest single part of the whole area" around the convention center and that the way to "gauge the power and prestige of an association will be its proximity" to it. His firm owns the 60-year-old Tudor building at 10th Street and Massachusetts Avenue, a former apartment building that is likely to be turned into a hotel.
The firm is assembling land on Massachusetts between Second and Third streets NW and recently sold land on 10th Street for another medical association building.
"There's no stopping the eastward movement," said Plumley. "There's a need for office space, and the District government wants to add 3,600 hotel rooms to the area."
However, he added that he expects to see a slight downturn in demand for office space during the first couple years of President-elect Ronald Reagan's term. One reason, he asserted, is that associations representing government-supported functions in areas such as education and health care may lose some funding.