It may not be the West End yet, but Washington's Union Station area is fast becoming the new opportunity for pioneering developers and could be knee-deep in office buildings by the turn of the century.
More than 20 sites in the area are under construction or slated for development in the next few years, including three, or possibly four, new hotels, two educational facilities, restaurants, stores, boutiques and thousands of square feet of office space.
Long abandoned by the upscale office developers as either too industrial or too seedy, the Union Station area is now making a comeback. Developers say that the rehabilitation of Union Station into a train station and retail-office complex, and the increasing demand for office space from nearby Capitol Hill has generated much of the current interest.
"The growth in this area over the next few years is going to be phenomenal," said Don Denton, of Dale Denton Real Estate Inc.
"It may still be a little tacky over there today, but before you know it, it's going to be the place to build," said Samuel Rose, a developer and landowner who has helped organize businessmen in the area north of Union Station to help get the city to speed up road repairs and improvements.
"I think this area is going to develop faster than the old downtown in the 7th and G streets NW area because it is at this tremendous transportation hub and close to Capitol Hill."
The biggest and earliest projects are still in the most acceptable corner of the Union Station neighborhood, the area southwest of the train station. Developers there are commanding rents between $25 and $30 a square foot, similar to rents in the area east of 14th Street. But several small-scale projects are also underway east of the railroad tracks and landowners in the area north of the station are hopeful that major redevelopment will be coming in the next few years.
The centerpiece of the Union Station area revival is the station itself. The Union Station Redevelopment Corp., the quasi-governmental body overseeing the project, is now working on the final negotiations in awarding a contract for development of the station. The preliminary plan offered by Union Station Ventures, an association made up of Equity Associates (a development affiliate of LaSalle Partners of Chicago) and Williams Jackson Cavanaugh of Baltimore, was chosen over other plans by the URSC this past summer. Union Station Ventures is now working on a final proposal, due at the end of February.
Jonathan Bortz, vice president of Equity, said that the company has not changed the concept of the preliminary plan, but did say, however, that the retail section had been expanded slightly to accommodate a "critical mass" of stores. He said their plans now included at least four or five restaurants of "substantial size" and some clothing and furniture stores mixed in with boutiques.
The retail section is expected to be two or three levels high and take up 175,000 square feet of space, while the plans call for 80,000 square feet of office space, which city officials said will be occupied by Amtrak.
Three lots just east of Union Station could also be developed into one, or possibly two, office buildings in the near future. In the Union Station Redevelopment Act of 1981, Congress said that jurisdiction over the three undeveloped lots could be transferred from the Architect of the Capitol to USRC, if it was found that the Union Station project would not generate enough revenue to enable USRC to pay its $3.5 million annual land and building lease for the use of Union Station.
If USRC decides it needs a revenue-generating development on the three lots, it could negotiate a long-term lease of the land with a developer, similar to the projects under the jurisdiction of the Pennsylvania Avenue Redevelopment Corp. Keith Kelly, executive director of URSC, said that Union Station Ventures would like to develop the parcels, but that URSC will not make that decision until after the final negotiations on Union Station.
Bortz and a number of private developers have also talked with the Postal Service about redeveloping the Main City Post Office next to Union Station. The Postal Service will be moving postal operations out of the building in 1988 and expects to start working soon on plans for the building's reuse.
"At this point, we are not actively thinking we will sell it," said Roger P. Craig, assistant postmaster general for real estate and buildings. Craig said that the Postal Service could retain ownership of the building and negotiate a long-term lease with a private developer to redevelop the building.
Jack Finberg, deputy for real estate operations with the General Services Administration's National Capital Region, said that GSA had worked with the Postal Service to evaluate the structure and that GSA was in the process of trying to determine if it could be refurbished for use by a government agency.
"It would be expensive to fix it up, but it's an ideal location, and if an agency needed to be located there for programmatic reasons, it might be worth the expense." said Finberg. "The Postal Service usually offers buildings to us first, though there is nothing that would require them to do so with the Main City Post Office."
Craig, however, said that the Postal Service would probably consider proposals from the private, as well as public, sector before making any decision, including any formal request from the Architect of the Capitol.
The Architect of the Capitol suggested earlier this year that the Post Office could be used to house printing operations for Congress. Area developers, however, say the last thing they want in that building is a continuation of the light industrial use.
"I think the city has seen that light industrial development hasn't worked in this area and that what we need is office and retail development," said Rose. A draft report on the Union Station area put together by city officials calls for "convincing" federal authorities that a mix of hotels, office and special retail would be the best reuse of the Post Office.
In that same vein, the city has requested a zoning change for the block behind the Post Office to eliminate the light industrial zoning currently allowed on that block. The city owns two parcels in that block that had been targeted as an expansion site for the Post Office. Now that the Postal Service is moving its operations, city development administrator Philip Johnson said that the city needs to "rethink" the use of that land, possibly even making it available to private developers for a joint project with the Post Office.
The coming redevelopment of Union Station has triggered substantial activity east of the station, though as yet the only projects under construction are small-scale office buildings.
The biggest parcel is a four-acre site owned by the CSX Corp. but under contract for sale to the development firm headed by Glen T. Urguhart, chairman of the National Capital Planning Commission. Johnson, who confirmed the contract, said that the parcel would be developed as office and retail space, possibly including a hotel.
Potomac Development Corp., a partnership between David H. Schwartz and Richard J. Bell, has been busy in the last year rehabing row houses and buying land in the area north of Massachusetts Avenue and east of the train tracks. Schwartz said that their main market is still political groups looking for office space close to Capitol Hill, but that in the future they hope to be able to attract diverse tenants.
The old Railway Express headquarters, owned by the CSX Corp. until sold to Potomac late last year, has wide freight openings at street level with two floors of office space above. Below grade is another floor, with a separate entrance on H Street, below the H Street overpass. Schwartz said that he showed the underground space to a group of furniture manufacturers last week and would hope to lure retailers to the project for the street level and underground space.
Although Schwartz and Bell are optimistic about the area east of the train tracks, they also say they will not start the rehabilitation of the Railway Express building or any other large developments until they have tenants committed.
Rose, working in the area behind Union Station west of the tracks, is developing a Days Inn Hotel to open in the summer of 1986, and in the future plans to build as much as 1 million square feet of office space in buildings around the hotel.
David Carley, one of the partners of Carley Capital Group, said that he did the rehabilitation of the Phoenix Park Hotel because he believes the Union Station area is "the new direction of development in this city." He said he is working on other projects in the area but that, because they are under negotiation, he could not talk about them.
"There is no question," said Carley, "that this area is the next really important development area of the city."