Akridge’s proposed Burnham Place would knit together the thriving NoMa and H Street corridor, but flat demand for office space, a key part of the development plan, poses a challenge. (Matt McClain/The Washington Post)
On one side is NoMa, a bustling new employment center with a catchy name, home to National Public Radio, CNN and the Justice Department.
On the other side is H Street Northeast, perhaps the buzziest corridor in the city for nightlife and restaurants, and the future site of Whole Foods.
After decades of decline, development is booming on all sides of Union Station, and now the station itself could become the anchor for Washington’s next go-to spot. A D.C. developer is making a big bet on the railyard behind it, proposing to build a deck over the tracks to support a commercial and residential hub that would unite the neighborhood behind the station for the first time in 100 years.
READ: Reimagining Union Station
From its offices across the street, the Union Station Redevelopment Corp., along with Amtrak and its partners, is studying every inch of the station to prepare its pitch to the policymakers and investors needed to make the master plan a reality.
What’s there now
The area around Union Station has been growing more racially diverse and prosperous. While some new apartments, government and commercial buildings ring the station, neighborhoods of historic homes are just a few blocks away.
Year built
Commercial and offices
Residential and hotels
A changing neighborhood
In 1990, 75 percent of the people who lived within a mile of Union Station were black. Now, whites make up 44 percent of the area’s populaton, and the share of Asians and Hispanics is also growing.
Poverty and education
In 2012, 61 percent of the area’s inhabitants had a bachelor’s degree, compared with 29 percent for the rest of the United States.
Sources: D.C. Office of the Chief Financial Officer, NoMa Business Improvement District, Post analysis of U.S. census data. Published Sept. 12, 2014.
More than two years after Amtrak unveiled its plan for the station, central obstacles remain: Congress cannot agree on how to spend annual transportation dollars, and the Obama administration is struggling to get rail legislation passed.
And the D.C. real estate market, for all its new apartments and restaurants, is producing little demand for office space, a primary financial driver for Burnham Place, the envisioned 3 million square-foot mixed-use mega-project.
Karen Hedlund, a top-ranking official at the Federal Railroad Administration, argues that something larger is afoot that will overwhelm cyclical budget constraints and real estate downturns — that Americans are making a generational return to cities and to rail travel as they spurn highways overwhelmed by congestion.
“By 2050 our country is going to have 100 million more people that we are going to have to move around,” she said, “and the economists believe that a majority of this population growth is going to be in cities or metropolitan areas.”
Skeptics point to the difficulty of finding the political will to enact a plan that could cost more than $10 billion. But Hedlund said that for people to move freely up and down the Northeast corridor, there is no other way.
“The alternative is double-decking Interstate 95,” she said. “There just is no more space.”
How do you get to $10 billion?
The model may be at another Union Station, in Denver, another fast-growing city.
Though much smaller in scale and cost, the $488 million redevelopment of the Denver station offered a 22-bay bus concourse and expanded train connections when it was completed in May.
The lion’s share of the cost — $87.3 million in grants and $300.6 million in loans — came from the Transportation Department, but Hedlund said proceeds from some 2 million square feet of expected mixed-use development around the station is expected to reimburse the federal government.
“Those loans made to Denver are being paid for from proceeds of that development,” she said.
The Obama administration would like to open a much larger flow of money for such projects, by way of its proposed Grow America Act, a four-year, $302 billion transportation bill. Instead, Congress and Obama patched together an extension to the Highway Trust Fund using a budgetary gimmick.
To put together a more diverse pool of funding sources, the Union Station Redevelopment Corp. (USRC), which manages the station, is working closely with Amtrak, the Transportation Department, developer Akridge and the Federal City Council (an association of local business executives) to evaluate precisely what work is needed and how much it will cost.
In the process, USRC has collected 8,000 documents about the station, everything it could find from storage, District agencies, the Library of Congress and historians.
All the partners decide what to study and who will pay for it, and they all had a hand in working with the D.C. government to approve funding needed to shore up the H Street bridge that passes behind the station.
The partnership will need to hold together over time, as greater sums of money are needed to build each new phase of a generational project. In the meantime, Amtrak and the USRC are trying to build support by offering interim improvements to the station’s more than 100,000 daily visitors, among them a new bus terminal, freshly repaired gold leafing on the ceiling of the main hall and an updated public address system.
“People don’t have to wait until well into the future to see the start of improvements,” said Beverley Swaim-Staley, the group’s president and chief executive.
Akridge, the D.C. real estate firm founded by John “Chip” Akridge, has committed to assembling $1.5 billion in private funds toward developing Burnham Place, the most ambitious project in the company’s 40-year history.
Since its founding, the company has had tried to acquire properties in the path of development, Akridge said, and that was the idea when he agreed to buy the development rights over the tracks, at a 2002 auction, for just $10 million.
Only three developers bid for the project. Union Station was on the decline, and the surrounding neighborhood wasn’t much better. A streetcar hadn’t even been proposed. “NoMa was a wasteland 12 years ago,” Akridge said. “H Street was even worse.”
Since then, progress “could not have been more positive,” he said. With all the new development in the area — Douglas Development has even begun rehabbing the Uline Arena, made famous by a 1964 visit from the Beatles — Akridge now expects Burnham Place to be the hole in the doughnut, one with better train access than any other site.
“We had no concept of what we see today, which is that Union Station is probably going to become the regional transportation hub in the Northeast corridor,” he said.
But the endeavor entails more uncertainty than most development projects. Akridge will have to front the capital for the deck years ahead of when it will see any return on that investment, and he isn’t sure of the price tag yet.
“You have to build the infrastructure upfront,” said Bob Murphy, managing principal at MRP Realty, a competing firm that just completed a 14-story, 400-unit apartment in NoMa. “If they are going to build that entire platform, they are going to have to have the money so that they can afford to carry it.”
Despite interest in the area, there are signs that the boom is waning. Rents at apartment buildings in neighborhoods like NoMa have begun to drop. Meanwhile, sequestration and defense spending cuts have taken a toll on the office market, which is Akridge’s bread and butter. Few companies are expanding, and those that are are leasing smaller offices, thanks to a push toward more efficient work spaces.
The vacancy rate downtown is 11.2 percent, barely down from 2009, according to the services firm Cassidy Turley. Office rents have been flat for five years.
The storm clouds are dark enough that Gerry Widdicombe, director of economic development for the Downtown Business Improvement District, thinks some office owners will have to convert their buildings to housing.
“We hear more and more from office guys that we’re going to do residential,” he said. “The office market is going sideways in a big way. No one knows really where it’s going.”
Millions of square feet of new offices are scheduled to arrive on the market before Burnham Place. Given the complexities of the master plan, Akridge will not be able to control the timing of his project as well as others.
But the first building at Burnham Place isn’t likely to be completed for at least five years, long enough for the market to roar back. And Akridge said there is already growing demand for efficient, light-filled work spaces providing less space per worker, which only newer buildings can provide.
“You can’t squeeze somebody into 125 square feet per person in a building built before 2013,” he said.
There are other tools available to the Union Station organizers, among them a surcharge on Amtrak tickets and a special tax on commercial properties around Union Station.
Getting any of them approved, however, would require some visible political muscle. Who is up to the task?
A new mayor could play a key role. D.C. Council member Muriel Bowser (D-Ward 4), the Democratic mayoral nominee, submitted a bill late last year calling for the creation of an Office of Public Private Partnerships, aimed at raising hundreds of millions of capital dollars.
A more likely candidate may be a former mayor, Anthony A. Williams. As president of the Federal City Council, Williams holds one of five seats on the USRC board. Before he arrived, the organization played major roles in quietly pushing school reform and redeveloping libraries across the District.
Though he declined to be interviewed, Williams is widely expected to make Union Station a top priority.
He has hired Emeka Moneme, a former Metro official and director of the D.C. Department of Transportation, to oversee infrastructure projects.
Williams made a spirited speech at the unveiling of Amtrak’s master plan.
And he was talking about how best to fund public infrastructure years before Bowser’s bill; in a 2012 keynote speech at the city’s annual economic development luncheon, Williams called for a public infrastructure fund akin to the one Chicago Mayor Rahm Emanuel (D) now deploys.
Few Washingtonians enjoy the connections that Williams does to Capitol Hill, the District government and private sector executives. Swaim-Staley says anytime she needs something, Williams is there for her: “He has been a champion of the project. He has been terrific. I can’t say enough.” Hedlund echoed that sentiment: “He’s been very active.”