ARLINGTON, VA-Local officials have been clamoring for federal action ever since the Pentagon and planes hijacked by terrorists on September 11 attacked New York’s World Trade Center twin towers. In the Washington region, District Mayor Anthony Williams and other leaders complained that the continued closing of Ronald Reagan National Airport was causing the lost of thousands of jobs at the airport, and potential tens of thousands of jobs in the tourism industry in DC and surrounding areas. While the lodging and retail industries may indeed be taking a beating, the office market immediately around the area of concern appears to have benefited from the disaster.

“It’s not suffering, to the contrary, over 1.9 million sf has been leased since September 11,” Tom Leachman told Leachman is a senior managing director for Insignia/ESG, based in Northern Virginia. That nearly 2 million sf is office space leased in the Arlington market. And many of those leases have been by the federal government. While some of those leases, like FDIC taking about 200,000 sf, or FEMA taking 90,000 sf were leases that may have been in the works, a big chunk of the new leases are the Department of Defense trying to find space for displaced Pentagon employees. Leachman and Transwestern vice president Peter Berk said DOD has gone right to Crystal City, the office market adjacent to both the Pentagon and National Airport.

They said DOD has picked up over 850,000 sf of space in 2521 and 2531 Jefferson Davis Hwy here. According to published reports, Illinois-based Equity Office Properties Trust in 1998 acquired the two buildings–James K. Polk and Zachary Taylor–The office REIT paid $158 million for the 90 percent stake in the properties that it did not already own. The twin, 12-story buildings have 902,371 sf of space, of which the Naval Sea Systems Command occupied 857,900 sf until July of this year. NAVSEA has moved to the Navy Yard in Washington, but Berk said the lease ran through at least fall of next year, and GSA has added two years to the lease.

A spokeswoman for GSA declined to comment, and officials from neither DOD nor Equity Office were immediately available for comment.

Both players also said they heard that USAirways, an airline whose main hub in National Airport, is attempting to sublease its 330,000-sf headquarters at 2345 Crystal Drive here. Leachman said GSA was taking that space too. Charles E. Smith owns the building. USAirways officials were not immediately available for comment.

Before the terrorist attacks, Crystal City had a vacancy rate of nearly 14 percent, including sublease space, with a base of 11.5 million sf of office in the submarket. Leachman and Berk agreed that these deals virtually eliminate that. “That is the lion’s share of everything available,” said Berk. “And there is not likely to be any space available within the next 30 days.”

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