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[IMGCAP(1)]TYSONS CORNER, VA-Commercial real estate executives in the DC metropolitan area–and certainly Northern Virginia–know the challenges facing the region are severe. Despite that, though, there is an underlying sense of optimism that the fundamentals of the area–coupled with its unique role as home to the federal government–will be enough to pull the region through a capital markets freeze and consumer-led recession.

So say the panelists at RealShare Northern Virginia, held Thursday morning at Hilton McLean Tysons Corner. “Washington, DC and the surrounding area is not a commodity city,” Dough Fleit, CEO of America’s Capital Partners Mid-Atlantic, told the audience. “We are truly a special place [for investors] and we will recover earlier than the rest of the country.”

Ironically, the economic crisis may have a residual positive impact on the DC area. The numerous government financial rescue plans–namely the Troubled Asset Relief Program–is generating about 40,000 square feet of additional demand for space in the immediate term, Bart Bush, assistant regional administrator for GSA’s Public Business Service, told the audience. It may be that once the Obama Administration is installed, more space will be required, he said, or conversely–the new Administration might decide the space is sufficient.

Washington is also benefiting from the financial meltdown in other ways: a vacuum is being created as Wall Street shuts down and DC is stepping in the fill the void. “There is a brain drain occurring with New York, and Washington is one of the beneficiaries,” Mark Levy, vice president and regional market officer for ProLogis, told the audience. Now these financial engineers are coming to work for the government, he said–but many of them will remain–and when the economy recovers, their input and strategies will benefit the region in the long run.

Even the Obama Administration’s key goals–such as health spending–are going to help the area. Maryland’s biotech and health care sector, Fleit said, are poised to benefit from Obama’s desire to greatly expand health insurance in this country.

To be sure, the multi-headwinds are serious right now, as the panelists were quick to point out. Jim Lee, president and CEO of Opus East, thinks the market is in for “another couple of years of pain” before a recovery is underway. Joe Stettinius, CEO of Cassidy & Pinkard Colliers said that it will be three to four years before developers are fully utilized.

[IMGCAP(2)]Still, the consensus is, for the smart and quick–and most importantly, the cash-rich–there are opportunities to make some money, especially in the second half of the year as more assets come to market by buyers whose loan terms force them to sell.

Also, the downturn has driven home some painful truths about underwriting and assumptions about performance–lessons bound to help in the next wave of business activity. In the last upcycle, there were too many companies acquiring buildings based on the exit strategy–that is, the upside they expected to realize in a sale, Jon Peterson, senior vice president of the Peterson Cos., told the audience.

While it is easy to see, in retrospect, where things when wrong and right–getting ahead of such trends as they develop, is not as easy. In other words, figuring out where the opportunities lie in the downturn is almost as difficult as trying to determine when the downturn will end.

One well-positioned company is Corporate Office Property Trust, which recently raised $140 million, as well as secured a construction line of finance. The company will be picky in how it chooses to disperse these funds, John Norjen, managing director of investments for the REIT, told the audience. But it is not unforeseen for the company to spend $100 million on investments next year–or more. “I would say if a once-in-a-lifetime opportunity arose–in a park for instance, that would cost $500 million, we would go for it,” he said.

More parochial investments may be targeted at existing tenants that want to expand their space at COPT-owned buildings. “We have tenants that want us to expand their space at Ft. Meade” and other locales that will be affected by the Base Realignment and Closure Act, or BRAC, Norjen explained. “Construction debt is hard to get now, so it is fortunate we have already lined up our financing.”

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