"There is no shortage of capital looking for real estate," Steve Gichner told GlobeSt.com. The report was completed just before the Sept. 11 terrorist attacks, but Gichner, a vice president with Grubb & Ellis, is not significantly altering his view. He pointed to the city of Washington, as a major reason the region is still attractive. "It is one of the few markets with potential for rent growth. It still has significant barriers to entry, little [is] under construction." As a testimony to his comments, the firm sites some completed deals during the first half in the District, and they include the sale of the William Rogers Building at 2001 K Street NW to Bernard Spitzer from Louis Dreyfus-Apollo Real Estate for $95 million, or $409 a square foot. The firm's research only reflects deals that have closed, not deals that have been announced, but not completed. But the reports said over 20 properties are currently on the market in the District. Specifically, the report said Class B properties have set record prices on a per square foot basis, with an average price per square foot of $234.71. The firm reported there are over 14 Class B properties on the market in Washington.

But while the District remains one of the nation's hot markets, with one of the lowest vacancy rates in the country, Northern Virginia saw a big drop in deal flow, explaining in part why this year's pace is so different from 2000. Through the first half of the year, 15 office buildings were sold for about $457 million, compared with 36 office buildings sold for about $1.1 billion for the same period last year. Not only has deal flow decreased sharply, but also Gichner said values had declined about 10% to 15%.

Meanwhile the pace picked up significantly in Washington's Maryland suburbs. In that submarket, 13 deals for $300 million were completed, versus 7 deals for $42 million for the first half of 2000. The pace through June 2001 is equal to all of 2000, dollar-wise, and Grubb & Ellis does not expect a slowdown, citing eight other buildings that are on the market right now.