CB Richard Ellis did not ignore the fact that the District lost millions of dollars each day for the several weeks that Ronald Reagan National Airport was closed, and that thousands of workers in the transportation, hospitality and tourism industries lost their jobs here after the attacks. But the firm believes that the city's commercial real estate stock of nearly 88 million sf remained insulated. The firm believes the local economy will bottom out by the end of the first quarter of 2002 and begin its recovery in the third quarter of next year.

That said, the firm like other prognosticators, believes that the federal government's demand for space will more than make up for any slack in activity among the private sector. Certainly in the example of nearby suburb Crystal City, that submarket's near 14% vacancy rate disappeared after the General Services Administration gobbled up more than 800,000 sf of vacant office space, a large portion of which had been leased to government tenants previously.

Moreover, CB Richard Ellis noted more than 4.8 million sf of new office space is under construction in the city. But the current state of the capital markets does present some obstacles to financing, particularly for lodging properties. Along with the lack of suitable sites for large buildings left in the District, space should remain tight in the market for the foreseeable future.