Updated: Jan. 17, 2017 at 12:07 p.m.
Along I Street, two nondescript office buildings mark the street’s intersection with Pennsylvania Avenue. But a new University project will transform the block into a bustling center for commerce — all generating revenue for GW.
Under the project, announced last month, GW will lease Rice Hall and 2100 Pennsylvania to real estate investment firm Boston Properties to convert the two buildings into a commercial and retail space designed to raise funds for academic projects.
Experts said the redevelopment is reflective of a national trend of universities investing in properties near their campuses and would allow GW to further profit from owning highly-coveted real estate in downtown D.C.
Under the proposal, which is still in its initial phase, administrators would vacate Rice Hall by December 2018. The offices formerly housed there will be relocated to alternate locations that officials have not yet identified. Next door, 2100 Pennsylvania Ave. – which currently houses commercial space including GW offices and shops and restaurants on its ground floor – will also be emptied and redeveloped.
The new proposal comes after The Avenue, a similar mixed-use development investment project also overseen by Boston Properties, was completed in 2011. That project transformed an empty lot next to the Foggy Bottom Metro station into offices, apartments, restaurants and the Whole Foods Market on I Street.
The Avenue now pumps millions of dollars to the University annually, helping to fund the construction of the Science and Engineering Hall, and has drawn students and residents to the neighborhood.
Patrick Kennedy, the chairman of the Foggy Bottom and West End Advisory Neighborhood Commission, said The Avenue made a “night and day” difference for activity in the area.
“Aside from 22nd Street, that entire site is ringed by retail and that has really activated the street. There are more people coming to that area and coming at all hours not just during the work day,” he said.
Kennedy said the new project could “enhance Foggy Bottom as a retail destination,” but he didn’t envision as dramatic a transformation as that from The Avenue, because the new development will not be residential and is located further from the Metro station.
Alicia Knight, the senior associate vice president of operations, said the new development could have a similar impact as The Avenue project, which increased the Foggy Bottom Campus’s vibrancy.
“During the process of engaging with the development community on potential redevelopment of 2100 Penn, it became clear that relocating the functions from the adjacent Rice Hall and including the building site into the redevelopment plan would result in an improved site, with improved retail frontage, while offering the University additional opportunity for non-tuition driven revenues to support its mission,” she said.
Knight said GW would not bear any of the planning, construction, leasing or management costs of the new building as part of its ground lease with Boston Properties.
Economics professor Anthony Yezer said the project will allow the University to maximize the benefits of owning real estate in the heart of D.C., where rents have soared in recent years. Redevelopment could link the two buildings to give the development a prime Pennsylvania Avenue address, he said.
GW would be able to set an “extremely high” rental price for potential tenants and find a less valuable space for administrative offices, Yezer said.
“You want land to be used in its highest and best use,” he said. “Anybody who took economics 101 knows this is a sensible thing to do.”
Other universities have recently used campus development projects to make revenue. Last March, Drexel University announced a 20-year $3.5 billion project to connect Philadelphia’s primary train station to its campus with corporate offices, residential, retail spaces and academic facilities.
Similar projects are underway or have been completed at Washington University in St. Louis and the University of Southern California, both of which are GW’s peer institutions, as well as at Purdue University and others.
Merrill St. Leger, who oversees urban design and planning at architecture and engineering firm SmithGroupJJR, said universities’ deals with private developers are “a great opportunity for the university to supplement its revenue.”
St. Leger said real estate investment provides universities with alternate revenue streams without raising tuition. And the developments can attract prospective students, she said.
“In urban locations where land is at a premium, they have to make most of what they have. It’s a way to use their resources efficiently,” she said.
GW has relied heavily on real estate investments as a major revenue generator. The University owns the second-largest amount of land in D.C., trailing only the federal government.
If the initial proposal is completed, an area of shops and restaurants would span much of the three-block stretch of I Street from the Foggy Bottom Metro station to Pennsylvania Avenue.
But the project would also force GW’s most influential offices into new locations. Officials have not yet determined where those locations would be, but said in a release that a study would be conducted to identify alternate locations on a campus already short on space. Student Association leaders have long protested losing space in buildings like the Marvin Center, claiming that student space is already limited on campus.
Kennedy, the Foggy Bottom and West End ANC chairman, said one of his primary concerns with the new project is that student space could be sacrificed to make way for administrator offices.
“I don’t want students to to be pushed into other areas on campus to compensate for the University’s investment strategy,” he said.
Kennedy said he had not yet taken a position on the proposal, but wanted to hear more from GW about the impact on parking, as well as the fate of a Capital Bikeshare station that would likely be displaced during construction.
The ANC plans to hear comments and concerns from the community at a hearing in February, he said.
Kennedy added that he was concerned that the neighborhood’s rapid high-end transformation could price small and independent businesses out of the area but that he hoped the University would make allowances to preserve an “eclectic mix of retailers.” 2100 Pennsylvania currently includes a T.G.I. Friday’s restaurant, a barber shop, a dry cleaner and Buff and Blue on Penn, a GW merchandise retailer.
“The type of organic, small businesses that used to line Pennsylvania Avenue are no longer there,” Kennedy said. “Those are the type of retailers that make a neighborhood.”