Washington, DC-based Dochter & Alexander Retail Advisors recently conducted a comprehensive overview of retail units in downtown DC and along retail corridors including Georgetown and 14th Street, in examining the impact of the pandemic on the retail sector.
Its results showed vacancy rates of 22.6% for Downtown DC, 16.6% for Georgetown and 11.0% for 14th Street. Compared to the winter 2020 numbers before COVID, these numbers have almost doubled in all three markets.
But there is good news on the horizon. Over the past year, at least 196 retail and restaurant tenants have actively sought space for rent in Washington, DC, demonstrating widespread confidence among retailers in the long-term viability of DC as a working environment. live and leisure.
David Dochter, Principal and Co-Founder of Dochter & Alexander Retail Advisors, spoke with Commercial Observer about the impact of the pandemic on these three submarkets and why there is optimism for 2021 and beyond. of the.
Commercial Observer: How would you characterize the state of the retail market in Washington, DC, today?
David Dochter: If you look through the markets we studied, when there is a neighborhood with a residential community and street shops, the performance is better than the downtown market or [central business district] of DC This is because the immediate population base represents activity and pedestrian activity. In the city center, you really have very little pedestrian activity at the moment. You may have 10% office space and no tourism activity to speak of. So it’s just a lot quieter. Georgetown and 14e Street have generally received good news due to their location in residential areas.
What do we see in Georgetown?
Even before the pandemic, there was a lot of pressure on retail and retail concepts, which had an effect on Georgetown [as] some closings were more portfolio focused than representative of the health of Georgetown’s immediate market. There is an ongoing development in retail, and this change has put pressure on many shopping streets resulting in an increase in vacancy on 14e Street and Georgetown.
But now we are seeing a huge increase in demand and activity. Much of this is driven by the evolution I mentioned above, with brands aimed directly at the consumer that may not have had a storefront in the past but have built a beautiful business model in line. I think the trends to come will be consistent with that, where those brands that haven’t established a physical presence are going to start establishing one. You get the experience, you hit the brand, and you have the halo effect in terms of the customer base you reach.
What do you think of downtown DC?
The city center has certainly been hit hardest in terms of vacancies. If you look at what drives downtown, it’s mostly offices, tourists, hotel rooms, and metro traffic. None of these are active at this time. They’re coming back, and we’re studying this closely to see what the trends look like, but downtown has been hit harder than the surrounding markets.
There really is an opportunity for brands and concepts that weren’t working before the pandemic, and an ability to recreate. It’s fresh clay to shape what the future of retail will look like. People will come back to the office, tourists will come back to the streets, so that the business models that work can come in and take advantage of the available density.
Why is there so much space available?
Along with the permanent retail closings, many other businesses have temporarily closed their doors, in a bid to wait for the worst of the pandemic. Ghost space is also in the market, defined as retail space occupied by tenants, but for various reasons available for rent. It really is the culmination of the pressure on retail before the pandemic, made worse by the closure due to the pandemic that has occurred. A perfect storm of sorts. However, this vacancy is starting to be absorbed and I think the retail landscape will be better because of the renaissance that is happening.
What trends do you see with rents?
In general, retail businesses charge rents in the city center [D.C.], Georgetown and 14th Street declined from Q1 2020 to Q4 2020. But while asking rents in Georgetown and 14th Street increased in Q1 2021, downtown rents continued to decline.
What is special about Georgetown?
Where we were before the pandemic started to become very commonplace, and retailing by nature shouldn’t be trivialized, as it’s an experience and a lot so influenced by the surrounding environment. Georgetown is not the same place as everywhere else. There is a special feature that appeals to the ambience of the street. There is a unique character of the spaces and buildings. All this leads brands to want to be there. Not to mention that the median demographics are very good. You have other factors like Georgetown University, and it’s also a tourist destination.
What Georgetown needs, and lacks, is an infusion of food and drink and entertainment. He has become more sleepy than he once was. But Georgetown has an opportunity because of the shift to embrace the feel of coffee, as well as the unsustainable mix that exists today. You need this mix and I think this is where Georgetown is going. It’s a place where many retailers want to plant a flag and that doesn’t change.
Why are there reasons to be optimistic?
There are a number of reasons, including very strong retail sales in March and overall national vaccination rates. We recently ran a linear forecast to project 133 tenants looking for space in the second quarter of 2021. The bottom line is that the deals are starting to be signed and there is light in the sky. end of the tunnel when it comes to the vaccine and the things that open up. Brands and tenants on the fringes are absolutely starting to get active. We’ve seen a large influx of restaurateurs and retailers from New York, Chicago, Miami, and Los Angeles looking and looking for opportunities in Washington, a noticeable increase from what we’ve seen during the pandemic.
Is Downtown DC on the rebound?
Dochter & Alexander follows about 40 retail tenants planning to open in downtown DC, with others opening in the past month including Foxtrot at 650 Massachusetts Avenue NW, Yardbird at 901 New York Avenue NW and Cheesecake Factory at 1426 H Street NW.
Was there anything surprising about the report?
What is surprising is the activity that we see and the number of companies that are able to grow. It was an unknown what it would look like on the other side. We functionally doubled the retail vacancy rate in the submarkets we examined, from pre-pandemic to post-pandemic. However, this is mitigated by activity in the market. I think it will be absorbed faster than we initially expected.