Have you noticed more and more “wholes” popping up in the D.C. retail market? Whole Foods Market, that is.
In the past month, the popular purveyor of natural and organic foods announced plans to open two new stores in the District. The first one will open in 2017 at 800 New Jersey Ave. SE in the ground floor of an apartment building that breaks ground next year. And most recently the retailer leased approximately 38,000 square feet at 600 H Street NE, a project being developed by Insight Property Group and the Lionstone Group.
When the two stores open, Whole Foods will have six in the District and at least 18 in the Washington area.
The new Whole Foods in the Capitol Riverfront neighborhood will have plenty of neighbors. Construction has been booming, and Harris Teeter is set to anchor a new 88,000-square-foot development at the Yards. Retailers tend to follow rooftops, and growth is the name of the game in the Capitol Riverfront Business Improvement District, where more than 700,000 square feet is either under construction or proposed for development.
In addition to high-growth zones in the District, retail developers are also looking to capitalize on the extension of the Silver Line and have begun to build in earnest along its path.
Tysons Corner already has one of the highest retail concentrations in the region with more than 5.5 million square feet. The two malls, Tysons Corner Center and Tysons Galleria, make up a large portion of existing stock, but retailers are looking for more. Tysons Corner Center is adding another 50,000 square feet, while 250,000 square feet of retail is being built at Tysons West, a new development near the Spring Hill Metro Station.
With all this new construction, it wouldn’t be unreasonable to assume that Tysons is in for a spike in retail vacancy, but so far demand has been resilient. Vacancies currently hover around 1 percent, among the lowest in the area, but rents have not grown in the past 12 months.
There is a lot retailers like about the D.C. market with its growing population of educated, affluent and employed consumers. Like the apartment market, it is expected to continue to grow.
However, unlike the apartment market, retail rents in the Washington area are still well below their pre-recession peaks. So while D.C. residents can look forward to new, health-conscious grocery stores, landlords are also looking forward to healthy rent growth in the not-too-distant future.
Connor Bevans and Maeve Gallagher are real estate economists and Jeff Myers is a senior real estate economist with CoStar Group. Please see www.costar.com for more information.