Grocery stores remain a strong proposition in the Washington area retail scene

December 1, 2013

With the holiday season in full swing, many people are stocking up for upcoming parties and gatherings. From traditional grocers, such as Safeway, Giant and Harris Teeter, to trendy organic options such as Whole Foods and Trader Joe’s, to numerous mom-and-pop markets, the D.C. region is awash in grocery options.

Like gas station owners, grocers know the importance of location; although people may prefer a specific store brand, they tend to patronize stores that are close to where they live.

Residents in the District are quite familiar with Safeway. With 13 stores right now, and more on the way, Safeway is the largest grocer in the city. Considering all the major grocery retailers in the District, Safeway leases about 45 percent of the grocery space.

Giant is the giant in the suburbs. While the mammoth grocer just opened its sixth store within the District, it has a dominating presence in suburbs, comprising almost half of the square footage leased by major grocers in Maryland and Virginia.

More recently, grocery chains have been focusing their expansion efforts in the District after nearly saturating Northern Virginia, where they have battled to stake claims in some of the wealthiest counties in the country. The total square footage of major grocers per resident is 11 percent higher in Northern Virginia than it is in the District, while D.C.’s total square footage per resident is 2.5 percent higher than Maryland’s.

While consumers come to pick up their turkeys, investors are looking to major grocery stores to bring home the bacon. National grocery chains are generally stable, attractive tenants, and many investors are eager to pay up for grocery-anchored shopping centers.

In fact, one grocery-anchored retail location was the object of one of the region’s most valuable retail deals in recent history. Last year, the retail portion of Wisconsin Place in Chevy Chase sold for just over $110 million, with Whole Foods accounting for almost half of the rented space.

Look for grocers to continue adding stores in the metropolitan area, especially in the District, where the supermarket tax exemption and the recent FEED D.C. Act are providing new incentives for grocers to open stores as the D.C. government looks to eliminate so-called food deserts in less affluent neighborhoods.

Connor Bevans is a real estate economist and Jeff Myers is a senior real estate economist with CoStar Group. Please see www.costar.com for more information.

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