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Brandywine Crossing Thrives in Prince George's County

By V. Dion Haynes
Washington Post Staff Writer
Monday, September 28, 2009

After opening in June, the Bonefish Grill in the new Brandywine Crossing shopping center in southern Prince George's County has become one of the top sales performers in the restaurant's chain. On Friday nights and weekends, patrons wait as long as 90 minutes for a table.

Brandywine Crossing, which lost several national retail tenants when it opened in November at the peak of the worst economic slowdown since the Great Depression, appears to be turning a corner. Work is nearly complete on a Bebe Day Spa, and a Hallmark store is not far behind. "Coming soon" posters are plastered in other spaces announcing a gym, an Italian restaurant and an insurance office.

Property managers said they expect the development to be 95 percent occupied by the end of the year.

The activity at Brandywine Crossing is not exactly an indication that retail and commercial real estate markets in the Washington region have bounced back; retail vacancy rates are at their highest levels in years. But real estate experts said the development's success demonstrates that under certain conditions shopping centers can thrive in a down economy.

Brandywine Crossing is showing promise, experts say, because it is anchored by Safeway, Target, Costco and Marshalls, stores that have been holding their own as consumers become more budget-conscious. And the area, on the border of Charles County, has few other concentrated retail options.

With Brandywine Crossing outperforming higher-end shopping centers, experts say they expect to see similar developments in the future.

"Grocery-anchored shops will be the first development to rebound as capital becomes available," said Gregory H. Leisch, chief executive of Delta Associates, a real estate and economic research firm based in Alexandria.

In the Washington region, retail vacancy rates rose to 5.1 percent in the second quarter of 2009 from 4 percent the year before, according to CoStar Group, a Bethesda-based real estate research firm. The vacancy rate was only 3.6 percent the second quarter of 2007, several months before the recession took hold.

The glut of space prompted property managers to lower rents to attract tenants. Average rents, according to CoStar, have declined steadily -- from $27.31 per square foot in the second quarter of 2007, to $26.33 in the second quarter of 2008, to $25.04 during the same period this year.

Shopping centers in the region generally outperformed their counterparts across the country during the second quarter of this year -- the national vacancy rate was 7.5 percent and the average rent was $17.15 per square foot. But the amount of vacant space in the Washington region still rose 29.5 percent during the past year, to 10 million square feet in mid-2009 from 8 million in mid-2008.

The problem could get worse, experts said. The Washington region has a large number of properties under construction, which could boost the vacancy rate if retailers continue to stay away, according to CoStar. Currently, 1.7 million square feet are under construction, ranking the Washington area eighth among 45 regions with projects in the pipeline.

In contrast to Brandywine Crossing, Stonebridge at Potomac Town Center in Woodbridge was launched in 2008 for higher-end retailers with a Wegmans supermarket as its anchor. Although the Wegmans is operating, other retailers have pressed developers to delay their openings until spring 2010 because of the economy, said Richard Lake, a partner in D.C.-based Roadside Development. That, in turn, has forced the company to delay another phase from 2010 to 2011, he said.

"Nobody canceled any deals," Lake said. "But they weren't willing to move forward with the opening."

Developers of Brandywine Crossing said they initially designed it as a higher-end shopping center, seeking to anchor it with clothiers such as Jos. A. Bank. But "it was clear these retailers were pulling back and not expanding as aggressively as before in seeking new markets," said Drew Gorman, managing director of Faison, the development company. So they made a quick pivot, he said, targeting retailers "focused on good-quality food and meeting people's daily needs."

Even after getting the anchors, developers said they struggled to attract secondary businesses. But that has picked up during the past six months, they said. So far, they said, they have lease commitments for all but 13,000 square feet of the 480,000-square-foot center. Eric L. Yltalo, director of retail leasing, said developers have offered tenants deals that reduced rents and defrayed costs of building out interiors.

Jonathan Ginsburg, managing partner of Bonefish Grill, said the upscale chain has developed a menu and pricing aimed at diners looking for value. "People come in and expect to spend a lot more," he said, attempting to explain the restaurant's recent success.

But consumer tastes can be difficult to predict. Simon Kim, vice president of Beauty 2 U, a supply store, said he has not yet seen a lot of foot traffic, but he expects it to pick up once the shopping center is full.

"It's not busy right now," he said, "but we have hope."

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