Georgetown's retail landscape starts to rebound from recession
Sunday, September 19, 2010; 5:51 PM
On a recent Friday night, the sidewalks of Georgetown were crowded with trendy twentysomethings, business types and a few mystified out-of-towners caught in the traffic created by Fashion's Night Out. The event, an outgrowth of Vogue editor Anna Wintour's effort to gin up business for recession-wary retailers in New York City, brought together more than 80 stores, restaurants and salons, with promotions to lure passersby.
Much like retail hubs in the Big Apple, Georgetown witnessed revenue decline and an increase in vacancies during the economic slump. But more recently, area retailers are reporting an increase in sales, and leasing activity is picking up.
Time will tell whether the uptick leads to a full recovery. For now, Georgetown offers a window into the changing retail landscape, particularly on the higher end.
Setting up shop in the District's fashion Mecca is no guarantee of financial success. Just ask the wave of retailers, like Ann Taylor, Pottery Barn and Puma, that packed up and left in the past two years. A number of these closures, however, cleared the way for a few well-received additions, such as the ever-popular Apple store. In many ways, the recession set into motion the renewal of Georgetown's retail landscape, which some observers say had become a bit dull.
Against the backdrop of the blaring music and undulating spotlights at Fashion's Night Out, Georgetown was anything but dull. Streams of pedestrians flowed in and out of area staples.
"Georgetown is back," said Banana Republic store manager DuWayne Burge. "A lot of retailers scaled back as the economy soured, but [now] one store after another . . . they're coming."
In fact, 39 stores shuttered in 2009, sending vacancy rates soaring to 12.5 percent at the close of the year, a far cry from Georgetown's usual availability of 5 percent to 6 percent, according to CoStar. But as those businesses closed, 26 new ones sprung up in their place. Even this year, with the loss of 23 more stores, 37 new retailers signed on to launch Georgetown locations. Vacancy, as of early September, has trended down to 5.2 percent.
"As the challenges in the economy highlighted that the same old stores that exist everywhere in the region couldn't, or didn't want to, stay in Georgetown, it created an opportunity for the more unique stores - ones that aren't represented throughout the region multiple times - to come in," said retail broker John Asadoorian of Asadoorian Retail Solutions.
A few notable high-end retailers, such as Michael Kors and Diane Von Furstenberg, are said to be looking at the neighborhood. Marcie Connolly at the commercial real estate firm Eastbanc said there is a growing interest among designers to locate in Georgetown. Of the 40,000 square feet of vacant space she had under management in 2009, about 8,000 square feet remains on the market.
Some of that space was absorbed by Crate & Barrel's offshoot CB2, which just inked a deal for 13,000 square feet at 3307 M St., where it will debut next spring. Meanwhile, J. Crew spinoff Madewell will open by year's end in Puma's former digs at 1237 Wisconsin Ave., and Brooks Brothers will take over Pottery Barn's 22,000-square-foot store at 3077 M St. in early 2011.
Madewell, with fewer than 20 locations nationwide, seems more exclusive than its pervasive kin, J. Crew. Within the past decade, a number of mall favorites, like Levi's and H&M, have absorbed space in Georgetown, with mixed reviews. Some boutique owners say the presence of national chains has been a blessing and a curse. Chains can attract a broader consumer base as well as "take away some of the identity of the area," said Churek Djamgerchinova, owner of Sangaree, an upscale women's clothing store.
Less than 40 percent of the 493 stores in Georgetown are national chains, according to James J. Bracco, executive director of the Georgetown Business Improvement District.
"By and large, we still have the unique boutiques and local entrepreneurs," he said. "We'd love to keep it that way, but the reality is the national retailers want to be here because this is the style district of Washington."
Larger retailers not only have the desire to locate in Georgetown, but also the money to do so, a necessity in the city's priciest retail corridor. Georgetown, despite the leasing lull at the height of the downturn, still garnered the highest retail rents in the Washington area, never falling below an average $40 per square foot in the past two years. Rents can, and often do, climb as high as $100 a square foot.
Sluggish sales, underscored by high rents, helped drive a few independent retailers, like Up Against the Wall, out of business. Other indie stores, however, have managed to thrive in the downturn by appealing to the Washington area's growing creative class - the artists, designers and techies with edgy tastes. Such has been the case for vintage store Annie Creamcheese on M Street, which recorded its highest sales in 2009, according to co-owner Garrett Bauman.
"People come for the uniqueness of what we offer," he said, adding that revenue has increased 30 percent thus far this year.
Bauman's neighbors did not attest to a similar rise in sales, but they generally agreed that consumers have loosened their purse strings. "Our customers are loyal and they are starting to spend again," said Jenny Zinn, manager of Betsey Johnson, which has been in Georgetown for 16 years.
Some of the newer kids on the block, however, have yet to connect with area shoppers. Despite having a strong following in New York City, Spanish shoemaker Camper, for instance, has seen the same demand in Georgetown in the four months since it opened.
"People are a lot more conservative here," surmised Camper store clerk Kate Peterson, standing in a empty store on a Friday night. "Business has been good, but people just aren't used to our style."
Asadoorian says that while it may initially be difficult for some of these trendsetting stores to penetrate the market, as more of them set up shop, they will create a fashion-forward shopping experience unique to Georgetown.
A part of that shopping experience will eventually be shaped by the redevelopment of the embattled Shops at Georgetown Park, which has sat half empty for months. New owner Angelo, Gordon & Co., who declined to comment for this story, is said to be repositioning the property to attract new tenants.
A deal to have Bloomingdale's bring its much-anticipated SoHo prototype to the enclosed mall fell through late last year. A few new leases, however, have been signed, including one for the National Pinball Museum, which will open this fall.
"There is something here for everyone," said Banana Republic's Burge. "What has saved us is that it's not just boutiques or the chains, but the serendipity of it all fitting together."