Six months ago, Prospect Place, a complex of shops in the heart of Georgetown, was a symbol of what was wrong with Washington retailing.
The brand-new buildings, surrounding an inviting courtyard in the District of Columbia's best retail neighborhood, sat almost empty and largely unleased.
Of the two dozen storefronts, only three or four were occupied and Prospect Place was being compared to Mazza Gallerie -- interesting for architects, but mediocre for merchants.
But as summer faded and fall fell, the vacant storefronts of Prospect Place filled up. By Christmas, Prospect Place was fully leased and bustling with business -- and so was Mazza Gallerie.
Traffic through the Mazza plaza on upper Wisconsin Avenue was so strong that Neiman-Marcus manager Anthony Hariman gave the center part of the credit for a record Christmas at his store.
That acknowledgement marked a turning point for Mazza Gallerie, which for three years had depended on Neiman-Marcus to feed it customers rather than the other way around.
The maturing of Mazza Gallerie and the prospering of Prospect Place also indicate a turnaround for Washington retailing.
Sales have not rebounded totally from their summer slump, most merchants agree, but the decline has stopped. Prosperity is still around the corner but after a surprisingly strong end to the Christmas season, the corner is closer.
The final word on Christmas sales won't be heard until next week when most major chains release their sales figures for December. Then after the January clearance sales, stores will count their inventories, add up their expenses and see what's left on the bottom line.
Although many merchants say their Christmas sales met or exceeded last year's, few expect profits to be as good as in 1979. As Martin Pfieffer, treasurer of the W. Bell & Co. catalogue showroom chain put it: "Business was about the same as last year, but expenses were higher, so you know what that means."
Advertising costs were up, promotional price-cutting increased -- reducing average profit margins -- and the cost of financing inventories went through the ceiling. Many stores finance their goods with bank loans pegged to the prime rate, which jumped erratically during the Christmas season. The prime went up so fast, one retailing executive complained, that the bank notified his company of three increases in the same letter.
But the Christmas season is over and so is election year -- traditionally a tough one for Washington retailers. The political problem facing merchants is to figure out how a Republican administration will affect the lifestyles and tastes of the city.
The conspicuous-consumption business has been the strongest segment of local retailing in the past year. Neiman-Marcus President Phillip Miller has boasted of an 18 percent increase in sales for his chain, and Saks Fifth Avenue executives have also admitted to a record year.
"The specialty business is really booming," said David Waters, chairman of Garfinckel, Brooks Brothers, Miller & Rhoades Inc. The department stores operated by the diversified Washington retailer didn't have a particularly good year, but sales were strong at Garfinckel's, Brooks Brothers and Ann Taylor stores.
Garfinckel's, Waters predicted, "is going to keep taking more than its share of the local market," and Brooks Brothers is "red hot. We have a lot of momentum there and the fashion trends are with us."
The Garfinckel corporation's emphasis on specialty retailing enabled the company to "outperform the industry for the first three quarters" of 1980, Waters said. "It looks like we will continue to do so for the entire year."
Waters is cautious about how the Washington market will perform in 1980, because, "the business just didn't have the buoyancy," during the Christmas season.
Garfinckel's will probably open half a dozen additional Ann Taylor stores this year and add as many as 25 units to its chain of Catherine's Stout Shops.
Major expansion is also expected this year by Hechinger's. The chain's newest store is opening opposite Montgomery Village in Gaithersburg, and further expansion is expected in the Philadelphia area, which Hechinger invaded last year.
Because new-home construction is off, the home improvement business is booming and Hechinger's will probably post the best 1980 -- and the best 1981 -- performance of any Washington retailer.
Profits are expected to be harder to come by in the highly competitive supermarket and drug store businesses.
Giant Food has increased its share of the local food market for the past couple of years, but now faces new competition from discount food warehouses and other retail innovations.
The most successful of the alternative markets has been Basics, an offspring of Grand Union. Though Grand Union has never been a major factor in the Washington market, its Basics stores have quickly become the most productive supermarkets in the region. Basics' first store is doing more business than Giant's best, even more than the legendary Georgetown Safeway, one of the highest-volume supermarkets in the nation.
The Washington-based drug chains -- Dart Drug, Drug Fair and People's Drug Stores -- also face stiff competition, mostly from each other. Dart recently pulled out of the Richmond market, where it had experimented with warehouse stores of its own.
While Drug Fair abandoned diversification into clothing, ice cream and fast food last year, Dart is expanding its subsidiaries, Trac Auto and Crown Books, which recently opened its first stores in California.
Suburban shopping center development has been slowed by the double whammy of soft retail sales and high interest rates. The biggest retail complex now under construction is the Georgetown Park project at Wisconsin Avenue and M Street NW, which will open later this year.