Local developers could cause a problem in the retail sector eventually by relying too heavily on bullish market studies that tend to suggest there is unlimited disposable income among area consumers.
Despite warnings that metropolitan Washington is "overstored" and that this condition may have as much to do with sluggish sales in recent years as has the economy, developers are adding millions of square feet to the inventory of retail space.
Meanwhile, some very painful lessons of the recent past seemingly are being ignored in favor of glowing market studies, which all but cast Washington as a mecca for retailers.
One study prepared recently for developers of a major, mixed-use project notes, for example, that area residents represent nearly $30 billion in disposable income--more than $5 billion for potential retail expenditures.
But market surveys can sometimes be misleading, as several recent failures have shown.
Ironically, many of those failures have involved retail outlets in areas of downtown Washington where a sizable amount of new retail space sits empty.
If there is a lesson to be learned from what is being viewed as a trend in some quarters, it may be that the massive build-up of retail space in downtown could result in an oversupply similar to that which exists in the office rental market.
Indeed, developers of office space may be contributing to what could become another glut--in retail space.
More than 10 million square feet of commercial development projects were in various stages of construction late last year between the White House and the Capitol. Developers and leasing experts agree that, as a result, there is an oversupply of office space.
Overlooked in the massive build-up of office space, however, is that most of the buildings involved have been planned to accommodate various types of retail establishments. In fact, nearly 400,000 square feet of retail space has been planned in 22 of the office buildings that will be completed during the next two years.
A Downtown Revitalization Plan, which city officials unveiled last year, envisions a more spectacular growth in retail space over the next decade. According to the recommendations in that plan, nearly 3.6 million square feet of retail space will be added to the 2.3 million square feet that are expected to remain after redevelopment in the core between 9th and 15th streets NW.
That is roughly the equivalent of six major regional shopping malls. Actually, some of the 5 to 6 million square feet of new retail space being built downtown will include two urban malls containing mostly boutiques and specialty shops.
It is questionable whether that much space should be built so quickly in a single sector of a region that has already been described as "overstored" by some in the retail industry.
Generally developers include a certain amount of retail space for branches of financial institutions or businesses that provide commercial services to office tenants. Increasingly, however, developers of some of the newer massive, mixed-use projects are designing them with an eye toward attracting more fashion-oriented and high-end specialty stores.
Indeed, some developers seem to think they are obliged to include retail space in new projects. But as one local leasing expert noted, "You've got to have high-volume business to pay the rent in those buildings."
"When you look at retail usage, the real demand is for restaurants," observed John P. O'Neill, former executive vice president of the Apartment and Office Building Association of Metropolitan Washington. "In the last few years, you walk up and down K Street and you find prime restaurants and not prime retailers.
"You can only have so many business outlets for business clients in a building," O'Neill continued. "You just can't have endless amounts of retail space in an area. How many airline offices can there be? How many drug stores? How many record stores?"
Despite a recent Council of Governments study that concluded that downtown department store sales have stabilized in recent years after a 10-year decline, sales in general have been sluggish in the District.
And given the rapid development of more retail space over the next couple of years, O'Neill said, "I'm not so sure it's the office business only that's going to go begging."