Although popular retailers such as Kate Spade and Trader Joe’s are largely focused on opening stores in the District, the D.C. suburbs continue to attract their share of merchants to the region’s expanding retail options.
Some of the top retail leases signed so far this year have been in the suburbs, where less expensive land allows the construction of bigger stores — and the parking space needed to support it. The top five retail leases include grocers, such as Whole Foods opening its first location in Prince George’s County, Todos Market leasing space in Woodbridge and Giant planning to open a store in Alexandria, all taking between 69,000 and 132,000 square feet of space.
There is more shopping outside of the city than just groceries, however. Two of Montgomery County’s largest retail leases in 2014 were signed by movie theater operators, which plan to open theaters catering to a more upscale crowd following the successful Angelika Film Center and Café in Fairfax County’s new Mosaic district.
Westfield Montgomery Mall is in the process of adding an entirely new retail section to accommodate a 66,000-square-foot cinema. Just down Rockville Pike, iPic Theaters will entertain Maryland residents in a slightly smaller 44,500-square-foot space planned for the Pike & Rose redevelopment.
As one would expect, given the difference in land size, there is much more retail space in the suburbs than in the District itself. The D.C. suburbs contain 268 million square feet of retail space, more than 12 times the 22 million square feet of shopping space in the District itself.
Construction activity is also higher in the suburbs. With approximately 1.44 million square feet of new retail space under construction, or nearly 2 percent of the total suburban retail market, just 372,680 square feet of new retail space is under construction in the District, less than 1 percent of the total.
Because of the high demand for large spaces and more new inventory, asking rents outside the city have been on the rise since 2013, while the District has seen rising rental rates for retail space since 2012.
Both Washington and its suburbs saw new tenants move into about 1 percent of their existing inventory. This positive absorption resulted in a decline in vacancy rates in the suburbs and inside city lines. The D.C. retail market as a whole boasts a healthy 4.6 percent retail vacancy rate; below the five-year average of 5.4 percent.
Kirstie Boatright is a research manager for CoStar in Washington.
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