The Washington Post

New apartment developments are drawing grocery stores, restaurants and gyms

Call it the “construction effect.”

With the Washington region awash in a wave of new apartment construction (and, to a lesser extent, new office development), retailers are seeking out the new locations and targeting the ground-floor storefront space included in many of them.

These retailers are hoping to make inroads into desirable, fast-growing neighborhoods, and the like, as well as tap into the natural customer base that has grown out of “live-work-play” lifestyles.

Since 2013, retailers have leased around 800,000 square feet of new space in multifamily and office developments around the region, a sum comparable to the size of Ballston Commons or White Flint Mall. To date, that leasing activity has been concentrated around the Navy Yard/Ballpark area and the U Street corridor, although numerous other neighborhoods around the Capital Beltway are seeing activity.

Grocery stores are making the biggest splash, opening locations in recently built or underway projects. Since 2013, grocers have signed for nine spaces totaling over 460,000 square feet in apartment and office buildings either recently completed or currently under construction.

Before the current wave of construction, big-block space may have been hard to come by in many urban neighborhoods, because of the size or type of the buildings. The new buildings taking their place, however, are specifically designed to offer the necessary square footage for such tenants.

Giant Food, for instance, will be opening at the Exchange at Potomac Yard in Alexandria, and at Cathedral Commons in Cathedral Heights. Safeway, Harris Teeter, Trader Joe’s and Wal-Mart have all expanded as well. In this way, areas previously underserved by supermarkets will be able to support population and migration trends well into the future.

Fitness stores are also rushing in to new construction projects in hopes of catering to a demographic that is younger and maintains an active lifestyle. Vida Fitness has a location in Navy Yard at the new Twelve12 rental complex, while Rockville’s PerSei Apartments will have a City Sports. Yoga studios and other alternative workout facilities have proliferated as well.

Many locally owned restaurants, such as Tico at Louis at 14th apartments in the U Street corridor, as well as national chains such as Jimmy John’s, which recently opened locations at 2001 Clarendon Apartments and the Beacon Clarendon Apartments in Arlington, are also part of the trend.

While leasing activity in these new retail spaces has been fairly robust, if this momentum should happen to slow, the greater retail market could feel a ripple of rising vacancy rates and slower rent growth because of increased competition among landlords to secure tenants. But the region’s demographic trends appear to be favorable for retailers, with rapid growth over the last decade supported by a largely well-educated and high-earning population.

Ethan Vaisman is a real estate economist with CoStar Group in Washington.



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