Friendship Heights has been a longtime center of luxury shopping in the Washington area, one of the few places where the well-to-do could shop for the most exclusive international and designer fashion lines without slogging to Tysons Corner or even Manhattan.
But the neighborhood’s status is starting to show signs of stress.
A year after CityCenter DC brought a slate of high-end shops downtown, and months ahead of when Ivanka Trump is expected to open luxury shops as part of a downtown hotel, the owners of the Collection at Chevy Chase — home to brands including Bulgari, Cartier, Gucci and Tiffany in Friendship Heights — recently advised that the center is in danger of losing some of the stores in the next couple of years when their leases expire.
The potential closures prompt questions about about how many Washingtonians or visitors here are willing to drop $800 on a pair of slingback pumps, as one can do at Jimmy Choo in Friendship Heights, or $9,000 on a Hermès handbag, as one can do at CityCenter.
“It’s kind of like squeezing a balloon,” said Greg Ferrante, a retail specialist at the services firm JLL. “There isn’t unlimited appetite for luxury space and the center of retail gravity now kind of sits on CityCenter.”
Historically luxury brands have co-located in Tysons Corner and Friendship Heights almost exclusively. Since downtown became an option, it’s unclear if any of the retailers will try operating shops both there and seven miles away in Friendship Heights.
Two big names currently in Friendship Heights, Dior and Louis Vuitton, have announced they will open locations in CityCenter. Magnate Donald Trump, who is turning the Old Post Office Pavilion into a luxury hotel with his daughter Ivanka, has said he will consider trying to attract Tiffany and Co. there, which has been considering a downtown location. The closest Tiffany currently is in Friendship Heights.
Despite all the wealth and critically acclaimed restaurants D.C. and its suburbs now enjoy, the pie of luxury shoppers in Washington — where Brooks Brothers and Ann Taylor are stalwarts — is being stretched, said Henry Fonvielle, president of McLean-based retail firm Rappaport Cos.
“D.C. is not a very fashion-forward town,” Fonvielle said. “Most people wear their jeans or their khakis. They might have a Louis Vuitton purse but they’re not going nuts with their fashion diet.”
Like CityCenter, which opened last year, Chevy Chase Center on Wisconsin Avenue offers a mix of office space and shops aimed at attracting top spenders from around the region. The property includes the shops at the Collection at Chevy Chase and a new office building, both of which opened in 2006.
The property’s owner, the Chevy Chase Land Co., took out a $116.6 million loan on the property in 2006 and is looking to re-work the terms of the financing. An analysis of the loan by the ratings agency Trepp mentioned that the company anticipated some retail closures.
Thomas L. Regnell, president and chief executive of Chevy Chase Land, acknowledged that some shops would be leaving Friendship Heights but attributed part of that to the company’s plans to intentionally let some stores go as it considers how to re-position the property.
“Retail landlords have tenants that leave on their own and then they have tenants that they want to get out because they can get another to replace them,” he said.
Regnell disputed the idea that new downtown shopping had cut into business in Friendship Heights.
“It’s been an extremely well-performing retail location for 60 years and it will be for the next 60 years. It has extremely enviable demographics. Other landlords would kill to have that kind of demographics,” he said.
At Chevy Chase Center, there are other concerns. Ninety percent of the property’s office space is leased to the Mills Corp., a developer that was acquired by Simon Property Group, of Indianapolis, in 2007. Mills has since vacated all but 15 percent of its space; another 58 percent has been sublet and 27 percent is vacant, according to the report.
“The amount of square footage that is expected to vacate will create significant cash flow problems in the near future,” the report said.
Regnell, who took the helm of Chevy Chase Land last year after its previous executive left suddenly, pointed out that the property is still nearly fully leased.
As Regnell determines the company’s next move in Friendship Heights, the developers of CityCenter are planning to begin construction on a Conrad hotel and 110,000 square feet of additional retail.
Follow Jonathan O’Connell on Twitter: @oconnellpostbiz