Reinventing, Rebranding, Recycling Washington, D.C.
In the nation’s capital, the retail environment has changed for the better over the last 10 years. But the recession is presenting the city with the odd predicament of being at the best of times during the worst of times.
Catherine Timko

As the uneven recovery from the recession continues to impact the nation and the nation’s capital, Dickens’ lines from A Tale of Two Cities certainly apply. That is especially true in the D.C. retail arena, where there are both winners and losers aplenty. Washington, D.C., has faced a tough road over the last 10 years. D.C. went from a market that had little retail to one that has made great strides.

In the “worst of times,” ongoing recession fears and the still unpredictable marketplace compel many stakeholders to rethink and redirect strategies and expectations, as projects are stalled or cancelled and retailers continue to shut their doors. That said, Washington, a city with a track record of reinventing itself, was recently ranked the Number 1 investment market in the country by the ULI/PriceWaterhouse 2010 Emerging Trends Report. One of then reasons for this can be found in Delta Associates’ Fourth Quarter Retail Report: D.C. is severely under-retailed with less than 9 square feet of retail per capita, compared to the national average of 23.4 square feet.

The Boilermaker Shops is part of the development plan in the Capitol Riverfront area.

Overall, the region still has remarkable appeal. It is on the short list for corporate relocations, D.C.’s residential base grew this past decade at the highest rate in over 30 years, and retailers — from boutiques to big boxes — are still seeking space. In fact, Costco just announced in December 2009 that its first D.C. store will be located in Fort Lincoln, a newly emerging northeast neighborhood. Other positive (and ironically recession-driven) marketplace factors include broader access to the finite inventory of premium retail space that was previously locked up, and more favorable rates and terms, as property owners are forced to be increasingly more flexible when negotiating lease rates and terms.  

“The best of times?” Those looking back to better economic conditions 10 years ago may also remember that was when the District’s residents and workers had significantly fewer options to shop downtown or in their own neighborhoods. In 1999, it was virtually impossible to buy a refrigerator, a good read from the New York Times Best Seller List, a computer or toys in D.C. The District’s offerings were limited to one department store, Hecht’s (now Macy’s), and the upscale retailers and boutique clusters in Georgetown, Friendship Heights and the rest scattered around town. Sometimes the effort to buy small necessities like a hammer or a set of sheets was barely worth the cost of the gas required for the hunt.

Rebranding

Rebranding Washington, D.C.’s retail market has not been easy. Considerable public and private resources were and are dedicated to supporting retail attraction and retention, ranging from legislative and zoning changes to a menu of financial and development incentives. These changes, along with considerable public will and the courage of several investors to take exceptional risks, have yielded enormous success.

The most transformative event for the downtown market was the decision by the late Abe Pollin to move the Washington Wizards downtown by building the Verizon Center (originally the MCI Center) in an area where the majority of buildings were vacant or in shambles.

“The Verizon Center sparked that area and helped to generate ‘demand’ and build the downtown brand,” notes Sean Cahill, senior vice president of Louis Dreyfus Property Group, which has several investments in the market.

The Verizon Center created a lively, compelling focal point for sports and entertainment and culture and ignited broader interest in the east end of downtown called Penn Quarter.  The traffic generated by the sports arena helped to attract a diverse mix of new restaurant and retailers and create a truly vibrant entertainment district. That said, downtown has still not realized its full potential and certain challenges still need to be overcome. Darrel Rippeteau, president of Rippeteau Architects and former chair of the D.C. Retail Committee, believes the D.C. height limit — which limits buildings from being taller than the Capitol building — is a restraint on the success of retailing in downtown.

“We simply don’t and can’t have the critical mass of people above the ground floor retailers to make the retailers successful,” says Rippeteau. Like others, he is not in favor of eliminating the D.C. height limit and believes it helps define the District, but it does require “real persons with visions of life in the center of things, in the center of the city and imagination.”

Recycling

It is just that vision and entrepreneurial spirit that has energized much of the reinvestment in downtown and rebuilding of the District’s neighborhoods, where recycling of space is fashionable and successful. Retail corridors as 14th and U Streets have re-emerged as vibrant enclaves with distinct and diverse retail and entertainment uses — testament to an organic and authentic approach. Busboys and Poets, a bookstore/restaurant that is a D.C. icon, has established a foothold by joining performance space with its concept. Furniture retailer Mitchell Gold & Bob Williams, with premier showroom space in a former auto dealership, along with Timothy Paul Bedding & Home, Cakelove and other pioneers like them, bring a new economic and social vitality to a once beat up urban landscape. 

DC USA brought a number of big box retailers into the district when it opened in the Columbia Heights neighborhood.

The drawing power of Target, Marshall’s and Best Buy at DC USA, a 500,000-square-foot retail and entertainment project in Columbia Heights, is compelling enough to attract other local and national retailers to that area. More importantly, it validates the retail potential beyond the downtown core and has created a model for other investors, proving that big box retail and vertical projects can indeed survive even thrive at “satellite” urban sites.

Across town, the Atlas Performing Art Center and the H Street Theater form the center of a hip and emerging art scene evolving along H Street Northeast. This historically commercial corridor, ravaged by the riots of 1968, is enjoying transformation as a regional entertainment destination. The arts, combined with new residential offerings, have helped attract a variety of new bars and cafes to the neighborhood. More than $65 million of new infrastructure investment is under way along H Street Northeast intended to support ongoing investment. 

The quest to bring more retail to southeast D.C. is one of the best things happening. Anchors like the Anacostia Gateway Office Project, the Honfleur Gallery and a planned trolley line, will provide permanent infrastructure that can be leveraged to attract new retail.  Redevelopment projects such as Skyland Town Center will introduce more than 325,000 square feet of retail to this shopping starved neighborhood.   

The Capitol Riverfront, D.C.’s newest neighborhood, is also well positioned to capitalize on the next major wave of investment, believed by many to be at least 18 months away. The Front, as this district-within-the-District is known, features 1.5 miles of riverfront and extends D.C.’s skyline to the water’s edge. The high-density neighborhood has much to celebrate — a growing daytime population, and more than 75 percent of the new residential units in the neighborhood are now sold and occupied. The Yards, a project by Forest City Washington, will bring much needed restaurant and entertainment venues to this evolving area.

“The new development that is under construction and planned along the riverfront provides a unique opportunity to create the right mix of retail and not be strictly rent- or market-driven, all of which is important, when trying to build a new sustainable community,” says Michael Stevens, executive director of the Capitaol Riverfront BID. More than 15 million square feet of new office space (6.5 million square feet of which are already in existence), 1 million square feet of new retail/restaurant/entertainment space (150,000 square feet existing) and approximately 9,000 new residential units (2,400 units existing with 2,500 residents in place) is programmed for this market. The area is anchored by the new, state-of-the-art Washington Nationals Stadium, the U.S. Department of Transportation, a 5.5-acre riverfront park and the historic Navy Yard campus.

The Yards is an ambitious mixed-use project by Forest City Washington in the Capitol Riverfront area.

These milestones have not come easy. Over 1 million man-hours have been dedicated to promoting and rebuilding the city, courting retailers and investors and creating the essential tools to nurture and support retail growth. Collaboration between public and private organizations, which began as a grassroots effort by a small group of stakeholders committed to rebuilding D.C.’s retail core, has yielded some extraordinary success stories. This approach is now a model for other cities.

There also have been considerable conflict, competition and some disappointments. Promises of big box and entertainment uses have fallen through at certain sites, and other, good sites were simply overlooked. Several pioneers of the first wave of new retail success along 7th Street Northwest and Georgetown have closed, driven out by rising rents.  Recycling of these spaces and others is creating opportunities for newer concepts and retailers previously unable to gain a foothold in the market, such as the new Apple store on M Street in Georgetown. 

Effectively positioning Washington, D.C., as a desirable and opportunistic retail environment also has had a dramatic impact on the overall quality of life. Additionally, aggressive, pro-active marketing outreach by the Washington, D.C., Economic Partnership and the city has been helpful in the equation.  

“It takes a strong commitment, comprehensive planning, funding and persistent, knowledgeable marketing program stewardship for any community to establish and promote a signature brand offering, remain competitive and create retail that compels and sustains consumer traffic,” says David Nellis, president of CRC. “‘Brand’ is the implied promise that the entity makes to all who encounter it, one that satisfies the expectation of quality, variety, value and more that, hopefully, is delivered every time the consumer interacts with the brand owner. To be successful, every brand has to satisfy that expectation, whether we’re talking widgets, neighborhoods or entire cities.”

Catherine Timko is principal of The Riddle Company, a Washington, D.C.-based communications firm, and partner in Community Retail Catalysts, an economic development marketing  firm that aids communities in attracting retail.

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