Mid-Atlantic Generates Success
Washington, D.C., leads the region in generating new retail activity, but other areas follow closely.
Nick Margiasso

Hines | Archstone-Smith is developing the $850 million mixed-use project at the former Washington, D.C., Convention Center site.

As the economy goes, so goes the nation’s retail market. That is, unless you’re in the nation’s capital, of course. The rules don’t always apply to the District that makes them. That also goes for the area surrounding Washington, D.C., in a Mid-Atlantic market that plays to a different drummer — one that plays the song of success regularly.

“Washington, D.C., is the economic engine for the area, creating jobs in the region,” says Tom Maddux, president of Baltimore-based KLNB Retail. “And since D.C. is the generator of all activity in the region, it is legitimate for people to be living in all the surrounding markets. And with jobs comes the need for housing, and with housing comes retail. With the elections coming it will almost start all over with new people moving in with the same needs. We’re a little more immune to economic conditions here.”

“As the nation goes, the Mid-Atlantic region goes better and close to best,” says Howard Biel, senior managing director for Faison, a Charlotte, North Carolina-based company with strong ties in the region. “I think that we are certainly near the top of the best performing regional economies in this country. Having said that, to say that we will be completely immune or unaffected by economic factors facing the nation would be inaccurate. The question for us is how do you best measure the response to that effect.”

The answer seems to be by doing what commercial real estate interests do best in the Mid-Atlantic — lead the way in growth and development.

Washington, D.C.

In looking for a leader in almost any area, there is no better place to start than the nation’s capital, Washington, D.C. The city is booming like few others, and continuing to create an economic force that surrounding geographies can feed off of in any and all economic landscapes.

“The D.C. area is blessed by a diversified and strong economy,” says Howard Riker, vice president of Hines, co-developer of an $850 million mixed-use project on the site of the city’s former convention center. “The downtown area, for the last 15 years, has really undergone a renaissance. Now there’s a growing retail and entertainment district where the strong residential and office areas have been established.”

The constant establishment of new jobs and residential buildup in and around the Capitol drives the retail faction at a seemingly perpetual growth rate over the course of recent history — and, most likely, for the foreseeable future.

“New job creation in 2008 is expected to be around 50,000, which is tremendous growth — and that’s down from recent years,” says Mike Reilly, senior vice president of Olney, Maryland-based Carl M. Freeman Cos. “Retailers see tremendous opportunity in the Washington, D.C., marketplace. There’s still a gap in terms of supply and demand in the surrounding sub markets, too. We continue to do deals and we’re fortunate to be in this regional market. Being close to the government and all of the professional consultants that feed off of that is a good thing.”

With well-publicized economic shifts, the trend to warm by the Washington, D.C., fire has become even more urgent for many. Experts and industry execs have seen this already in the residential market, which means the retailers will follow. It all adds up to an ever-increasing economic shift in the region due to a shift in lifestyle for the folks that drive it.

“Tenants are coming closer in to the D.C. area,” says Geoffrey Mackler, principal of Timonium, Maryland-based H&R Retail. “A lot of the outer-lying areas have been hurt with the sub prime situation and retailers really want stores in densely populated markets. It will be interesting to see what happens with the economy really slowing down. In our area, things are very different because of the closeness to the federal government in D.C. Unless the federal government relocates, in some capacity there will always be jobs created here both in the public and private sector that come with a high education level and a decent paycheck.”

And, as the nation’s capital, D.C. is already endowed with a massive landscape and an established expanse in place. That means, in the case of new development, the path is averse to the new ground-up projects in suburban areas. Instead, redevelopments and refurbishments are the inroads to increased development in Washington, D.C.

“In the main areas there continues to be redevelopment of old properties,” Maddux says. “That will continue as real estate becomes obsolete and market demands allow for its redevelopment. And the trend is to put strong retail deliverers into those urban and high growth markets. In downtown, there are a lot of things going on and they’re all mixed-use.”

One of the major projects was announced by Mayor Adrian M. Fenty when Hines | Archstone-Smith was granted the rights to develop an $850 million mixed-use center at the much talked about former Washington Convention Center site. A combination of London-based Foster + Partners, D.C.-based Shalom Baranes Associates and Lee + Papa and Associates and Seattle-based Gustafson Guthrie Nichol will be designing the project. The 10-acre site will include 250,000 square feet of retail, more than 670 residential units, 465,000 square feet of office space and other miscellaneous entertainment areas. The unnamed project is scheduled to break ground in January 2009 and looks toward a completion date of July 2011.

“Our site really represents a chance to fill out that growing retail trend,” says Riker, the company’s vice president. “We have a great opportunity to provide a critical mass of retail, and that’s what we’re trying to do. Hines | Archstone-Smith will be co-master developing the project and we’ve been committed to the D.C. area for a long time. We see this development as a core investment opportunity, and hope to create a landmark project that will represent the best that the city can provide on numerous fronts. From the beginning, we made a decision to make the project focus tailored to downtown and its diverse customer base from residents, office population and even tourists.”

The Rappaport Companies will also be adding to the retail roar in downtown with its redevelopment of Skyland Town Center, which will be improved into a mixed-use location. The center, which will feature more than 400 residential units and approximately 300,000 square feet of retail space, is scheduled for completion in early 2009. Forest City Enterprises’ Waterfront project, which will include 2.5 million square feet of residential, office and retail space on the Anacostia River, is scheduled for completion in late 2009.

All signs certainly point to a continued and increasingly feverish development situation for the already booming Washington, D.C., market.

“In the D.C. market, we feel really good,” Reilly reiterates. “Occupancy rates and rents are still high as well as accounts receivable. If a lease is expiring, 95 percent of the time the retailer is renewing that lease. If not, we have a waiting list at many shopping centers for new merchants.”

Even though the trend is to come in closer to the economic nucleus that is Washington, D.C., the market boom of the past few years still means there are projects coming on line that have been in the pipeline before this most recent trend toward the capital. Those projects will help sustain a relatively unaffected overall growth pattern of retail in markets just outside D.C.

“There are two types of development going on in the region,” Reilly says. “There are infill redevelopments all going on closer to the core of D.C. getting a mixed-use facelift. We just rezoned a 98,000-square-foot center in Montgomery County, Maryland, and are tearing it down to rebuild 250,000 square feet of commercial and multifamily at Olney Town Center. That’s typical of development occurring closer to the core of D.C. But on the outskirts, there are still large and more traditional big box-anchored projects going on.”

KLNB Retail’s Maddux also sees the growth sustaining.

“There are jobs and retail all the way out from the center of D.C.,” Maddux says.

Most of the top area developers have reason to be relatively optimistic about the projects they will be opening in the appealing areas outside of the city.

“We have a pipeline with a dozen projects underway or ready to go,” says Faison’s Biel. “The pipeline that we have is robust by being geographically concentrated. We are making our mark stronger in Southern Maryland in the counties southeast of D.C.”

Maryland

Maryland has been a prime place for relocation, residential and retail development for an exceedingly long period. It relies on the growth of Washington, D.C., to bring high-income families and the markets that follow them further out into areas somehow related to the nation’s hub.

“We focus our efforts in primary locations within primary markets,” says Michael Dietrich, senior vice president of acquisitions and finance for Owings Mills, Maryland-based Greenberg Gibbons Commercial. “The Maryland market gives us the best opportunities to work with the high end retailers that we work with day in and day out.”

Dietrich also agrees with the positive assessment of the still-flowing regional economy that keeps much of Maryland progressing forward on the retail development landscape.

“The corridors around Washington, D.C., in Maryland and Virginia are not recession proof, but I think we’ve got such an influx of government defense and spending dollars, that we will always have stability in our regional economy.”

Prince George’s County and Montgomery County

When you talk about financial and economic stability, you talk about Prince George’s County, Maryland. With an average household income in the $70,000 range, the suburban Washington, D.C. area is no longer the under-retailed location it was only a few years ago. All of the state’s top developmental players have projects finishing or starting up in the near future. And there are some big hits in the pipeline.

“There’s a lot of opportunity in Prince George’s County, which has been underserved for a while but is now getting a lot of retail movement,” says Tom Maskey, senior vice president of retail for The Peterson Companies. “There will be development going on there for the foreseeable future.”

National Harbor, a $2 billion mixed-use development by The Peterson Companies, will introduce 300,000 square feet of retail this summer.

The Peterson Companies has trumped nearly everyone by taking on a project called National Harbor in the Maryland city of the same name. It will not only be one of the most ambitious projects in the Mid-Atlantic region, but also one of the most impressive projects in the nation with over 7 million square feet of total space upon completion. The mixed-use development’s first phase opens in April, and 300,000 square feet of retail will be completed by summer of this year. The project is estimated to cost $2 billion.

“National Harbor is one of those amazing projects,” Maskey says. “It’s a really large mixed-use project on a waterfront development on the Potomac River with about 4.5 million under construction right now, and the bulk of the retail will open this summer.”

Konterra Realty rivals that project with a $3 billion joint venture development with Cleveland-based Forest City Enterprises called Konterra, a community to be built on more than 1,400 acres in the Baltimore-Washington, D.C., corridor in an area that will straddle both Prince George’s and Montgomery Counties. The Konterra Town Center will be the mixed-use key to the overall development, and will include 5.3 million square feet of retail and office space, 4,500 residential units and a 600-room hotel. The project is still waiting for some approvals from the state and county, but it is scheduled to break ground late this year or early 2009.

Brandywine Crossing is a Faison project with 720,000 square feet of mixed-use offerings to be built at U.S. Route 301 in Brandywine, Maryland. The project still might be expanded in the future.

“Brandywine Crossing will be built in two phases and will feature Target, Costco and Safeway,” says Howard Biel of Faison. “The second phase has just been rezoned as well, and that will be a major cinema and other big box stores.”

Greenberg Gibbons Commercial and Petrie Ross Ventures have a comparable joint venture project called Woodmore Towne Center coming online in fall of this year. The 700,000-square-foot retail development breaks ground this spring.

Federal Realty’s addition to Bethesda Row will be complete this spring.

“From our perspective, we’re focusing on mixed-use lifestyle projects like Woodmore because we think the entire industry is heading there,” Dietrich says.

In Montgomery County, they’re heading down the mixed-use, lifestyle route as well. Westfield has recently begun a redevelopment and expansion of Westfield Montgomery in Bethesda, adding 334,000 square feet to the already 1.2 million-square-foot retail center.

Rockville Towne Center gets a new addition, including a Super Fresh Grocery store, this summer.

And close by, Federal Realty’s Bethesda Row property is getting a Spring 2008 addition of 43,000 square feet of new retail and 180 luxury residential units to its approximately 500,000 square feet of overall mixed-use property. The company also added retail and restaurants to its 180,000-square-foot Rockville Towne Center in Rockville, which will get a Super Fresh grocery store this summer.

“The Washington, D.C., metro market will continue to be a top priority market for retailers across the country due to its strong demographics and density within the region,” says Wendy Seher, vice president of leasing for Federal Realty. “These area characteristics, combined with superior location, will continue to maintain demand for retail space which produces strong sales volumes throughout the market.”

Baltimore

The second biggest city in the Mid-Atlantic region also has some first-rate projects underway. In the suburbs of the city a developmental partnership between the Maryland Transit Administration, Baltimore County and Owings Mills Transit LLC (a partnership between David S. Brown Enterprises and Willard Hackerman) will bring Metro Centre at Owings Mills to the area, a 46.8-acre mixed-use project located on Painters Mill Road in Owings Mills, Maryland. KLNB Retail is handling leasing for the property. The project will be centered on the existing Owings Mills metro station, which transports commuters from the suburbs into downtown Baltimore. The project, which is scheduled for completion in 2012, will be comprised of 1.5 million square feet of office and retail space office, 495 Class A residential units, a 40,000-square-foot public library, a 60,000-square-foot community college and a 250-room hotel. The initial phase is scheduled for completion in the fall of 2009.

Forest City Enterprises is also making a big splash in Baltimore with a progressive project called The New East Baltimore Community. The development, a key part of the revitalization of the city’s eastern area, is an 80-acre mixed-use community that will be located adjacent to Johns Hopkins University medical complex. The initial building in the project’s first phase, The Science + Technology Park, will open this April, while the rest of the project will come online over the course of a 10-year period. Upon completion, the first phase will include 1.1 million of office and research space, 850 residential units, 50,000 square feet of retail and a park area on 3 acres.

Anne Arundel County

Two projects highlight the retail goings on in the nation’s naval capital in the county’s famed city of Annapolis, while another duo of development marks anticipated expansion elsewhere in Anne Arundel County.

Greenberg Gibbons Commercial is on track to open its Annapolis Towne Center project this October. The 2.2 million-square-foot mixed-use development will have 675,000 square feet of retail anchored by Wegman’s and Target, 900 residential units and office and hotel space. Petrie Ross Ventures is handling leasing for the development.

“Annapolis Towne Center is the kind of upscale mixed-use project that has a sense of place in the region where there is a lifestyle element being incorporated that includes office retail and is strongly anchored,” Dietrich, senior vice president of acquisitions and finance for the company, says.

The company also has a project underway in Fort Meade.

“We have a Fort Meade project that is going to be mixed-use with residential, retail and hotels,” Dietrich says. “It will have 200,000 square feet of retail, 2,000 residential units and a hotel or two.”

Westfield opened a 240,000-square-foot addition to Westfield Annapolis in November 2007.

In November 2007, Westfield completed the $150 million redevelopment of its Westfield Annapolis project, adding 240,000 square feet of retail to bring the center to 1.5 million square feet overall. Tenant additions include Pottery Barn, H&M, Martin + Osa, Under Armour, Metropark, Ann Taylor Loft and McCormick & Schmick’s Seafood.

Petrie Ross Ventures is developing Savage Towne Centre, a $175 million project that recently broke ground. The site plan calls for approximately 200,000 square feet of office and retail space, 260 residential units and 200 hotel rooms. The property is located at the MRAC train station, 3 miles east of Fort Meade.

Virginia

South of Washington, D.C., the retail development market is still running strong for the same reasons. Area developers have projects underway or recently coming online that fill the retail needs of a vibrant community and economy still very near to the economic and national hub that is Washington, D.C.

Northern Virginia

With a border leaning on the backs of Maryland’s Montgomery and Prince George’s Counties, the northernmost reaches of Virginia see a lot of the same successes that those affluent areas champion in the retail landscape.

“We’ve been on a run of town centers and mixed use projects over the last few years in this region,” says Tom Maskey, senior vice president of retail for The Peterson Companies. “Our biggest project in Virginia is the Virginia Gateway in Gainesville. We’ve opened over 800,000 square feet of space there already with a Target and a Best Buy. We’re under construction on the next phase that will add another 180,000 square feet to the project that will be open late this year. We’re also planning another 500,000 square feet to be built in late 2008 or early 2009 that should bring the entire project to about 1.56 million square feet.”

The Virginia Gateway project is split into two parts: the 480,000-square-foot Gateway Commons and the 750,000-square-foot Market Square. Maskey’s company is also involved in another pair of Northern Virginia projects. Both in Loudoun County, Crosstrail is a 870,000-square-foot retail location which also includes 1.8 million square feet of office space and 1,380 residential units, while Moorefield Station is a similar development not too far from that site. The first phase opened in late 2007 and, upon completion, the entire site will have 750,000 square feet of retail, 150,000 square feet of office space and 1,500 residential units.

The total redevelopment of Spotsylvania Mall into Spotsylvania Towne Centre by Cafaro Co. will be completed this fall in Fredericksburg. The $100 million overhaul will add a 280,000-square-foot outdoor lifestyle facet to the center that already includes anchors such as JC Penney, Costco, Macy’s, Belk, Dick’s and Sears.

Virginia Beach-based Divaris Real Estate is well invested in this particular region as well. The company is handling leasing at Waynesboro Town Center, which is a redevelopment of what used to be the Waynesboro Outlet Village. The Collett & Associates project, which opened partially in October 2007 and will be complete in the spring, will house approximately 400,000 square feet of retail space in Waynesboro. Target, PetSmart and Michael’s will anchor the center.  And Cedarville Center, a 770,000-square-foot mixed-use project built on 90 acres in Front Royal, will get underway in 2009. The project is being developed by The Rappaport Companies.

Southern Virginia

Divaris Real Estate continues to get involved with the state’s major projects from top to bottom, and this region of the Mid-Atlantic is no different. Arguably Divaris’ biggest leasing and ownership role will come courtesy of The Town Center of Virginia Beach, an Armada Hoffler development. The 17-city block, $500 million mixed-use project includes 4.3 million square feet housing retail, three residential properties and two hotels. The development is scheduled for completion this fall.

And Florida-based The Goodman Company is adding a pair of properties that will get its hat in the ring within the region, too. The Shoppes at Murphy’s Mill is the company’s largest project, coming online in Spring 2009 with a shopping center that will total more than 700,000 square feet in Suffolk. The company will also hit Virginia Beach, bathing the area in retail thanks to the 500,000-square-foot Landstown Commons retail property that will be finished this spring.

Divaris will handle leasing for Premiere Properties’ The Marquis mixed-use center. The center will be 1 million total square feet upon completion, and The Marquis’ 500,000-square-foot first phase opens this spring in Williamsburg. They will also play the same role for Towne Center West, a mixed-use project on 40 acres in the Short Pump area of Richmond. The center is expected to be completed this fall, and will offer 150,000 square feet of shops, office and residential space and a 250-room Hilton Hotel.

This fall, Forest City Enterprises will complete work on the 900,000-square-foot White Oak Village project.

Another leasing project for the company is Chippenham Place, which is being developed by Crosland on the site of Cloverleaf Mall. The Kroger-anchored mixed-use project will be comprised of approximately 200,000 square feet of retail space and over 500 residences. Construction begins this year.

Also in the Richmond area, Forest City Enterprises has big plans for The Shops at White Oak Village, a 900,000-square-foot retail center scheduled to open in the fall. The $161 million development will include Circuit City, Lowe’s, JC Penney, PetSmart, Sam’s Club, Target and Ukrop’s among its retail tenant list, and a Hyatt Place hotel. The property will be located at the intersection of Interstate 64 and Laburnum Avenue in Henrico County.