Neighborhood Revival In The Mid-Atlantic
Economic development programs are helping developers turn to smaller, local markets in the Mid-Atlantic.
Catherine Timko

Washington Gateway Retail Center along the New York Avenue corridor in northeast Washington, D.C.

Neighborhoods across the country are enjoying a retail renaissance. In the Mid-Altantic region, communities from Philadelphia to Front Royal, Virginia, are attracting retail investment along commercial corridors once over looked and in older obsolete downtowns. Retail is a vital component for economically and socially healthy neighborhoods, and innovative methods of research that uncover the ground truth of cash economies have helped to augment intelligence on local markets. As a result, considerable investment has occurred in neighborhoods of all size and demographics as retailers and investors have become comfortable that these often underserved markets yield tremendous buying power.

Changing demographics, a return to urban living and a preference of the market for mixed-use projects, have influenced product type. An increase in incentives, public private ventures, and government willingness and support has helped direct investment to neighborhoods.

Arbor Place, a 16-acre mixed use development by Abdo Development and Broadway Management.

The District of Columbia remains one of the strongest retail investment markets in the country, and many of its neighborhoods have blossomed with investment. There are over $9 billion of projects under construction throughout the city, according to the Washington, D.C. Economic Partnership. Approximately 1.3 million square feet of this is retail, and another 3.1 million square feet of retail space is proposed in various stages of planning and development.

A substantial portion of the new development in D.C. is happening along corridors and major gateways into the city and within older neighborhoods. As the product focus has changed so has the direction of development.

“In the past the majority of retail investment occurred in downtown and relatively affluent neighborhoods in Northwest [Washington],” says Keith Sellars, senior vice president, Real Estate Development and Retail for the Washington, D.C. Economic Partnership. “Now we are seeing clusters of retail at the outer edges moving inward, toward the city’s core.”

The New Town at Capital City Market  project is part of $3 billion in new development underway in Washington, D.C.

Almost $3 billion of new investment is proposed along a 3-mile stretch of the New York Avenue corridor in northeast D.C., a prominent entryway into the city. Notable projects such as Washington Gateway Retail Center (Ft. Lincoln New Town/Concordia Group), Arbor Place, a 16-acre mixed use development (Abdo Development and Broadway Management), and the New Town at Capital City Market (FLGA Real Estate, Sang Oh & Company and Apollo Real Estate), a 489,000-square-foot retail center at a key intersection, will add 1 million square feet of new retail space over the next 2 to 5 years. This investment will dramatically change the shopping patterns of area residents but also enhance the image of this corridor, now home to vacant lots, dilapidated buildings, and fast food.

An even greater concentration of investment is underway at the Capitol Riverfront area, home of a major government site formerly known as the Southeast Federal Center and the Washington Navy Yard. This area has a unique opportunity to position itself as a completely new neighborhood with over 12 million square feet of new development. Key anchors include the new Nationals baseball stadium, and The Yards a 42-acre mixed-use project by Forest City Washington/MacFarlane Partners.

Investor interest extends into many of the city’s older more established residential neighborhoods where unmet demand is at its highest. The city’s first Target store is opening this month at DC USA, a 500,000-square-foot project by Grid Properties LLC, in Columbia Heights, an ethnically diverse neighborhood. After years of planning, restaurants and entertainment venues have once again finding locations on H Street NE, a commercial street devastated by the riots in 1968, budding as a hip and urban location.

East of the River, projects such as the Anacostia Gateway are intended to spur economic growth and retail services back to the neighborhood. Giant Food opened a 63,000-square-foot super store in December 2007 in the Shops at Park Village, a mixed-use development on the site of the former Camp Simms National Guard facility.

The Anacostia area has more available tracts of land than other areas in the Washington, D.C., and has evolved as a prime development target. A variety of projects are planned for neighborhoods East of the Anacostia River including Skyland Town Center, a 340,000-square-foot center by The Rappaport Companies, Marshall Heights Community Development Organization, and the William C. Smith Companies. Poplar Point, a 110-acre strip of federal parkland directly across the river from the Navy Yard is one of the last largest parcels of undeveloped waterfront in the District. This project is expected to contribute substantial new retail, services, and jobs to this predominantly African-American community that just celebrated the opening of its first new grocery store in years. The city is in the final stages of a competition for this 5 million-square-foot mixed-use project.

Reinvestment in existing properties is increasing. Firms such as Douglas Development, PREIT, and Combined Properties are investing millions of dollars to renovate existing properties throughout the region.

“We have over $30 million designated for renovation and improvement projects within our portfolio over the next 24 months,” says Peter Mathieson, director, east coast acquisitions, for Washington, D.C.-based Combined Properties. “Ultimately, this investment strategy will improve the appeal of our shopping centers within their respective primary markets.”

As developers press the limits into outer suburbs, many smaller communities are benefiting. Front Royal, in Warren County, Virginia, located approximately 70 minutes from the heart of D.C., is experiencing a renewed interesting in its charming downtown district. Several new retailers including a local craft and pottery store, a chocolate store and a new restaurant have opened, building on the success of The Daily Grind, a regional coffee house that opened in 2006. All of these businesses are establishing the downtown as a comfortable place to spend a leisurely afternoon. The town’s proximity to the Blue Ridge Mountains and Dulles International Airport make it an attractive residential or corporate location (just outside the fly zone), and even a destination for tourists. Rents are comparatively low, enabling an appealing alternative for budding entrepreneurs and regional retailers seeking to expand.

Private investment in Wilmington, Delaware, also continues at a steady pace where new retail and residential development is helping to redefine neighborhoods in the Downtown District, and along the Christina River. The Ships Tavern District — a six-block historic area where downtown intersects with the riverfront — is focused on ground floor retail with residential above. Revitalization resulted after the city and consultants began working with key property owners and potential investors. A project developed by Struever Brothers Eccles, & Rouse, the 200 block of Market Street features 86 residential units with an eclectic mix of local and regional restaurants and retail tenants on the ground floors. This development helped to reactivate this area with pedestrians and has been a stimulus for other development along this key corridor in downtown.

A rendering of the riverfront in Wilmington, Delaware. Photo credit: Carlos Alejandro (designed by Hank Alinger, LDR International)

Residential and retail development are bringing new energy to the riverfront area as well. The Buccini/Pollin Group is developing Justison Landing, a $500 million, 11-acre mixed-use project that includes for-sale and rental housing, 98,000 square feet of retail space and 300,000 square feet of commercial space. The company’s Christina Crossing retail center is situated on 10 acres just south of the Christina River on the site of a former salvage yard. A 70,000-square-foot ShopRite supermarket is scheduled to open this fall, and another 50,000 square feet of retail space will be available when the project is completed.

Just north of Wilmington, the neighborhoods of the City of Brotherly Love are piquing the interest of retailers. New multifamily housing development and the efforts by organizations such as the Philadelphia Center City District in the downtown area, have helped strengthen retail in the downtown core and adjacent blocks. City initiatives such as the Neighborhood Transformation Initiative have helped spur development in neighborhoods west and north of Center City.

Attraction of convenience retail and grocers is a top priority for the city and several organizations have been collaborating on an aggressive recruitment strategy to bring grocers into the inner city.

Park West Town Center recently opened in West Philadelphia.

Park West Town Center, a 340,000-square-foot project anchored by a ShopRite and Lowe’s Home Improvement recently opened in the Parkside section of West Philadelphia. This project provides promise that retail is viable in neighborhoods that are vastly underserved throughout the city. According to James Johnson Piett, project manager, Food Trust Organization, projects such as Parkside provide a model that can be replicated throughout the city. Parkside, which took almost 10 years to complete, was assisted by the Pennsylvania Fresh Food Financing Initiative, a public/private venture between the state and three non-profit partners in Philadelphia, to attract food retailers to underserved communities. “Clearly the public and community commitment is there, resources are available to incentivize development, and land is still relatively affordable,” says Piett.

Philadelphia has frequently been touted by market experts as one of the top cities in the country with real potential for investment. Many have begun to speculate that the new administration of Mayor Michael A. Nutter will further focus on neighborhood reinvestment with his recent appointment of Andrew Altman as director of commerce and economic development. Altman, a nationally acclaimed planner, has a reputation for reinvigorating neighborhoods from Oakland, California, to Washington, D.C., where his neighborhood planning efforts helped to galvanize much of the reinvestment now underway.

Catherine Timko is principal of The Riddle Company, an economic development consultancy based in Washington, D.C.