Mid-Atlantic Retail Market Remains Resilient Amid Economic Challenges

Retail in the Mid-Atlantic continues to showcase resilience, bolstered by a strong consumer base, even as economic uncertainties such as rising interest rates and work-from-home trends affect urban centers. According to industry experts, including Richard Lake of Roadside Development, the market remains vibrant, with tight vacancy rates signaling strength across various submarkets.

A key shift occurred earlier this year when JBG Smith canceled its Potomac Yards entertainment district project in Alexandria, Virginia. While this was a setback for some, others, like Global Fund Investments, saw an opportunity. Having recently acquired the Gallery Place retail complex adjacent to Capital One Arena, Global Fund’s Robert Hoffman shared that the property’s future looks promising, with tenants remaining committed even before a 25-year agreement secured the presence of the Washington Capitals and Wizards at the arena.

Despite Gallery Place’s distressed status due to expired leases and closures, including major retailers like Urban Outfitters and Bed Bath & Beyond, Hoffman remains optimistic, crediting the city’s $515 million investment into Capital One Arena as a key factor for future success.

Challenges related to office vacancies remain a concern for Washington, D.C.’s retail sector. As Bill Miller, principal at Miller Walker Real Estate, explains, the region is not immune to the impacts of work-from-home trends, which have reduced daytime retail traffic in urban areas. However, some developers are capitalizing on this shift by converting office spaces to residential use, fostering a more stable, mixed-use environment.

Suburban retail, on the other hand, is flourishing. Developers like Mike Howard of Rappaport and Gary Michael of NAI Michael Cos. report near-zero vacancy rates, with grocery-anchored centers driving demand. Howard notes that suburban shopping centers are experiencing unprecedented success, with high rents and strong interest from prospective tenants, particularly in the grocery and necessity retail categories.

This article is based on insights from the original publication in the August 2024 issue of Shopping Center Business magazine. You can read the full article here.