D.C. Retail Gets a Boost
- Jun 02, 2015
According to Marcus & Millichap’s retail research report for the second quarter of 2015, employment is gaining momentum in the Washington, D.C., metropolitan area. Companies and government agencies have created more than 27,300 jobs in the region over the past six months, bringing the year-over-year total to 48,500 and boosting the retail sector.
As a result, retailers are more determined than ever to expand their presence in the area. Over the past year, developers have added 1.5 million square feet of retail space to the market, which accounts for a 0.7 percent increase in inventory. Marcus & Millichap data revealed that an additional 2 million square feet will come online this year, the highest amount since 2009. The majority of completions will be mixed-use projects, such as the $120 million Capitol Gateway Marketplace, developed by A&R Development and the D.C. Housing Authority.
Retail vacancies have declined by 0.2 percent over the past year, reaching 5 percent at the end of the second quarter. Net absorption will continue to outpace supply, and will reach more than 2.8 million square feet of space by the end of 2015. As a result, vacancies will drop another 0.3 percent, reaching 4.7 percent.
Although retail rents will continue to increase in 2015, the growth is projected to happen at a slower pace, because of the large supply increases. Rents will only advance 0.2 percent in the remainder of the year, reaching an average of $24.90 per square foot per month.
A stable employment sector, rising property values and and abundance of cheap credit have attracted numerous investors to the district this year. Over the past 12 months, transaction activity increased by 10 percent for both single- and multi-tenant properties. Important deals include JCR Companies’ acquisition of the Manokeek Village Shopping Center, for $22 million; PREIT’s acquisition of the Springfield Town Center, for $465 million; and the $19.5 million and $31.1 million sales of the Goshen Crossing and 8459 Leesburg Pike neighborhood retail centers.
Charts courtesy of Marcus & Millichap.