Retail vacancy remains elevated in downtown D.C., but coming down elsewhere - Washington Business Journal

Listen to this article 3 min

When it comes to empty retail space, D.C.'s neighborhoods are faring better than office-heavy parts of the city.

Celebrity entrepreneur Jon Taffer bet in 2021 that D.C.'s fortunes were on the rise as public health restrictions imposed to slow Covid-19's spread loosened, more people were comfortable dining indoors, and the city's restaurant industry was poised for a rapid rebound.

It appears he lost that bet, as his restaurant group's Taffer's Tavern has shuttered at 700 Sixth St. NW near Capital One Arena after a run of about two years. And he's not alone, as the vacancy rate for retail space on D.C.'s East End hit 22.6% this fall, from 20.8% at this point three years ago and from a mere 9.2% headed into the winter of 2020, per newly released stats from Dochter & Alexander Retail Advisors. That compares to a regionwide retail vacancy rate of a little more than than 12.7%, down from nearly 15.8% in fall 2021 and from just under 7% heading into the first pandemic winter.

Other parts of the District and region have fared better, including Georgetown, where leasing demand has been strong and vacancy rates have come down sharply since their pandemic-era highs, and the NoMa/Union market area, where a glut of new retail delivered with freshly developed apartment and office buildings has been slowly getting absorbed.

The common thread? It might sound cliche, but live-work-play environments, where there's a steady flow of shoppers and diners day and night, are doing better than the places more heavily dependent on office dwellers who are still hybrid or fully remote, per Dave Dochter, principal and co-founder of Dochter & Alexander.

Drilling down more in the East End, the vacancy rate along F Street, at almost 38.4%, is the highest in the region. There's nearly 611,700 square feet of vacant retail in the submarket, out of an inventory of nearly 2.9 million, and much of that empty space is along Seventh or F streets, per Dochter & Alexander.

That's not to say Chinatown's a sinking ship, per Dochter. There are signs of climbing interest, thanks to factors including Monumental Sports & Entertainment's renewed commitment to Capital One Arena, and new tenants, including Raising Cane's and Fuddruckers, are helping to chip away at those vacancies. What's more, East End's vacancy rate dipped down slightly from the summer, when it stood at almost 22.9%.

"I think the bottom is in, is what I would say, for that market, and now it's figuring out what its new identity is going to be," Dochter said. "Fundamentally, all of the drivers are there.

Georgetown's retail vacancy rate, by contrast, stands at about 11.15%, up from just shy of 10% over the summer, but down from 17.75% in fall 2021, and from nearly 8.4% heading into the winter of 2020. Among the recent activity, Amorino Gelato has inked a deal for the former Georgetown Running Co. spot at 3401 M St. NW, Canadian outfitter Arc'teryx is coming to the shuttered J. Paul's at 3218 M St. NW, and multicultural restaurant River Club has replaced Bangkok Joe's at 3000 K St. NW. Arc'teryx, of note, wasn't nearly as bullish on Georgetown the last time it was looking for space in the District. That it's keeping its space at CityCenterDC and expanding into Georgetown is a positive sign, Dochter said.

Other parts of the city fall more or less in line with those same trends. Vacancies remain elevated in the central business district as compared to before the pandemic; are more or less even with where they stood in Capitol Hill after spiking three years ago; are elevated in Capitol Riverfront due in part to new ground-floor space delivering; and coming down in the Union Market area.

In all, per Dochter: "It's generally, I would say, moving in the right direction," Dochter said. "It's not 'sky is falling' as much as it was in the early days of Covid."