D.C.’s First Wegmans Shows How Grocers Can Spur Development In Wary Communities
As large mixed-used developments take shape in D.C., developers are leaning on the perceived virtue of grocery stores to help gain community support and attract apartment renters.
The popular grocer decided roughly a decade ago it wanted to be in cities, and it has been working with developers to bring that vision to reality ever since, said Dan Aken, director of real estate and site development at Wegmans, speaking Thursday at Bisnow's Northwest D.C. event at City Ridge.
"These were markets that we wanted to be in that we would not serve because we just could not pull folks out into the suburbs," Aken said. "It's where we want to be, we feel it's worth the effort and it takes a little bit longer but it's worth it."
Aken said Wegmans lowered the square footage of its typical locations from more than 100K SF to 80K SF to accommodate more urban locations, and it has a 60-person design team to tease out the challenges that come with building in compact, dense sites.
Grocery-anchored retail centers have been a boon since the pandemic began for investors looking for a safe bet, and the pace of transactions is still blazing. In the first quarter of this year, Crexi reported shopping center transactions grew 56%, while more than half of all transactions last year were grocery-anchored, according to JLL.
But even before properties are completed, developers see landing a grocery anchor as key to currying favor with development-reluctant communities and encouraging would-be renters that a new project will provide for their everyday needs by the time they move in.
Roadside founding principal Richard Lake said he had the grocer at the table with Fannie Mae while he was still negotiating to buy the property, and Wegmans' buy-in was key to bringing the vision of the 10-acre campus to fruition. The developer's equity partner on the project was North America Sekisui House, and Lake said getting its buy-in was also critical.
"The first call I made was to Wegmans," when the property became available, Lake said. "The journey of getting this project and putting it together was really having these two organizations supporting the vision of the project."
When it opens, the store will sit alongside six residential buildings composed of 690 rental units, 167K SF of office space, and tens of thousands of square feet of retail, including multiple restaurant offerings like King Street Oyster Bar and Tatte Bakery.
It is a development pattern others are following as they plan megadevelopments in other parts of the city. At Urban Atlantic, Hines and Triden's 66-acre Parks at Walter Reed development, Whole Foods is planning to open its 40K SF store in April 2023, said Vicki Davis, Urban Atlantic's co-founder and managing partner.
When the Whole Foods was announced in 2019, one city official called it "catalytic for the development," allowing the Parks at Walter Reed as a whole to "really take shape."
Having a grocery store alongside other placemaking amenities makes major projects easier to swallow for communities seeing their neighborhood change, said Ernie Jarvis, CEO of Jarvis Commercial Real Estate.
"Developers have this poor reputation of being this big bad developer until they build a grocery store," Jarvis said. "Those are very positive things for the community, not, 'Is it going to be a pain in the ass to go down Georgia Avenue?' Yeah it could be, but you've got a grocery store, you’ve got green space, you’ve got housing for all different types of income."
Davis said developers have gotten better at identifying those kinds of amenities when planning big projects. She anticipates that the needs her projects are addressing will only become more important over time. She said as the millennial cohort matures, they are looking for good schools, green space and more space for themselves and their families, something Parks at Walter Reed and other well-thought-out mixed-use communities can provide.
"They're going to start settling down, having a family," Davis said. "The thing is, how do we, as Washingtonians, support them?"
The same process also happened in upper Northwest D.C. for the City Ridge development, which has long been a more tepid area for development within District borders.
Robert Wolcheski, a member of the acquisitions and development team at Roadside and self-described "deputy mayor" of City Ridge, said the voluntary community engagement the developer did with the community led them to focus on bringing a daycare to the campus, filling an identified gap in the neighborhood.
"Some developers are afraid of talking to their neighbors, but if you engage in conversation, you can learn things that benefit you," Wolcheski said. "Bringing that community process into a matter-of-right project was instrumental."