New Concepts Replace Aging Brands On D.C.'s Most Expensive Retail Corridor

The sidewalks of Chinatown's Seventh Street corridor, anchored by the newly renamed Capital One Arena, are filled with people day and night. Despite the foot traffic, several older struggling brands have been priced out of D.C.'s most expensive corridor this year as new experiential concepts enter the market. 

When McLean-based Capital One decided this summer to introduce its new café concept to the D.C. market, it chose two of the city's busiest corners. It acquired a building at Georgetown's Wisconsin and M intersection for a record price, and it planted its flag at Chinatown's bustling Seventh and H intersection.

The cafe will not only take the former Radioshack space, as previously reported, but it will also replace the Fuddruckers on the iconic corner, said Douglas Development principal Norman Jemal, the building's landlord. 

"The café concept is really what I would call a flagship, and a corner like Seventh and H is a marquee flagship corner," Jemal said.

He did not say when Fuddruckers would close, but Capital One said it plans to open by late 2018. 

Directly across the street, the former City Sports is being replaced by Studio Xfinity, the second location in the U.S. of Comcast's experiential concept. Signs on the window indicate it plans to open this fall. Modell's was initially the tenant in line to replace City Sports, but the legacy sporting goods retailer was replaced by the new retail concept from the cable giant. Rappaport represented the landlord and the tenant in the deal. 

The two deals represent an improvement for the landlords, replacing older, faltering retail brands with new concepts from more stable companies, Dochter & Alexander Retail Advisors' principal Dave Dochter said.  

"City Sports wasn't making it anywhere in the country as a brand," Dochter said. "RadioShack was not making it on its portfolio globally. Those are two examples of the Seventh Street market going in the right direction."

Another older, struggling brand could soon be replaced on the next block up: Hooters. Jemal, also the landlord of the 825 Seventh St. NW building Hooters occupies, said Douglas has an option in the lease to replace the sports bar known for its wings and scantily clad women, and it is actively marketing the space to new users.

"We have the opportunity to remerchandise the space, and we’d like to put in something that’s more befitting of the market today," Jemal said.

He said he is looking to replace it with another food and beverage merchant, and Hooters will not close until he finds another tenant. 

Just north of the Hooters, the corridor will soon welcome a new food and drink spot. Yard House, a craft beer bar and restaurant brand from Darden Restaurants, signed on in January for the space at the corner of Seventh and I streets. 

Yard House will take the space formerly occupied by Goethe-Institut, a German arts and culture venue. The beer bar will seat 338 inside and 40 outside.

But as a new bar prepares to open on the Seventh Street corridor, a neighborhood staple recently shut down next door.  

After a 15-year run at 810 Seventh St. NW, Regional Food and Drink closed its doors this summer. RFD owner Josh Alexander told DCist in July he was forced to close because of rising rent prices on the corridor. RFD's lease was up for renewal this summer, and the landlord hiked his rate by 10%, he said. 

PM Realty Group's Eddie Trujillo, who represents the landlord for the RFD and Yard House retail spaces, said he expects to land a replacement for RFD soon. But he said leasing out retail space on the city's most expensive street does present challenges. 

"The market conditions are tougher than anybody wants to admit," Trujillo said. "There's a lot of space on the market both for office and retail. Depending on how well-located you are, those retail rents are high." 

To fill the RFD space, he said the company is asking $120/SF rent, a lower rate than many spaces in the neighborhood. The Seventh Street corridor has the city's highest rents with prices reaching up to $300/SF, according to Dochter & Alexander's latest market report, compared with $250/SF in the next highest submarket, Georgetown's M Street. 

"Being that we're not right on 7th and H, it's probably a good rent," Trujillo said. "We're trying to lease the space. We're not trying to keep it on the market for too long." 

One of the corridor's largest vacancies, the former National Museum of Crime & Punishment space in the Terrell Place building, has been on the market for more than two years. The space has roughly 8K SF on the ground level, which its broker Streetsense has proposed breaking up into smaller suites. Streetsense retail strategist Kelley Milloy said the space has gotten interest from a variety of small and large tenants.

"It's been pretty active," Milloy said. "It's just a matter of finding the right tenant. It's a big space and there are a lot of different ways we can go about it." 

Dochter said landlords should not have to lower rents to sign new tenants on Seventh Street. He said the recent closings reflect more on the struggles facing some parts of the retail sector than as a sign that the Seventh Street corridor is overpriced. Given the heavy foot traffic and strong demand on Seventh Street, he said the right type of retailers should be successful there. 

"They just couldn't afford the rent," he said of RFD. "It's not like retailers aren't making it because there isn't business. It's a matter of which retailers can afford to be in the marketplace. What are the brands that want the exposure, want the foot traffic and can produce the volumes to justify a rent that is a healthy rent? That's not for every brand. That doesn't fit every business plan."