Georgetown Landlords Are Going Small To Stage A Big Comeback
After ceding ground to upstart neighborhoods, one of the oldest retail destinations in D.C. has mounted a comeback.
Georgetown has seen retail vacancy fall by 7 percentage points since it peaked at 20% in the spring of 2021, according to Dochter & Alexander Retail Advisors. The submarket has roughly 1.6M SF of total retail space.
Direct-to-consumer brands and smaller tenants looking for a prestige address to showcase their products are leading the charge, retail brokers in the area told Bisnow.
“To some degree, Covid had a cleansing effect on various retail markets, and I think Georgetown is one of those,” Dochter & Alexander Retail Advisors principal Dave Dochter said. “I think what you're going to see coming back in Georgetown is going to be much more exciting for the consumer.”
The competition is back on for the 3K SF-or-smaller storefronts that dot M Street and Wisconsin Avenue, the main streets of Georgetown. That’s a shift from the depths of the pandemic, when newer retail districts like 14th Street and Union Market saw their fortunes hold thanks to the many remote workers occupying the submarkets’ multifamily properties.
From the winter of 2020 to the summer of 2022, 14th Street saw its vacancy rate rise from about 5% to just under 9%, but Georgetown saw its vacancy double from more than 8% to more than 16% over the same period, according to data from Dochter & Alexander.
"There was definitely a pause during the pandemic, and I think a lot of national retailers, which is the makeup of [Georgetown], really didn't know which way was up," said Kelly Silverman, senior vice president at CBRE.
That’s changed over the past year or so, said Silverman, who has brokered several Georgetown leases in recent years with CBRE Vice President Gary Taubin.
The pair told Bisnow that interest was strong in a 600 SF space at 1246 Wisconsin Ave. NW, which is now occupied by accessory brand Little Words Project. Taubin also said the pair secured a lease with online-native jewelry brand Mejuri at 3223 M St. NW, which joins other direct-to-consumer businesses like Warby Parker and Aritzia that like to set up shop alongside each other.
“We had immense traffic, a lot of interest, even on a space that is obviously small,” Silverman said. “We do see a lot of these brands that want the shingle and want a presence and are willing to flex their typical size to be in the party.”
Business is brisk at larger properties like 1238 Wisconsin Ave. NW, as well, where owners EastBanc and Acadia Realty Trust are wrapping up a transformation that will bring the 30K SF building more in line with tenant demand for smaller spaces.
The partners are in the process of converting the former Zara store on the corner of Prospect Street into six new retail storefronts, all of which should be open by this summer, Philippe Lanier, principal at EastBanc, told Bisnow.
The new shops include Wolford, Ever/Body, Blank Street Coffee and Van Leeuwen Ice Cream. EastBanc is moving its headquarters to the entire 15K SF office spread in the building, which will also feature five one- and two-bedroom residential units.
The developers acquired the ground lease for the property in 2019, a time when Lanier acknowledged Wisconsin Avenue in Georgetown was struggling to bring in fresh retail. But as the developers completed structural renovations to divide up the ground-floor retail, Lanier said tenants were ready to start shopping for space once again.
"It was clear that Wisconsin Avenue was going through a bit of a transition back then," Lanier said. "Securing this corner property and redeveloping it was a key part of revitalizing the Wisconsin piece of Georgetown. And what really gave us the confidence that we had in it is that it laid out in a way that we could break it up into six units that were all 2K SF or less.”
Other landlords for larger spaces in Georgetown are considering changes of their own. Jamestown, owner of the nearly 600K SF Georgetown Park mall on M Street, is still exploring plans submitted to the Old Georgetown Board last year for a residential conversion of up to half of the property, a spokesperson confirmed to Bisnow.
The landlord has also signed a lease with Stuf Storage for a nearly 8K SF self-storage facility that is slated to take up a portion of the mall's underground parking space.
Elsewhere, the Latham Hotel site at 3000 M St. NW remains in limbo as Thor Equities pursues plans for a luxury hotel and retail on the site. Thor didn't respond to a request for comment on the status of that project.
Even major tenants that already have a presence in the neighborhood are downsizing. Nike has filed plans to move from its 33K SF location at 3040 M St. NW to a smaller, 10K SF space across the street, UrbanTurf reported in June.
Dochter's firm is marketing the soon-to-be-former Nike space. He said small tenants are fueling the demand in Georgetown, and while there are still tenants looking for larger spaces, they constitute a smaller proportion of the overall tenant pool today than they did pre-pandemic.
“Generally speaking, if you have a 10K SF space all on the same grade, you're probably going to be better served to break that space up into smaller bays because you'll be able to achieve a higher rent per square foot,” Dochter said. “The depth of tenants that are active and looking for space in that size range is much broader than the 10K SF and larger users currently.”
Silverman said there’s still room for a variety of tenants in the submarket, particularly more food and beverage concepts. She’s looking forward to the 20K SF “mega Italian” restaurant from Starr Restaurant Group that’s set to occupy the former Dean & DeLuca space at 3276 M St. NW by the end of this year.
But on the whole, she expects shoppers will be pleasantly surprised that, in just a few months, many of the storefronts that went dark three years ago will be open for business again.
"In a post-Covid world, the streets may not seem like every storefront is spoken for, but in reality ... there's a very small amount of vacancy," Silverman said.