H Street Losing Retail Momentum To Union Market, But New Projects Could Bring It Back
The H Street corridor emerged this decade as one of D.C.’s hottest restaurant corridors, but its neighbor to the north appears to be pulling away some of that momentum.
But local stakeholders see reasons for optimism in the coming months, from the H Street Festival that will draw thousands of people to the street next month to the upcoming completion of a major mixed-use building with hundreds of new apartments and ground-floor retail.
Dochter & Alexander Retail Advisors' Summer Retail Market Report, released last week, identified H Street as an area that is losing momentum and the market dynamics are moving back in the tenants’ favor. Union Market is moving in the other direction, according to the report, gaining momentum and shifting in the landlords' favor.
The retail vacancy rate on H Street now stands at 8.2%, according to the report. Dochter & Alexander’s previous report, released in February, pegged H Street’s vacancy at 6%. Dochter & Alexander principal Dave Dochter said that increase in vacancy is due to new retail space becoming available rather than existing retailers closing.
“The momentum there is partially sliding towards tenants because more availability is coming online," Dochter said.
Restaurants have closed, but they are often quickly replaced by other concepts. Sally’s Middle Name closed in March and was replaced by Toli Moli. Star & Shamrock closed in February and Bullfrog Bagels took over its space.
“H Street is still a great street for retail, but it’s been a little bit quieter and hasn’t been the same market for home goods and fashion you’ve seen in other neighborhoods,” said Dochter & Alexander Director of Market Strategy and Research Max Ward, who worked on the report.
The late 2016 deliveries of The Apollo and Anthology, two large mixed-use buildings on H Street between Sixth and Seventh streets, brought a surge of activity to the area. In addition to hundreds of new residents, the projects brought retailers such as Whole Foods, Starbucks, The Wydown, The Daily Rider, Solid State Books and Farmbird to the street.
The three years since have seen smaller apartments buildings developed and infill retail spaces renovated, but the next major delivery on H Street will encompass two full blocks between Eighth and 10th streets. Avec, a 420-unit mixed-use project from Rappaport and WC Smith, plans to begin welcoming its first residents in October.
The team has signed three retailers to Avec's ground-floor space that each plan to open in early 2020. It signed boutique fitness chain Solidcore for 2,500 SF, Urban Nail Lounge for 1,600 SF and AT&T for 1,100 SF. With 44K SF of total retail, the development still has over 38K SF available, including multiple spaces designed for restaurant tenants.
Rappaport President Henry Fonvielle said the team has multiple leases pending, including at least one restaurant, though he declined to name the operators because of confidentiality agreements. He said the modern retail spaces Avec is bringing to the market will help attract new restaurant users to H Street.
"There are ton of cool buildings up and down H Street that give it an eclectic feel and make it fun, but if you want to have a bar on one floor of an old townhouse you are limited by what you can do," Fonvielle said. "Having some modern spaces with high ceilings and storefronts I think will offer an atmosphere people want."
The Dochter & Alexander report highlighted Avec as a reason to expect H Street to bring back some of the momentum it has lost.
"The Avec project is going to recharge H Street," Ward said.
Even with the new delivery, H Street will still compete for restaurant tenants and customers with other trendy parts of D.C., including the nearby Union Market neighborhood. The area around the Union Market food hall has welcomed at least 10 new restaurants and retailers since the start of 2018.
Dochter said a lot of new concepts have been drawn to the booming Union Market area and are often deciding between that and H Street.
"What we’re seeing right now are sometimes users are looking at one or the other," Dochter said. "Union Market has had a good amount of momentum recently, but the long-term play is that it blends into one marketplace."
H Street Main Street Executive Director Anwar Saleem said the Union Market area’s string of recent of openings has presented a challenge, but it is one he thinks H Street will overcome.
"Any time you have other restaurants opening, it is competition, but I think we’ll survive that," Saleem said. "Union Market will have their heyday right now, and rightfully [so], because each neighborhood should grow … I think that we will still be able to hold our own. We grow incrementally, you fall back sometimes and then grow again and improve yourself."
Fonvielle said he thinks H Street's restaurant scene has attributes that differentiate it from Union Market, but he said all restaurants must work hard to compete with the growing number of dining options across the city.
"There's a lot of competition in the restaurant industry as a whole," Fonvielle said. "There are a ton of new restaurants that have opened up and are closing all over town."
While a lengthy menu of restaurants has opened on H Street, the corridor has not had as many service retail or soft goods shopping options as other parts of the city.
"What H Street has had historically is a lot of bars and restaurants and entertainment, what it has not had is the services needed for living in a neighborhood," Fonvielle said.
Saleem also said he hopes to see growth in H Street’s retail scene apart from restaurants. He believes local companies will help spark a growth in shopping options, starting with one popular fashion brand that is in talks to open on H Street.
EAT, a D.C.-based fashion brand founded by 25-year-old Malik Jarrett, has grown its presence online and was named the top local clothing collection last year by Washington City Paper. The company is in talks to open its first brick-and-mortar store on the 700 block of H Street, Saleem told Bisnow. An EAT spokesperson confirmed the H Street store is in the preliminary stages but said the deal has not yet been finalized.
“I think locals are going to help introduce H Street to more retailers,” Saleem said.
The corridor will soon receive its annual spotlight with the H Street Festival Sept. 21. The festival shuts down 11 blocks of the street and features 14 performance stages and over 100 vendors. Last year, the event drew about 150,000 people.
That level of foot traffic brings in a significant amount of money for H Street's businesses. The street's restaurants and bars during last year's festival brought in $1.5M more than they would on a standard September Saturday, according to festival organizer H Street Main Street, equating to an average $20K increase in sales for each business. The 176 on-street vendors brought in a total of $4.4M.
"It's like Black Friday for restaurants," Saleem said. "They double or triple their income."
Avec representatives will market the project's residential and retail during the festival, and Fonvielle said the annual event helps boost the overall excitement around the neighborhood. Fonvielle also is serving as chair of the Atlas Performing Arts Center's Oct. 3 gala, which will be attended by a host of H Street real estate and business owners.
Those events help boost activity on H Street in the near-term, but to bolster the long-term success of the corridor, local stakeholders are looking at the Hechinger Mall property. The 8.6-acre shopping center site is under contract to sell to developers MRP Realty and JM Zell.
"It would extend [the corridor], because right now it ends around 13th Street," Fonvielle said. "If Jeff Zell and Bob Murphy are successful, they're going to build a tremendous amount of residential and retail. That would be a wonderful anchor for that end of H Street."
Saleem said the redevelopment would bolster revitalization efforts along Bladensburg and Benning roads and would make H Street a complete corridor.
"Once a developer does something at Hechinger, I think it will boost H Street," Saleem said. "If you have everything from Hechinger to Union Station, H Street can't lose."