Grocery Stores Continue To Expand Across D.C. Area Despite Pandemic
Grocers have been expanding rapidly across the D.C. area for years, and they have continued to open new stores and search for new spaces during the pandemic.
The coronavirus has devastated many segments of the retail industry, creating a wave of restaurant closures and accelerating the demise of department stores. But grocery stores have been one of retail's lone bright spots this year, as they have remained open for residents stuck at home to shop for their necessities.
This has put grocers in a stronger financial position, and many have continued to open new stores and plot their next phase of expansion. Industry experts say they see several major grocery brands searching the D.C. market for space, and they expect grocers will continue to sign deals for new stores in the coming months.
"Grocers are active in the market, and that includes new grocers looking to come in and existing grocers looking to expand," said H&R Retail principal Bradley Buslik, whose firm represents multiple grocers. "I 100% expect there to be new grocery stores who sign leases in Q3 and Q4 in the District and in the suburbs."
The grocers in the market for space range from growing European brands Lidl and Aldi to established players such as Giant Food to e-commerce giant Amazon, which is rolling out its new grocery store concept.
Local officials hope the expansion of these grocery stores will extend to some of the region's underserved areas where the need for better food access has only been exacerbated by the pandemic. Stakeholders see grocers on the market in neighborhoods in D.C.'s Ward 7 and Ward 8 and in Prince George's County that have unmet demand for grocery stores.
"We actually experienced pre-pandemic, operators were beginning to have conversations about expanding to Ward 7 and Ward 8," D.C. Deputy Mayor for Planning and Economic Development John Falcicchio said. "The fact that business remained at least even, if not greater, during the pandemic, would put them in better financial footing to expand."
The District's grocery stores have fared much better than its other retailers during the pandemic. During nine straight weeks from late February to late April, D.C. grocery sales were at least 10% higher than the same week last year, according to data analytics firm Earnest Research.
D.C. grocery sales peaked the week of March 18, when they were 80% above the same week last year. Business has since come down to normal levels, and for the last seven weeks D.C. grocery sales have been within 2% of their year-over-year baseline, according to the weekly performance numbers Earnest Research shared with Bisnow.
For comparison, retail sales are still down more than 10% from last year, and restaurant sales are down more than 30%, according to data Earnest Research provided to the Washington D.C. Economic Partnership.
"Sales have increased across the board for grocery stores," WDCEP President and CEO Keith Sellars said. "Grocery stores are doing well, but they had to shift to adapt to customers' needs during COVID-19."
The number of grocery stores in the District has grown from 37 in 2000 to 69 today, according to WDCEP, including multiple new stores that have opened during the pandemic.
Union Kitchen Grocery opened its fifth location last month in Ballston. It has also signed deals to open in Eckington, the West End and the Nationals Park area, Union Kitchen CEO Cullen Gilchrist told Bisnow. But Union Kitchen, which operates roughly 3K SF stores that he said function more as corner stores, has seen sales decrease during the pandemic and Gilchrist said it is slowing down its expansion plans.
"We've got our ears to the ground and are trying to understand what's going to happen in the next three months, the next nine months, and plan around that, but there's not clarity to any of that, so we're trying to be smart," Gilchrist said.
Grocers have already signed deals and announced plans for several new stores in the District and in the suburbs. Based on deals that have been publicly announced, WDCEP projects three new grocers will open by year-end in the District, and five additional grocers will open by 2022.
Early last year, German grocer Aldi inked a deal to anchor the Art Place at Fort Totten development with a 25K SF store. Aldi has opened stores in Alexandria and Hagerstown this year, and it plans to open in Gaithersburg and Silver Spring this fall, Aldi Frederick Division President Jeff Baehr said.
"Washington, D.C., continues to be a priority market for Aldi expansion," Baehr wrote in an emailed statement.
One of Lidl's planned locations is in the D.C. suburb of Camp Springs, Maryland, where CBRE last week announced it brokered the sale of a 3.5-acre pad site from Velocity Cos. to Lidl. The grocer plans to open a 25K SF store.
Velocity Cos. CEO Brandon Bellamy said the grocer will bring a new option to a part of Prince George's County that is considered a food desert, and he is working on several sites in similar areas where he thinks Lidl would be a good fit. He said the grocer's discount offering and smaller format allow it to open in neighborhoods where the larger grocers may not have a presence.
"They're taking advantage of what the market conditions are suggesting, that a smaller format with a variety of options can be effective because you can go a lot of places with that," Bellamy said.
Lidl last year announced plans to open its first D.C. location at the Skyland Town Center development in Ward 7, the first new supermarket to open east of the river in more than a decade. The grocer is continuing to look at sites in the District for additional locations, CBRE Executive Vice President Michael Zacharia said.
"Lidl has been pushing for growth in the mid-Atlantic for years," Zacharia said. "They've now seen some opportunities open that weren't there before, and they've secured several sites around the region and are now scouring D.C. for more urban locations."
DMPED is involved with many grocery deals in the District, and Falcicchio said he sees Lidl and Aldi as two of the most active grocers on the market. He also said he sees Giant showing interest in expanding in Ward 7 and Ward 8, where it already has one location in Congress Heights.
A Giant spokesperson wrote in an email to Bisnow that the grocer does not have immediate expansion plans to share.
Amazon is also in talks to open new grocery stores in the D.C area. The company last week announced the opening of its first Amazon Fresh grocery store in Los Angeles. The 35K SF store will feature more household brand name products than organic-focused Whole Foods, which Amazon also owns.
Amazon is planning to open at least two of the 30K SF-plus grocery stores in the D.C. suburbs, the Washington Business Journal reported last month, citing building permits in Fairfax County and Chevy Chase.
The company is planning to open two of its smaller Go Grocery stores, ranging from 8K SF to 13K SF, at the Liz project on 14th Street and the Avec project on H Street, the Washington Business Journal reported. An Amazon spokesperson told Bisnow it plans to open Amazon Go Grocery stores in the D.C. area, but declined to provide further details on its plans.
Falcicchio said he has heard Amazon is in continued conversations for more D.C. stores, but he could not provide details. Sellars said he hopes to see Amazon continue to expand in the D.C. market.
"I think you could see them in areas very similar to the 14th and U Street corridor where it's very densely populated and you have a lot of singles, a lot of professionals who shop three or four times a week," Sellars said of Amazon.
Sellars also said he hopes to see more grocers expand to Ward 7 and Ward 8. He said new residential developments in these underserved neighborhoods could help convince grocers to open.
"Retail follows rooftops," Sellars said. "Population has been increasing, and that's a great opportunity for grocery stores to capitalize on those sales that are being created as well as underserved neighborhoods throughout the city that grocery stores recognize are great markets for them to expand."
Buslik and Zacharia, the two retail brokers, both said they expect to see new grocery deals signed in Ward 7 and Ward 8.
"We've seen residential development and retail development east of the river, that has been a big push and has proven to be successful," Zacharia said. "I think that will open more opportunities for retail developers and grocery stores to enter and serve that market. It is woefully underserved, and opportunities are being looked at by developers and grocery stores to open in that area. That is happening today."