Part 1: Leases, Landlords and Tenants
This is the age of the receding retail presence. Across the country, storefronts are displaying vacancy signs in increasing numbers, whether at the mall or along downtown streets.
Cushman & Wakefield predicts a total of 9,000 or 10,000 stores will close this year, with that number rising to 13,000 locations next year.
A seemingly similar downward trend is active — along with other fortunate ones — in Georgetown, which has seen the departure of Bandolero, Barney’s Co-op, Bebe, Benetton, Bistro Français, Calypso St. Barth, Dandelion Patch, the Flor store, Indigo, Kit and Ace, Nine West, Qdoba and Reebok Fithub (not to mention the Old Print Gallery).
Real estate executive Michael Brennan touched a nerve in April when he wrote in The Georgetowner: “Georgetown’s shopping and dining scenes have lost their luster. What does that mean for the value of your property?
“Take a stroll down M Street or Wisconsin Avenue and one loses count of the number of ‘For Lease’ signs in storefront windows. Vacancies abound on Georgetown’s most prominent commercial blocks, sitting tenantless for months on end.”
The announcement that longtime favorite Appalachian Spring — which is closing in Georgetown this Saturday — could not sustain itself at its Wisconsin Avenue location caused concern. The business continues at Union Station and in Rockville and Reston.
To some, it may seem a case of penny-wise, pound-foolish landlords killing the goose that laid the golden eggs, but it is more complex than that.
While understanding that landlords want to get the most out of their property, one longtime retail tenant of a landmark Georgetown store also knew that a rent reduction — however small — can help pay other bills. He asked for a reduction from his landlord and got a very slight one.
“Two persons need to come together and come up with a solution,” said the down-to-earth business owner.
Another retail tenant explained why landlords sometimes leave property empty for a long time, waiting for the next big renter: bank loans to owners are tagged to anticipated lease payments.
Yet another retailer cited as a cautionary tale a New York Times story about shuttered Bleecker Street stores in Greenwich Village, in which the phrase “high-rent blight” appeared. It’s also known as late-stage gentrification.
Luckily for Georgetown, new entries include Aesop, Curio, Lilly Pulitzer, Rene Ruiz and T&U Mongolian Cashmere.
In its 2016 market report, the Georgetown Business Improvement District writes of retail: “During calendar year 2016: 34 new retailers opened and 25 closed, for a net gain of nine new retailers; Georgetown continues to be an attractive retail district for online retailers to open brick-and-mortar locations and a first location for national and international brands entering the market; the 27-year old restaurant liquor license moratorium officially ended, and some new restaurants have already obtained liquor licenses; Wisconsin Avenue continues to change, as building owners in the 1300 and 1400 blocks renovated or began renovating their buildings, and new tenants filled many of the vacancies in the 1600 block.”
As an aside, it is worth noting, according to the BID: “In 2016, Georgetown was once again the strongest-performing office submarket in the region, with occupancy rates at 94.5 percent and average gross rent 13 percent lower than the Central Business District.”
Snyder Properties’ Pinkberry space on M Street is being rehabbed and will soon be occupied by beauty startup, Georgetown Allure. On Wisconsin Avenue, the same property owner has reconstructed a three-story historic building to rent the first floor as retail but — for the first time — the second and third floors as apartments (luxury, of course).
Quick Pita morphed into a similar offering on Potomac Street, Falalel Inc., as did Shophouse, Chitpotle’s shuttered Southeast Asian food spot, now Bibibop, a Korean food joint, on M Street. (Gtown Bites, where Emmy and Harry’s Georgetown Dinette used to be, has closed due to structural problems with the building.) At the end of 2016, clothier Sherman Pickey closed, but the space — in the 1600 block of Wisconsin Avenue, known as Book Hill — was quickly filled by British décor store Pillar and Post.
According to the BID: “Georgetown has slightly over two-million square feet of retail space and more than 450 retailers. At the end of 2016, Georgetown retail vacancy was 6.7 percent, a slight decline from just over 7 percent in 2015.
“Several large vacancies will be filled in 2017 but there are also some buildings that have remained vacant for more than a year. Georgetown has felt the effects of changing consumer expectations, online sales, and the national oversaturation of retail stores.”
Remember, there’s always Escape Room Live on M Street to let out your frustrations — as well as solutions. More to come next time.
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Part 2: July 12.