Report Finds DC Retail Holding Steady

WASHINGTON, DC-Delta Associates’ year end retail report shows that the asset class is holding its own despite the increasing signs of difficulties evident in other real estate sectors. For instance, vacancy rates are holding steady at 2.3%, compared with the rising rates of other asset classes, the report said.

Rental rates increased 3.9% in 2007, after rising 5.7% in 2006. Also, although cap rates are starting to rise for all commercial real estate product types, cap rates for grocery-anchored shopping centers had the lowest increase over the past year–just 10 basis points.

Grocery anchored retail sites are maintaining the greatest stability compared to other retail types, Delta found. Of the total retail inventory in the Washington metro area, 52.1 million sf is located in 299 grocery-anchored shopping centers, which is almost half of the total retail inventory in the metro area.

New supply is poised to enter the market, the report also notes: there are 16 notable grocery-anchored shopping centers, totaling just over 4.5 million sf, under construction in the metro area at year-end 2007. Given the economic viability of grocery-anchored shopping centers, Delta projects that this trend will continue.

Janis Schiff, a real estate attorney from Holland & Knight, tells GlobeSt.com that she views 2008 as another strong year for DC retail, especially in the District itself. “In the city people are still spending money and retailers are doing well” the residential housing downturn notwithstanding. The decline in residential housing prices is having a greater affect in outlying suburbs. These, she says, retail might suffer a bit more in 2009 and 2010.