While retail developers and retailers continue to be extremely cautious about expansion—last year, the industry delivered the lowest amount of new space in about three decades, according to the CoStar Group, a Bethesda, Md.-based research firm—they might forget that even in a downturn, there are areas that can support retail growth.
For example, Prince George’s County in Maryland boasts a growing population due to its proximity to Washington D.C.; healthy employment in government, technology and aerospace sectors; and higher than average household incomes. By some accounts, the county is the wealthiest in the nation with an African-American majority—approximately 65.6 percent of local residents identify themselves as black, according to the U.S. Census Bureau. Another 17.6 percent identify themselves as Latino—an important fact, since African-Americans and Hispanics, along with Asian-Americans, will be among the most lucrative markets for retailers in the coming decades. As of 2005, approximately 37.2 percent of the households in Prince George’s County had incomes above $75,000 a year. Retail sales per capita are somewhere around $9,261.
Yet Prince George’s remains under-served. A 2004 research study conducted by The Washington Post found that approximately 53.3 percent of local residents often shopped at regional malls outside the county. There are few national apparel or furniture chains in the area, says Marc Menick, vice president of retail leasing with the Peterson Cos., a Fairfax, Va.-based real estate developer. (One of the company’s newer projects is the 300-acre National Harbor mixed-use development on the Potomac River in Prince George’s County. This year, National Harbor’s convention center will host the ICSC Mid-Atlantic Idea Exchange conference.) The county also has a shortage of good ethnic restaurants, in spite of the fact that residents tend to be well-traveled and have a taste for fine dining, adds John Henry King, economic development director with the City of Bowie, Md., the largest municipality in Prince George’s County.
In advance of ICSC’s Mid-Atlantic show, which is scheduled to take place Feb. 16 and 17, Retail Traffic interviewed Menick, King and Carter Davis, vice president with JBG Rosenfeld Retail, a Chevy Chase, Md.-based firm which is redeveloping Bowie Marketplace, a 190,000-square foot grocery-anchored shopping center in Bowie. Below, they talk about current business conditions in Prince George’s County.
Retail Traffic: How much of an impact have you felt from the recent recession?
King: We are not immune to the swings of the economy, but because we are predominantly a government town, the recession has not been as dramatic here. We haven’t seen the massive amounts of job losses and layoffs seen in other communities. And we are already starting to see a thaw in residential sales, people are out looking at homes, and I think that’s going to translate into retail sales once again.
Davis: There has been a little bit of an impact on vacancy and a little bit on rents, but it’s certainly not as bad as in other parts of the country, because it’s still Washington D.C. Prince George’s County is one of the main Washington suburbs and there is generally low unemployment, so the market in general looks good to retailers.
Menick: What I will tell you is we’ve got about 12 centers within an hour ring of the Washington region. Of those 12 centers, the center that got the least amount of rent reduction requests was the Rivertowne Commons [a 380,000-square-foot shopping center] in Prince George’s County. Very, very few tenants were coming in [for concessions] at Rivertown.
RT: What kind of vacancy rates are you seeing right now?
Davis: It isn’t that high. I really don’t know the exact numbers, but maybe it’s five or 10 percent. In a large shopping center, it’s only a handful of stores.
Menick: There really hasn’t been a tremendous effect on vacancy. At Rivertowne, the only thing that remains vacant is an old theater. Everything else that’s become vacant has filled up within three or fourth months. At National Harbor, as it’s becoming more and more of a real place, we are actually able to get more attractive deals [from prospective tenants]. There are retailers that we want to get that are just not expanding because they don’t have the capital and that requires us to be more aggressive, but in general, we are seeing folks making more attractive deals.
King: In Bowie, the vacancy rate is 6.9 percent for retail. Our freestanding stores are pretty well occupied—in fact, we’ve only got one freestanding building vacant and the owner tells me they are in the final stages of a legal review for a sale. Predominantly, vacancies are in shopping centers and the largest vacancy is in one of the older centers that’s getting ready to be redeveloped.
RT: What does the county have to offer retailers?
Menick: It’s got tremendous density, a lot of people have high incomes. There is a tremendous amount of people with a lot of money and in dire need of quality goods and services that, compared to the rest of the region, just don’t exist today. But I think retailers are kind of waking up to it with a few new projects opening. They’ve seen that the community has shown up in droves and is spending the money. There is a lot of great opportunity in Prince George’s County.
King: Prince George’s County is the wealthiest predominantly African-American County in the nation. I think we are well above the median income no matter who you compare us to. What the developers and retailers are discovering is a market with people with money to spend, looking for places to spend it.
RT: Are you thinking of any specific retail businesses that would do well here?
Davis: In general, there is more of a need for restaurants.
Menick: There is a tremendous opportunity for restaurants and soft goods retailers. Quality restaurants, unique non-chain restaurants just don’t exist, or not a significant amount of them exists. Quality soft goods retailers don’t exist—if people are looking for the better national brands, not value-oriented, they are forced to go outside the County. I personally think there is a pent-up demand for the national brand retailers, it’s just not known yet because not a significant amount of them exists in the County today. But I think [once they] find out there is that pent-up demand and come in, sales will be very strong.
King: In Bowie, the single largest demand continues to be for grocery stores. Royal Ahold and Safeway have gone with larger concepts, but a lot of the residents like the smaller stores—for example, an Aldi with about 20,000 square feet. There is an opportunity for the stores with a smaller footprint to come in and compete with the larger national chains. Secondly, there is an opportunity for different kinds of food and restaurant concepts. We don’t have a lot of ethnic food concepts in the city. If one’s tastes don't run to Mexican or Chinese, you have to go far to get that.
RT: What do you expect to see at the Mid-Atlantic ICSC Idea Exchange?
Menick: I am sensing the mood is going to be much more positive than last year. Last year, the majority of retailers were discussing how many stores they were going to close. Now, they are not coming in droves, but they are coming and they are talking about growing in strategic pockets. The conversation about closing a massive amount of stores has really weaned off and conversation about new growth is happening.
King: I think we are going to see a couple of things at this show, beginning with a lot of excited folk coming in to see the new facility at National Harbor. For the first time ever, the conference will actually be at a conference facility in Prince George’s County. That’s going to bring out a lot of folks. I think attendance will be up over last year, folks have seen the bottom of the recession now and they’ve got to form their plans for what they are going to do over the next couple of years.
Davis: I think people understand the reality of the market, but hopefully they will be optimistic. There are certainly select opportunities. The people who will be there will be there for a reason.