Retail commercial real estate performance in Washington, D.C. has been mixed in 2023. On the one hand, the sector has benefited from a strong tourist economy and a return to in-person shopping. On the other hand, it has faced headwinds from inflation, rising interest rates, and supply chain disruptions.

The retail vacancy rate in Washington, D.C. was 4.8% in the first quarter of 2023, down from 5.3% a year ago. This is the lowest vacancy rate for the retail sector in the District since the third quarter of 2019. Retail rent growth has also been positive in Washington, D.C., albeit at a slower pace than other commercial real estate sectors. Cushman & Wakefield data shows that retail rents increased by 3.8% over the past 12 months.

However, there are some signs that the retail sector is starting to cool in Washington, D.C. For example, retail sales in the District declined by 0.3% in July 2023, the first decline in five months. Additionally, the Washington Retail Association (WRA) lowered its forecast for retail sales growth in 2023 from 6% to 4.8%.

Overall, the retail commercial real estate sector in Washington, D.C. is performing well, but there are some signs of a slowdown. Investors should carefully monitor the economic environment and consumer trends before making any investment decisions.

Here are some of the key trends that are shaping the retail commercial real estate market in Washington, D.C. in 2023:

The rise of e-commerce: E-commerce continues to grow rapidly, and this is having a significant impact on the retail sector in Washington, D.C. Traditional brick-and-mortar retailers are struggling to compete, and many are closing stores.

The experience economy: Consumers are increasingly looking for experiences, rather than just products. This is leading to a shift towards experiential retail concepts in Washington, D.C., such as food halls, entertainment centers, and fitness studios.

The omnichannel experience: Retailers are increasingly realizing that they need to offer an omnichannel experience, which means providing a seamless experience for customers across all channels, including online, in-store, and mobile.

The growing importance of location: Location is still the most important factor for retailers when choosing a site in Washington, D.C. However, the definition of a prime location is changing. Retailers are now looking for locations that are close to public transportation, have a mix of uses, and are walkable and bike-able.

Investors who are considering investing in retail commercial real estate in Washington, D.C. should carefully consider these trends. They should also focus on investing in properties that are well-located and offer a unique experience for consumers.

If you are interested in a free broker opinion of value or just learning more about investing in commercial real estate in Maryland, Virginia, or Washington DC, please contact us. Avenue Real Estate is a leading full service commercial brokerage in the Baltimore and Washington DC areas and we would love to help you explore your options and make informed decisions about commercial real estate investments.