The nation’s capital appears poised to emerge this year with its strongest retail market since the pandemic.
Vacancy in the market’s sector is expected to hit a five-year low this year, according to a special second quarter report from Marcus & Millichap. Nearly half of the 20 submarkets tracked by the firm are already in the midst of vacancy declines.
Net absorption in the sector, meanwhile, is on pace to surpass 950,000 square feet for only the second time since 2019.
Marcus & Millichap senior vice president Brian Hosey pointed to some of the market’s fundamentals as a reason for strength.
“The growing influx of transplants, combined with the metro’s strong job creation, is fostering
increased demand from retailers, setting the stage for a promising retail market in 2024,” Hosey said.
Another factor pushing vacancy rates down is a lack of inventory. The stock of retail supply is expected to grow a mere 0.4 percent this year as retail construction levels off.
Some of the top performing submarkets are tucked into Southwestern Maryland. Bethesda-Chevy Chase and East Prince George County have both notched significant vacancy rate decreases as tenant demand jumped.
Meanwhile, the market’s average asking rent is projected to rise by more than 10 percent compared to 2019.
Even as vacancy rates drop, the District is still looking for ways to revive struggling subsets of the sector. Last week, local officials announced $3 million in rewards for five businesses opening, reopening and expanding into vacant downtown spaces, the Washington Business Journal reported. The recipients of the funds include H&M, an old-fashioned Jewish deli and a local food accelerator, Union Kitchen.
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