Thursday, August 20, 2015

DCUSA Has Never Been Fully Leased

More than seven years has passed since the opening of the DCUSA shopping center in Columbia Heights and it has never been fully leased. With 540,000 square feet of retail, it's the largest retail development project in the District. It is three stories tall and encompasses about half of a city block. There are 1,000 underground parking spaces.

Technically Lane Bryant was the first store to open at DCUSA, in March 2008, followed the next day by Target. Other big box stores Best Buy, Marshall's, and Bed Bath & Beyond eventually followed along with Washington Sports Club. The larger spaces have always been filled. But developers have had a harder time filling and keeping occupied the mid-sized and smaller storefronts.

Whole Foods was part of the original lease plan, to be located on the southwest corner of the building. That deal eventually fell through. So did another proposal to bring Richmond grocer Ellwood Thomspon's to DCUSA. Those spaces are now partially filled by Petco, DSW and Five Below. Otherwise, there are a handful of smaller spaces that have either never been filled (space between Staples and Children's Place), or have turned over with no current replacement tenant (former Radio Shack space). 

The pedestrian traffic to and from the big box stores + Washington Sports Club seems astronomical. Former retail agents claimed that over 50,000 people walked by the DCUSA site daily. I do wonder why the smaller spaces have seemed more challenging to keep full. My guess is that the rent is probably too high. In 2011, this Washington Post article put the rent range for DCUSA at $40 to $90 / sq ft. That's equivalent to a rent range of $3,333 - $7,500 per month for a 1,000 sq foot store. There is a program in place to offer discounted (~30%) rental rates to small or minority business owners. IHOP operates under this program as a franchised location of the chain restaurant. 

Even with the small business incentive DCUSA has never been more than about 85% occupied. Since the District collects sales taxes from all businesses, and collects revenue from the parking garage, which they own, it's in the city's best interest to have a fully leased building. But, that's up to the developers and leasing agents. The next opening appears to be Chick-fil-A, replacing Lime Fresh. The most recent opening was Zombie Coffee, which replaced the built, but never opened short-lived Tasti D-Lite store, in a tiny 810 sq foot space. I really can't foresee all of the empty spaces being filled anytime soon, and I wonder if I'll be making this same report in 2018, a full 10 years after the first stores opened at DCUSA.

First-floor lease plan circa 2005. Note never-opened McDonald's, Starbucks, SunTrust, Whole Foods, etc.