GEORGETOWN RETAIL MARKET REPORT. georgetowndc.com

GEORGETOWN 2017 RETAIL MARKET REPORT georgetowndc.com

2017 was an active year for the Georgetown retail market, with many changes to the tenant mix and some notable deals that will shape Georgetown s retail evolution. This report includes information on openings and closings in 2017; anticipated openings for 2018; market fundamentals, including vacancy rates, average rents, and foot traffic; and insights on the past performance and future of the Georgetown retail market. 2017 MARKET HIGHLIGHTS + + Georgetown is the largest outdoor retail district in the region, and is known in D.C. and around the world as a destination for shopping, dining, history, culture, and recreation. + + There were 29 retail openings and 28 closings in 2017. The quick service restaurant category saw the largest net increase, with eight openings and four closings. + + Georgetown continues to have a low ratio of restaurants to retail overall. A survey of Georgetown residents revealed strong interest in more restaurants. Interviews with office tenants also revealed demand for more quick lunch options south of M Street. + + Notable deals in 2017 include: Amazon Books signed a lease at 3040 M Street, next to the Nike store, the first Amazon bookstore in the D.C. region. Capital One bought 3150 M Street for $50.2 million, a record price for a retail building on a per-square-foot basis ($5,700/sf). Capital One will open a Capital One Café at this location. Wawa will open in the Restoration Hardware space at 1222 Wisconsin Avenue, the second location of the company s expansion into the D.C. market. Jose Andres will open America Eats Tavern in the former Old Glory space at 3139 M Street, his first restaurant in Georgetown. + + 2017 was the year of the pop-up in Georgetown, with eleven different pop-ups from new e-commerce retailers and established national and international brands. + + Georgetown continues to be a neighborhood where new tenants entering the market want to open first. Seven retailers opened their first D.C. location in Georgetown in 2017. + + The Wharf opening, internet sales growth, and macroeconomic forces continue to create headwinds for Georgetown. Retail property owners and business owners must be flexible and provide excellent customer experiences to remain competitive. The BID continues to work hard to create an attractive and welcoming public environment to support the retail market. + + Some large property owners are starting to lower rents and structure more flexible lease deals. GEORGETOWN BID RETAIL MARKET REPORT 2017 2

GEORGETOWN MARKET FUNDAMENTALS i Total Retail Inventory (BID area) 2,100,000 SF Retail Vacancy Rate (2017 year-end) 5.6% DC Region Retail Vacancy Rate (2017) 6.0% Average Retail Rents High Retail Rent $80-$120/SF NNN $300/SF NNN Total Retailers and Restaurants 462 Retail Stores 245 Full Service Restaurants (includes live entertainment) 62 Quick Service Restaurants (includes coffee/sweets) 59 Spas and Salons 56 Gyms and Fitness Studios 14 Retail Services 26 Total Office Inventory 3,440,000 SF Daytime Employment (BID area) 13,350 Hotel Rooms 731 Georgetown Resident Population (0.5 mile from M & Wisconsin) 9,427 Median Household Income (0.5 mile from M & Wisconsin) $147,452 Visitor Breakdown by Home Location Zip Code 20007: 8% Other DC: 21% VA and MD suburbs: 29% Other US: 35% International: 7%

PEDESTRIAN TRAFFIC TRENDS Foot traffic in Georgetown is clearly divided between weekend days and weekdays. Saturday is the busiest day in Georgetown, followed by Sunday and Friday. Counts are lower during the week (Monday through Thursday), and similar each of those days, reflecting the daytime population during the week and a larger visitor population on the weekends. Peak hours during the week are 1 pm and 6 pm; on the weekends, 3 pm. Throughout the year, pedestrian counts follow seasonal and event trends, and are highest in May, July, and October. Pedestrian Traffic by Day of Week, as a Percent of Weekly Total (2017 data) 24% 22% 22.34% 20% 18% 16% 14% 15.50% 17.23% 12% 10% 10.82% 11.11% 11.53% 11.49% 8% 6% 4% 2% 0% Monday Tuesday Wednesday Thursday Friday Saturday Sunday Monthly Pedestrian Counts as a Percent of Annual Total (2017 data) 12% 10% 8% 6% 4% 2% 0% January February March April May June July August September October November December GEORGETOWN BID RETAIL MARKET REPORT 2017 4

GEORGETOWN BID RETAIL OPENINGS AND CLOSINGS 2017 CATEGORY 2017 OPENINGS (29) 2017 CLOSINGS (28) Retail 14 openings 16 closings & Other Stories Brandy Melville Brilliant Earth COS Duxiana Hinckley Pottery Kendra Scott Klagsbrun Studios Marine Layer Pillar and Post Take Care Tresor Interior Trunk & Drawer Vans Appalachian Spring BCBG Calypso St. Barth Diesel FLOR GANT Godiva Chocolatier Kit and Ace Milano Collections P Street Gallerie P Street Pictures Rene Ruiz Second Time Around Spice and Tea Exchange Swiss Watch Works Touche Georgetown Violet Boutique Full Service Restaurants 3 openings 7 closings Boulangerie Christophe Laduree Oki Bowl Ramen Basil Thai Chopsticks Daily Grill Orange Anchor Sea Catch Smith Point Unum Quick Service Restaurants 8 openings 4 closings Acaiberry Bibibop Blue Bottle Coffee District Pizza Falafel, Inc. Kung Fu Tea Subway sweetgreen Canal Café Gtown Bites Postmodern Foods ShopHouse Entertainment 1 opening 0 closings PanIQ Room Retail Services 3 openings Pop-ups 11 pop-ups Brow Bar DC Georgetown Allure The Ritz-Carlton Spa AU Rate New York Chubbie s Fornash and Toss Gtown Pop-up Shop illesteva M2057 by Maria Pinto MacKenzie Childs Of Mercer Rapha Cycling Sissy Yates Jewelry State and Liberty Nectar Skin Bar GEORGETOWN BID RETAIL MARKET REPORT 2017 5

Georgetown continues to be a desirable neighborhood for new retailers entering the D.C. market, and several brands opened the only D.C.-area store in Georgetown, or the first of multiple D.C.-area stores. FIRST-TO-MARKET RETAILERS OPENING IN GEORGETOWN IN 2017 Retailer Address Type Home Location & Other Stories 3241 M Street Women s clothing and accessories Sweden (H&M) Blue Bottle Coffee 1046 Potomac Street Coffee shop California Brilliant Earth 3332 Cady s Alley Conflict-free diamonds California COS 1200 Wisconsin Avenue Men s and women s clothing Sweden (H&M) Duxiana 3307 Cady s Alley Luxury bedding Sweden Laduree 3060 M Street French bakery France Nearly 60% of the 462 retailers and restaurants are local or regional businesses, meaning they are only in Georgetown, or are only in D.C. or the D.C. region. ii This diverse mix of local, national, and international businesses provides shopping, dining, and experiences for every type of shopper. 2017 RETAIL ACTIVITY BY MARKET SIZE Activity Local & Regional National/ International Opened 2017 12 17 Closed 2017 17 11 Opening 2018 19 15 GEORGETOWN BID RETAIL MARKET REPORT 2017 6

THE WHARF OPENS AND INTERNET SALES KEEP GROWING. WHAT DOES THIS MEAN FOR GEORGETOWN? 2017 marked a significant milestone for the District with the opening of Phase 1 of The Wharf. The $2.5 billion project, delivered two million square feet of new development, including 200,000 SF of retail, 15 bars and restaurants, 16 retailers, three music venues, 683 hotel rooms, 436,000 SF of office, and 791 residential units. iii The Wharf is the most significant waterfront development in D.C. since the opening of Washington Harbour in Georgetown. The density of new restaurants, most of them by local chefs and restaurateurs, represents a new source of competition for Georgetown. In addition to The Wharf opening, 638,531 square feet of retail delivered across the District in 2017. Another three million square feet are under construction for delivery by 2020, or in the pipeline for near-term development. iv The District s growing population, which has increased 13% since 2010 to 681,170 residents in 2016, has enabled this development boom. v Developers building at The Wharf, and in other neighborhoods, have been able to bundle generous tenant improvement packages and custom retail and restaurant build-outs into their development costs. With limited new development or redevelopment opportunities, Georgetown property owners generally have not been able to provide comparable TI packages. Regardless, the increasing competition from other neighborhoods means Georgetown business and property owners must continue to provide a high-quality experience and mix of quality tenants. While new developments are opening, internet sales continue to capture a larger share of total retail sales. In the last 10 years, online sales have grown from 3.5% of total U.S. retail sales to 9.1% of total sales. During that period, online sales have grown by 15% per year on average, while total retail sales have grown 2.5% per year on average. vi The internet has not eliminated the need for physical stores, but has changed the way many stores function. Some retailers see their stores as showrooms for online purchases, and others allow customers to buy items online and pick them up in store. Georgetown businesses will need to understand their customers expectations and provide an excellent customer experience to adapt to a rapidly changing retail market. WHAT S IN STORE FOR 2018? While retail vacancies in Georgetown appear higher than normal, many of these vacant spaces have tenants opening in 2018. At the end of 2017, the retail vacancy rate was approximately 5.5%, down from 6.7% in 2016. vii (Note: the BID reports vacancy as existing unleased retail space. Other methodologies may calculate this number differently, and result in a slightly different number. Overall, the retail vacancy rate has been trending down since 2015). The percentage of empty ground floor retail space, however, is closer to 10%. viii Brokers and property owners report that retailers continue to have strong interest in Georgetown, and more prolonged vacancy may reflect recent instability in the retail industry generally, rather than a decline in the fundamental value of the Georgetown market. At least 24 retailers and restaurants have signed leases to open in 2018, or will be announced in 2018, as of this printing. Some additional retailers and restaurants closed at the beginning of 2018, including Sports Zone Elite, Maxime, Pier 2934, and Old Glory, with more expected later in the year, including Morton s. Some older concepts may also suffer in 2018 as the market continues to evolve. GEORGETOWN BID RETAIL MARKET REPORT 2017 7

2018 OPENINGS & ANTICIPATED OPENINGS (See map on the following page) Retailer Address Type Location Say Cheese! 1132 29th Street Quick Service Restaurant 1 TBA 2917 M Street Full Service Restaurant 2 TBA 2920 M Street Quick Service Restaurant 3 Angolo 2934 M Street Full Service Restaurant 4 Reformation 3035 M Street Women s Clothing 5 TBA 3025 M Street Retail Tenant 6 Amazon Books 3040 M Street Bookstore 7 TBA 3104 M Street Retail Tenant 8 America Eats Tavern 3139 M Street Full Service Restaurant 9 Capital One Café 3150 M Street Bank, Coffee Shop, and Work Space 10 TBA 3210 M Street Retail Tenant 11 Roots 3259 M Street Men s and Women s Clothing 12 Sugar Lab 3279 M Street Gelato Shop 13 Georgetown Barbershop Co. 3279 M Street Hair Salon 14 Starbucks Coffee 3347 M Street Coffee Shop 15 Wawa 1222 Wisconsin Avenue Convenience Store 16 TBA 3251 Prospect Street Full Service Restaurant 17 TBA 1242 Wisconsin Avenue Retail Tenant 18 Café Georgetown 3141 N Street Coffee Shop and Wine Bar 19 Insomnia Cookies 3204 O Street Cookie Shop open Late-Night 20 Compass Coffee 1351 Wisconsin Avenue Coffee Shop 21 TBA 1400 Wisconsin Avenue Full Service Restaurant 22 TBA 1424 Wisconsin Avenue Full Service Restaurant 23 Chase Bank 3217 P Street Bank 24 Neopol Savory Smokery 3210 Grace Street Quick Service Restaurant 25 Reverie 3210 Grace Street Full Service Restaurant 26 The Wine Outlet 3210 Grace Street Wine and Cheese Shop 27 South Moon Under 1065 Wisconsin Avenue Women s Clothing and Accessories 28 Bandoola Bowl 1069 Wisconsin Avenue Quick Service Restaurant 29 Reren Lamen & Bar 1073 Wisconsin Avenue Full Service Restaurant 30 Church Hall 1080 Wisconsin Avenue Full Service Restaurant 31 Bluestone Lane 1066 Wisconsin Avenue Coffee Shop 32 TBA 1054 31st Street Full Service Restaurant 33 Guapo s 3050 K Street Full Service Restaurant 34 GEORGETOWN BID RETAIL MARKET REPORT 2017 8

2018 OPENINGS & ANTICIPATED OPENINGS = The Georgetown BID Area R ST R ST DENT PL RESERVOIR RD CAMBRIDGE PL DENT PL Q ST Q ST P ST VOLTA ST 24 O ST WISCONSIN AVE P ST O ST 23 22 31ST ST DUMBARTON ST N ST 30TH ST 29TH ST 28TH ST 27TH ST ROCKCREEK PARKWAY N ST 37TH ST 36TH ST 35TH ST 34TH ST BANK ST 33RD ST CADY S ALLEY POTOMAC ST 32ND ST 20 21 19 14 15 13 17 18 PROSPECT ST 16 M ST 9 12 10 11 31 30 32 29 28 8 7 BLUES ALLEY 33 M ST 6 5 THOMAS JEFFERSON ST 3 2 4 1 PENNSYLVANIA C&O CANAL GRACE 25 26 27 WHITEHURST FWY SCOTT KEY BRIDGE POTOMAC ST GEORGETOWN WATERFRONT PARK K ST 34 WASHINGTON HARBOUR FRANCIS POTOMAC RIVER GEORGETOWN BID RETAIL MARKET REPORT 2017 9

More broadly, 2018 may be a more stable year for the retail industry. Holiday sales in 2017 were stronger than expected up 5.5% over 2016. ix Consumer confidence has been steadily increasing over the last several years, and by the end of 2017 had surpassed recent high confidence levels from 2005. x Unemployment has similarly been declining for years, reaching 4.1% at the end of 2017, the lowest level in over 10 years. Average hourly wages for all workers increased slightly in 2017 0.4% though this represents slower growth than in 2016 (0.8%). It is unclear, however, whether consumers truly have meaningfully more spending power. Finally, some experts predict that retail bankruptcies will continue in 2018, but there will be fewer than in 2017. xi Recent retail bankruptcies have largely been the result of heavy corporate debt burdens, so increased consumer spending may have a limited impact on the ability of distressed retailers to stay afloat some of whom have a presence in Georgetown. Some Georgetown businesses had a slower than expected start to 2017, partially attributable to negative effects of the Trump administration, but those effects may be fading. The impacts of the 2017 tax cuts passed by Congress are yet unknown, but there may be a short-term boost to the economy that could have a positive impact on consumer spending. A NEED FOR MORE RESTAURANTS IN GEORGETOWN Georgetown continues to lack a sufficient number of restaurants to support the retail mix and provide opportunities for residents and visitors to spend more time in Georgetown. A survey of Georgetown residents in November 2017 indicated that residents overwhelmingly want more and better restaurants at a mid-price point (more information on this survey is available on the BID website). Similarly, many office tenants report a need for additional quick, affordable lunch options south of M Street. The recent concentration of food trucks on Thomas Jefferson Street proves the demand for this kind of product. Several quick-service concepts that are growing in the region have yet to enter Georgetown, including Cava, District Taco, Roti, Shake Shack, and Taylor Gourmet, among others. While the restaurant liquor license moratorium expired in 2016, a cap remains on tavern licenses. Additional neighborhood-serving bars could encourage more resident spending, provide post-work options for office tenants, and increase the amount of time visitors spend in Georgetown. Georgetown can also absorb additional fitness uses. Residents also report strong interest in neighborhood-serving retail, like a bookstore, hardware store, and small food market with fresh and prepared foods. GEORGETOWN BID RETAIL MARKET REPORT 2017 10

FOR MORE INFORMATION CONTACT: Jamie Scott Director of Planning and Economic Development Georgetown Business Improvement District jscott@georgetowndc.com (202) 298-9222 x208 While all data in this report were produced by the BID or gathered from the sources cited, the BID does not guarantee the accuracy of the data presented in this publication. The staff welcomes opportunities and partnerships to refine available data. The Georgetown BID area comprises the commercial corridors along Wisconsin Avenue between M Street and R Street; M Street between 27th Street and 37th Street; the commercial areas of Prospect Street; and the commercial areas south of M Street to the Potomac River. Every year the BID publishes market reports on the Georgetown economy. This report, all prior reports, and other research are available on the BID website at bid.georgetowndc.com. ENDNOTES: i Data in this table come from various sources. Market Fundamentals, including retail inventory, retail vacancy, retail rent, and office inventory: Costar, 2018. High retail rent and DC region retail vacancy rate: Dochter & Alexander, 2018. Resident population and median household income: Esri, 2017. Total retailers and retailers by category: Georgetown BID, 2018. Hotel rooms: STR, 2018. Visitor home location: Buxton, 2014. Additional demographic data are available on the Market Reports and Research page on the BID website. ii Note: The Georgetown BID strives to track the exact number of retail locations in Georgetown, as well as to place them in local, national, or international categories. iii Southwest BID iv Washington, DC Economic Partnership Development Report 2017-2018 v U.S. Census Bureau, Annual Estimates of the Resident Population: April 1, 2010 to July 31, 2016 vi U.S. Census Bureau, Retail Indicators Branch. Estimated Quarterly Retail Sales: Total and E-commerce vii Costar and Georgetown BID viii Ibid ix National Retail Federation, 2017 x Trendlines Washington 2017 xi 7 trends that will disrupt and define retail in 2018. Retail Dive, January 4, 2018. georgetowndc.com