David A. Lewis

David A. Lewis

+1 202 721 1127
David A. Lewis
Blog Posts: Retail Law Advisor

Trends in Urban Grocery Store Development in Washington, D.C.

Continuing our coverage of trends in urban grocery store development, this post examines recent and ongoing activity in Washington, D.C., which is a leader in grocery-anchored, mixed-use redevelopment projects.

It’s not by accident that DC leads in urban grocery store development. District leaders have undertaken a concerted effort to attract new grocery stores through public incentives, and grocery stores are more frequently than not a focal point of rapidly changing District neighborhoods. By one count, more than thirty grocery stores have been developed or re-developed in the District since 2000, with twenty-five of those stores being supermarkets in excess of 30,000 square feet. Reports of the demise of grocery stores have, so far, been greatly exaggerated – at least in DC.

One trend in DC’s urban grocery growth has been the repositioning of older grocery-anchored strip centers or standalone supermarkets into multi-story, mixed-use developments. Examples include the Giant-anchored Cathedral Commons on Wisconsin Avenue, the Giant-anchored O Street Market in Shaw, and the so-called “Swift Safeway” in Petworth. The re-development of the so-called “Social” Safeway in Georgetown, like the Cathedral Commons, includes additional in-line retail alongside the grocery store. Below are a few themes that have emerged in DC and may apply to other older grocery stores and supermarkets prime for conversion into denser, mixed-use projects elsewhere in DC and in urban markets around the country.

Urban Design/Zoning

The urban design trend among the re-developed DC grocery stores has been to flip the script: whereas the conventional supermarket design places the store to the rear of its lot behind a large parking field, DC’s new grocery stores have uniformly built to the street line. Parking and loading are generally tucked underground or behind the building so that the building becomes an inviting and integrated part of the neighborhood streetscape.  Transit access and bike parking are often major features as vehicle parking is de-emphasized.

Another way DC’s grocery stores are flipping the script on the traditional model is with respect to use. While the legality of the vernacular DC residential district “corner store” languishes in the city’s comprehensive zoning re-write, many of DC’s new grocery stores brought multi-family residential components to the commercial use rather than the reverse - trying to shoehorn a grocery store into a residential area. As a result, many of the new grocery stores have multiple levels of residential development above the new stores, giving grocers a much-sought, built-in customer base immediately adjacent.

Neighborhood Relations

Complying with dimension, use and parking requirements of zoning is a key consideration of these new grocery-anchored developments. Just as important are neighbors’ concerns regarding, among other things, traffic, parking and other impacts from the new development, as well as the temporary closure of the store while redevelopment is underway. A community outreach and benefits strategy is as important for a grocery-anchored mixed-use project as it is for any other project. Even so, disputes are occasionally unavoidable.

Ownership Structure

A grocery chain faces many options about how to complete an infill development or re-development.  The store owner could partner with a local developer to handle the entitlements process and/or to develop, manage, and ultimately sell other uses (e.g., multi-family residential) integrated into its project. Depending on the jurisdiction, these options can include engaging in a sale-leaseback, creating a condominium with separate retail and residential units, subdividing the parcel, entering into a space lease or ground lease, or having a third party developer do the work on a turn-key basis. The precise structure of the arrangement will be unique in most instances and will depend on financing and the capital structure funding the redevelopment.

While neighborhood groups may initially be resistant to re-development from a traditional surface-parked grocery store to a denser mixed-use development, once constructed these developments offer the benefit of providing what is often additional transit-oriented residential development without ousting the original grocery store use.  (This is in stark contrast to what is happening with the re-development of gas station and car wash sites, where the original use is being eradicated.  DC has become so concerned about the loss of so many gas station sites that it has created an approval process required to permit an owner to eradicate a gas station use.) As developers around the country search for well-located urban sites for additional residential development and as grocers seek to establish and/or strengthen their foothold in urban markets, we may well see the models for re-development applied elsewhere.