Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 1
1.
Purpose of the Report
Retail development plays a central role in the economic development and quality of life for a city and its region. Thriving stores and local businesses help define the character of urban neighborhoods and provide numerous jobs to local residents.
Today, the District of Columbia is enjoying a resurgence of economic vitality that is creating new opportunities for residents. The number of home purchases is rising, home values are appreciating, and new retail establishments are opening downtown and in other affluent areas.
However, the future viability of the nation’s capital is by no means assured.
Population continues to fluctuate, and the city is becoming increasingly bifurcated;
High-income neighborhoods coexist with severely distressed communities afflicted with abandoned housing and unsafe streets. Although a building boom is transforming downtown, many other areas of the city are stagnating as residents move out and neighborhood businesses close.
This situation is not unique to Washington, DC. The Department of Housing and
Urban Development’s 1999
report indicates that, despite the gains made by cities during the economic expansion of the 1990s, the current economic boom has largely failed to improve conditions in many of the nation’s inner city neighborhoods.
1 According to HUD’s 1999
, many central city neighborhoods remain underserved. Even the “healthiest” of cities containing deep pockets of poverty that are under-retailed and have high unemployment.
2
The failure of many inner city neighborhoods to benefit from the population influx and economic gains made by metropolitan areas in the 1990s, along with the growing need for new retail markets as suburban markets become saturated, has led to a new interest in inner city retail potential. Researchers are re-examining advantages to retail offered by inner cities to suggest alternative methods of attracting businesses and improving neighborhoods where, until recently, opportunities to capitalize on retail potential have been largely ignored. Today
America’s inner cities remain an untapped resource for business.
In 1995, the Coalition of Economic Development Organizations (CEDO) and Coalition for Nonprofit Housing Development (CNHED) commissioned the
That plan highlighted the huge amount of local consumer spending leaving the city’s neighborhoods due to lack of quality retail goods and services locally.
These difficulties are only compounded by the unique differences of the District when compared to other cities. ICIC’s 1995 report
1. United States Department of Housing and Urban Development. “State of the Cities 1999.” June 1999.
2. United States Department of Housing and Urban Development. “New Markets: The Untapped Retail
Buying Power in America’s Inner Cities.” July 1999.

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 2
indicates that the District is different from other cities because of:
 A lack of inner city businesses, even relative to other inner city areas
 A lack of a manufacturing base
 The large presence of the federal and local governments
 The legacy of political crises surrounding the District government and budget
This report is an effort to detail the on-going retail investment challenges in
Washington, DC’s neighborhoods. It reviews previous national reports on inner-city development and urban retail development strategies. The report also includes input on the experiences and goals of community development organizations seeking to attract retail establishments and incorporates interviews with a diverse group of retail business owners, investors, and brokers operating in the city and suburbs. This report was commissioned by DC Agenda to provide a starting point to help inform ongoing efforts to bring more retail establishments into low/moderate-income neighborhoods.
We have outlined a set of neighborhood retail indicators that neighborhood CDCs could use to measure market potential that more accurately reflect current urban market conditions. A number of these indicators are retail specific, since retail establishments in different categories use different characteristics to decide whether to locate in a specific area. Participants from a focus group of key informants identified the types of retail establishments they wanted to target for underserved areas. These are:
 Quality grocery stores and other food stores (i.e. bakeries, green grocers, and butchers) that sell high-quality products.
 Hardware
 Full-service pharmacies
 Apparel stores
 Coffee and ice cream stores
 Sit down restaurants and delis that sell prepared foods
The retail categories can be grouped into two types: Essential services and
Discretionary services. Pharmacies, Grocery, and Hardware stores are Essential services, and will want to have exclusivity in a neighborhood (i.e. prefer to be the only one of their type in the neighborhood). Generally, the less brand loyalty consumers have to a store the more retailers will want exclusivity, since these types of retailers generally offer products that could be bought at any other store of the same retail type. Fresh Fields, a national whole food retail chain, is an exception to the supermarket model. Fresh Fields makes higher margins on their sales so they are more flexible on where they will locate.
Apparel stores, Coffee/Ice Cream shops, and Restaurants provide Discretionary services. Discretionary services offer goods that are not necessary to daily living, but are valued by customers who have extra money to spend. These stores

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 3 generally want complements, or other similar stores around them to attract a critical mass of consumers and dollars to the area. These stores are not competing directly with each other, but target a specific demographic group. Moreover, their site selection is governed less by space requirements than by the appearance of the neighborhood, and whether the neighborhood is demographically desirable.
2.
Survey Methods and Samples
The Urban Institute interviewed twenty two key informants, all of whom currently work on retail issues in the District of Columbia. Individuals surveyed include CDC representatives, developers, retailers, and government officials. We also conducted a focus group early in the process, with representatives from various local agencies to identify key issues and retail sectors. We designed the interviews to explore the barriers and opportunities to retail development in Washington, D.C. Each interview lasted roughly one hour. The names, addresses, and specifics of their individual responses are confidential.

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 4
1.
Profile of Washington, DC Retail
Washington, DC has a great deal to offer businesses as the nation’s capital—home to the federal government and a large tourist industry—and for its location near a booming
Washington, DC D&B
1995
D&B % Change
2001 1995-2001 technology industry in northern Virginia.
3 The city’s
African-American middle-class is the most prosperous in the country, and the median income of the area’s Black families exceeds that of the next most prosperous city by
Population
Retail Establishments
Retail Employees
Ratio population/establish.
% of Region's Retail Estab.
% of Region's Retail Emp.
Retail Sales/population
554,256 572,000
5,982
66,962
92.65
19.0%
19.4%
$ 23,263
5,030
62,155
113.72
13.3%
13.6%
$ 17,060
3%
-16%
-7%
23%
-30%
-30%
-27%
*Employment data are from Dun & Bradstreet Marketplace CD.
over $10,000 a year.
4
Despite these advantages, the District has suffered a dramatic drop in population size and number of employed city residents for the past two decades.
5 Over the years these demographic trends, along with political problems and a perceived high crime rate, have made attracting retail into the District a difficult task.
Overall, the Washington area’s retail sales rank fifth highest in the country.
Washington, DC currently has over 5,000 retail establishments and 62,155 retail employees, as of January, 2001. Nearly one third (31.5 percent) of the retail establishments in the District are eating places, by far the largest retail category.
Grocery stores make up the second largest retail category, followed by miscellaneous retail and liquor stores.
The District’s population is only 12 percent of the region’s total and has declined nearly 6 percent since 1990.
In contrast, the region as a whole has increased by over 12 percent.
6
The District’s share of the region’s retail establishment/ employees is higher relative to its share of the region’s population due to the heavy concentration of eating establishments in the District. The
Washington DC
Total Number of Retail Establishments
Total Number of Retail Employees
Percent of Region's Retail Establishments
Percent of Region's Retail Employees
Washington, DC population 2000
Percent change since 1990
Washington, DC Metro population 1999
2001 D&B
62,155
Census
District’s eating establishments are
31 percent of its retail sector, far
Percent change since 1990 higher than the 20 percent share in Maryland and the 21 percent share in Virginia.
This concentration is not surprising given the heavy presence of companies and
5,030
13.3%
13.6%
572,059
-5.7%
4,739,999
12.2%
3 Technology firms and corporations are beginning to move into the District as well.
4.
5.
Action Plan for Community Retail and Economic Development in Washington, DC
Action Plan for Community Retail and Economic Development in Washington, DC
6. 1990 Census of Population.

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 5 firms in the District. The heavy concentration of eating establishments in the District is also a reflection that other types of retail chains prefer to locate in the suburbs rather than the District. In 1992 and 1993 the District added just 29,000 square feet of new retail space, while the Virginia suburbs added 5.8 million square feet and the
Maryland suburbs added 2.6 million.
An examination of previous and current totals of the retail sector in Washington, DC show a population decline and downward trends in retail numbers and sales. Dun &
Bradstreet totals show the number of retail establishments and employees declining by 16 and 7 percent respectively. Consequently, the ratio of population to establishments grew 23 percent to over 100 individuals per one store. The District also saw its share of retail establishments and employees in the region decline sharply since 1995. The District’s share of retail establishments and employees fell to roughly 13 percent, a decline of 30 percent. Finally, the amount of retail sales in the District relative to overall population also slumped, dropping 27 percent to just over $17,000. In real terms the District lost retail businesses across the board, and the City’s role as a retail center appears vulnerable. But, the evidence shows that strong demand exists for many categories of retail in the District’s low/moderateincome neighborhoods
2.
Recent Retail Developments in the District
Over the past few years certain DC neighborhoods have seen a dramatic increase in retail development. This rise can be attributed to a strong economy, a new interest in urban retail development, and the District government’s attention to retail development. Fortune magazine recently released its 2000 annual report on the
“Best Cities for Business” ranking DC and its suburbs as the 4 th best metropolitan area for business in the country. Mayor Anthony Williams has made economic development a top priority for his administration, and the magazine cites the Mayor’s
“pro-business approach” as one of the reasons for the District’s high ranking.
7
Listed below is a sample of the wide variety of retail development being planned or occurring throughout the District:
 In November Mayor Williams unveiled a “Downtown Action Agenda,” an 18-point plan designed to increase housing, retail, and entertainment in the city. The plan includes the creation of 7,600 downtown housing units, 1 million square feet of retail space, 1,600 theater seats, 1,500 hotel rooms, and up to 5 million square feet of office space. The plan calls for the city to work on city beautification, opening up currently closed downtown streets, and encouraging the construction of market-rate and affordable housing in the Mount Vernon
Square region.
8
7. Wilgoren, Debbi. “Fortune Rates Area 4 th Best for Business.” The Washington Post November 14,
2000, E7.
8. Wilgoren, Debbi. “D.C. to Move Quickly to Launch Downtown Revival.” The Washington Post
November 15, 2000, B4.

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 6
 The District plans to spend $850 million over the next five years rebuilding five neighborhoods East of the Anacostia River by opening government offices, making infrastructure improvements, and creating affordable housing in the neighborhoods. The plan includes building new offices for the DC Department of
Employment Services at the Minnesota Avenue Metro Station in Northeast; building an additional government center on an empty lot at Good Hope Road and MLK Jr. Avenue in the Anacostia business district in Southeast; renovating or constructing apartments on East Capital Street and in the Bellevue neighborhood; and addressing the need for development and housing in the
Congress Heights neighborhood in Southeast.
9
 The city’s decision to move the Department of Employment Services to Northeast
Washington will clear the way for the Freedom Forum and its $100 million project to move the Newseum to Pennsylvania Avenue and Sixth Street, NW.
Moving Employment Services is projected to create up to 160 retail, restaurant, and administrative jobs along with hundreds of jobs in construction.
10
 Currently over 40 sites are under development in downtown DC totaling nearly
$3.5 billion. This development includes four new hotels, business and retail space, entertainment facilities, improved signage, and the new Washington
Convention Center. Over $257 million is being invested in F Street redevelopment projects.
11
 Starwood Urban is currently working to develop the 3500 block of Connecticut
Avenue in Cleveland Park. The company has bought up older buildings and intends to rent the renovated space to retailers.
 Starwood Urban and DC developer Michael Cain are currently developing retail in
Dupont Circle. Plans include new retail establishments, restaurants, and bars to open in the near future. Retailers coming to Dupont include Ann Taylor and Club
Monaco.
12
 The DC government has recently come to an agreement with a Detroit developer to create a new major retail center in the District that will include a Giant Food,
Kmart, and Home Depot. The center will be located near the Rhode Island
Avenue Metro station near the New York Avenue corridor. The center will house the first DC locations for Kmart and Home Depot and the first new Giant in DC since 1979. Construction is expected to begin in April 2001, and the stores are slated to open in 2002. The agreement reached between the city and the developer stipulates that 51% of the center’s employees will be reserved for DC
9. Wilgoren, Debbi. “Williams Plans to Rebuild 5 Areas.” The Washington Post November 11, 2000, B1.
10. Woodlee, Yolanda. “Williams Talks Up D.C. Development.” The Washington Post October 13, 2000,
B2.
11. Source: Downtown BID
12. Spinner, Jackie. “Dupont Circle Makeover, For Better or Worse.” The Washington Post November 6,
2000, E1.

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 7 residents, and at least 35% of construction contracts will be earmarked for small or disadvantaged businesses.
13
 A $200 million development at Chinatown/Gallery Place Metro station is planned that will create a 650,000 square foot complex housing a movie theater, an entertainment center, restaurants, and other retail establishments. The project, adjacent to the MCI Center, is expected to move forward in the near future.
 Grocery chains are planning to open up new stores in the District. Giant and
Safeway have indicated they will each open four new stores in the District, 14 and
Shoppers Food Warehouse Corporation is reportedly looking for a location in the city as well. Fresh Fields recently opened a new store on P street between 14 and 15 th Street, NW. th
13. Spinner, Jackie and Martha McNeil Hamilton. “Retail Complex Planned for D.C.” The Washington
Post September 28, 2000, A1.
14. Hamilton, Martha McNeil and Jackie Spinner. “Giant, Safeway Plan New Stores in District.” The
Washington Post September 29, 2000, E1.

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 8
Survey respondents agree that retail loss is a serious problem for the District’s economic well-being and overall image. As mentioned earlier, the categories they hope to attract are: Quality grocery stores and other food stores (i.e. bakeries, green grocers, and butchers) that sell high-quality products; Apparel stores; Coffee and ice cream stores; Sit down restaurants and delis that sell prepared foods; Hardware stores; and Full-service pharmacies.
Misperceptions about retail opportunities in DC and land assembly appear to be two of the biggest stumbling blocks to retail development. Respondents observed that many retailers are hesitant to enter the city because of perceptions of local government efficiency and safety concerns. Many people also cited population decline and other demographic changes as contributing to the retail problems.
Land availability can impact development since many retail establishments have specific space criteria for opening a store. Transportation access is another key factor in determining whether retailers locate in a particular area. One retailer said they had trouble finding a suitable location because many available sites are on streets that are too narrow to allow access to delivery trucks. Retailers also rely on traffic counts to determine whether the site is suitable for development. Given that the majority of auto commuters use access roads from downtown, surrounding neighborhoods often do not have the requisite traffic to entice retailers. The potential for developing land around Metro stops may offer a new development opportunity to retailers.
Interview and focus group participants identified a common list of challenges to retail development (perceptions, demographics, land availability, etc.). Many of the problems highlighted in this report can be addressed by different players attempting to attract retail. The first two barriers regard perceptions about the population that could be addressed by local CDCs. The last three are issues that only local government can rectify. The challenges most frequently mentioned in our interviews are listed below:
 Population Decline and Demographic Perceptions. From 1990-2000, over
30,000 residents moved out of Washington, DC. Despite the overall increase of the metropolitan population to nearly five million residents, the District population stands at roughly 570,000. Interviews revealed that retailers are concerned about the population decline and want to see an increase in population before committing to the District. In the last few years international migration and tax incentives to first time homebuyers has helped produce a modest annual increase in the District, but retailers say there needs to be a critical mass of residents that is faster than the slow gentrification occurring.
One item our interviewers mentioned was they wanted to see a greater commitment to building residential units in conjunction with retail. They felt the city needed to have a comprehensive plan (combining housing and retail) viewing the city as not just a commercial center with surrounding residential enclaves, but neighborhoods integrated with both retail and residential elements.

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 9
In general, they felt things were getting better on this front, no doubt influenced by the efforts of the DC Office of Planning to conceptualize a master plan for the
District.
The issues related to turning population decline into growth depends on successful revitalization of neighborhoods and improving public services, especially public safety and schools. Such efforts will have to come from local government initiatives.
However, the issues related to the misperceptions of the existing population is a topic that can be addressed by local CDCs. Both HUD and Abt Associates have developed indicators to measure unmet demand in the District. HUD examined buying power potential and calculated retail gaps (defined as the difference between household buying power and total retail sales) for inner city areas that are “under retailed.” Washington, DC was found to have an overall gap of $2.8 billion, and inner-city neighborhoods in the District had an aggregate gap of over
$379 million.
15 Similarly Abt examined the amount of money leaving inner city areas and developed a “leakage” indicator (outflow from the neighborhood - measured by the amount residents spent in area stores - divided by the expenditure potential, or the potential sales if residents made expenditures locally). Abt found that, of four low-income DC communities examined, grocery, hardware, furniture, apparel, and other types of retail all showed high leakage.
16
DC residents in the neighborhoods analyzed spent the majority of their disposable income outside of their neighborhoods. This effort could be replicated in other neighborhoods to show the potential for retail development in each community using preexisting data.
 Perception of crime. Many respondents feel retailers have the perception that
DC is “poor, black, and crime
Washington, DC 1993 1999 %Change infested.” One respondent said,
“retailers have a hesitancy to go where there are perceived problems.” Many felt that retailers
Homicide
Sexual Assault
Robbery
454
324
7107
241 -46.9%
248 -23.5%
3,344 -52.9% need to be confronted with up-todate data showing the market has changed dramatically. In fact, the number of homicides in the District
Aggravated Assault
Burglary
Larceny/Theft
Auto Theft
9003
11,532
31,466
8060
4,616 -48.7%
5,067 -56.1%
21,673 -31.1%
6652 -17.5% dropped 47 percent between 1993 and 1999. The number of sexual
Arson
Total
200
68146
119 -40.5%
41946 assaults dropped by 24 percent from
324 in 1993 to 248 in 1999. Finally, over a larger range of crimes the decline is
-38.4% equally impressive. Between 1993 and 1999 overall crime has dropped 38.4 percent
17
. Once again local community groups can take the lead and provide
15. United States Department of Housing and Urban Development. “New Markets: The Untapped Retail
Buying Power in America’s Inner Cities.” July 1999.
16. Action Plan for Community Retail and Economic Development in Washington, DC
17. As reported for the Uniform Crime Reports

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 10 detailed analyses of their neighborhoods to show actual conditions and crime statistics.
 Land Assembly. One of the most commonly mentioned barrier to retail development is land assembly. This issue was highlighted in an Abt report five years ago. Retailers require large plots of land for their stores, and, because property is owned by so many individuals, it is often hard to control a sufficient sized plot to entice retailers. This is a huge problem on Georgia Avenue, where the retail properties are too small to attract retailers and the property ownership is too fragmented to develop requisite lot sizes. New development often requires expensive land assembly and demolition of existing structures. The cost of major rehabilitation or change in retail use for many of the older retail buildings in the District may be greater than the potential investment return. Land speculation appears to have driven up the cost of acquiring new land, and construction costs are extremely high forcing retailers to either pass on the
District or develop stores that can generate income quickly (fast food chains).
Some of the available areas sufficient to handle larger retail development lack complementary infrastructure (like highway off-ramps). Retailers indicated that they cannot get their supply trucks to proposed sites because the streets aren’t wide enough to accommodate them.
Many respondents also said that more retailers would serve DC if there was more available parking. An example a respondent gave was the difference between
Adams Morgan and Bethesda: “If you live between them, you go to Bethesda to shop because there is parking.” Some respondents felt parking did not matter in areas that have lots of foot traffic (Dupont), but in places like Anacostia,
Columbia Heights, and 14 th Street parking availability will be critical to future success. There was some disagreement over whether parking was critical to retail success. Generally larger cities offering public transportation require much less parking to attract retail than suburban areas. Some interview respondents feel parking is used as an excuse by retailers to not come into an area, pointing to Connecticut Ave as a place where parking is not available but still does well.
The success of Dupont Circle suggests that parking requirements may be offset by a commitment to develop neighborhoods that attract large scale foot traffic.
There are enormous opportunities to develop retail around existing metro stops, and local organizations would be wise to encourage such development. If neighborhoods can increase foot traffic without relying on consumers to use their automobiles, the need for parking will not be as great a barrier to retail development across the District.
 Lack of buildings with sufficient size and signage. Retailers often need high ceilings to reduce noise (in restaurants), display goods, and store merchandise on the premises. The buildings used for retail in DC are often office buildings which, combined with the District’s height limitations (12 stories), make retail difficult to attract. Moreover, some interview respondents indicate that retail lots in DC are often residential re-zoned to commercial. Many buildings

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 11 constructed on these lots have limited depth and may not be large enough to house state-of-the-art retail facilities.
Another difficulty for retailers is obtaining approval in DC to allow nontraditional signage. This problem often occurs in areas that are relatively well off. In an area such as Georgetown, there are signage requirements that restrict the way a business can advertise their store; conversely, on Georgia Avenue there are no requirements which creates a chaotic, and to many, unappealing streetscape.
Streetscape issues do have an impact on retailers. Many respondents felt the commercial corridors in the District were not as visually stimulating as they could be due to signage problems and the lack of street maintenance. One respondent felt that her shopping center was successful due in large part to their commitment to keep the center spotless. Garbage on the ground was picked up, all garbage cans were emptied daily, and any graffiti found was immediately removed.
 Retailers are concerned about having quality workers. Most local retailers hire within a .5 mile radius of their store (larger department stores have a wider recruitment strategy). Therefore, a neighborhood’s workforce is critically important to a potential employer. This problem is two-pronged. First, many adults in the city lack higher education and do not have the skills to advance to better-paying jobs. Illiteracy and unfamiliarity with technology are serious concerns, particularly for those who have been out of the job market for some time. Language is a common barrier, particularly for immigrants.
Secondly, respondents believe area schools are poorly educating neighborhood children. Young people complete high school without even the most basic abilities. There is a feeling that schools are not providing a “useful” education, that they are not up-to-date technologically, and that students graduate without being able to speak or write proper English.
The concern over the poor educational system at area schools is unfortunately a problem that far exceeds the scope of this work. Researchers have found that across the country, the link between school and careers is largely absent for many high school students.
18 Students rarely have a good idea about a wide range of middle-level careers and the skills needed to succeed in those careers.
The District School Board has tried to address this concern by starting the
School-to-Careers program, which combines classroom learning with learning about the world of work.
High school students will follow one of five career pathways: business/marketing, health/human services, arts/communication, engineering/science or industrial technology. Each pathway includes numerous career opportunities, as well as a rigorous academic program which will prepare students for college.
18. See Robert I. Lerman, May 1996, Helping Disconnected Youth by Improving Linkages between High
Schools and Careers , The Urban Institute, Washington D.C.

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 12
Such a program is a good first step to developing a workforce required to attract retailers looking for employees and consumers with disposable income. Local
CDCs can also play a role by working with retailers to develop tailored workforce development programs to supply employers with a trained and dependable labor force.

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 13
This section provides an analysis of the targeted categories identified by the focus group. Each analysis is divided into three parts: an overview of current conditions for the retail type; a review of the requirements retailers use to decide on locating a specific store; and a set of neighborhood indicators for each targeted category to help communities understand where they stand with respect to accessible retail opportunities and where they want to go. Not everyone may agree with all six retail categories, and, in practice, attracting some of these businesses may require difficult political choices or trade-offs. But these categories reflect a desire to seek new opportunities, where differing interests can come together to craft a balanced and workable retail strategy for the District of Columbia and its underserved areas.
Traditional data that businesses use to select sites can be an impediment to attracting retail into distressed areas. The Department of Housing and Urban
Development contends that the full market potential of inner cities cannot be fully described by traditional data sources.
19 This “information gap” leaves much of the inner city cash economy unrecorded. Lack of data leads many retailers to overlook inner city locations and puts a damper on investment in those markets.
In a recently released April 2000 report the Federal Reserve Bank of Richmond recommends analyzing new indicators to measure inner city purchasing power in its Marketwise
Report Model to fully realize the potential of inner city markets.
20
One research group, Social Compact, has identified three core market drivers businesses used for analysis: 21
 Buying power indicators, including household income, housing values, and density
 Stability indicators such as population shifts
 Security indicators or crime levels
The group argues that data sources currently used to analyze neighborhood demographics fail to highlight the strong business opportunities available to retailers.
Traditional indicators, such as median income or median housing value, can misrepresent a community’s market potential. Moreover, many companies and many economic development groups are currently purchasing information from national and international marketing firms that provide detailed but inaccurate neighborhood profiles along with marketing stereotypes about residents’ preferred purchases.
This report builds on Social Compact’s work by also including indicators to help measure some of the other barriers mentioned in this report. A misperception of the local population is not the only barrier to attracting business investment into the
19. United States Department of Housing and Urban Development. “New Markets: The Untapped Retail
Buying Power in America’s Inner Cities.” July 1999.
20. The Community Affairs Office of the Federal Reserve Bank of Richmond. “A Window of Opportunity:
The Concentrated Buying Power in Inner Cities.” Community Development Marketwise Reports, April
2000.
21. Social Compact, “Emerging Neighborhood Markets Initiative,” Chicago, Illinois, 1998.

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 14 inner city. Moreover, each retail type places greater emphasis on different types of barriers. This paper recommends developing inner city indicators for all five of the barriers outlined in this report. These indicators may be used to highlight retail potential largely unrecognized by traditional data sources and emphasize both the unique qualities and similarities of each retail type. Data on location, number of businesses, and employees are from the January 2001 Dun & Bradstreet
Marketplace CD. Population counts for each Ward are 1998 totals from the Office of
Planning.

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 15
Washington, DC Ward Map
3
4
1
2
Mall
6
5
7
8

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 16
1.
Grocery Stores 22
A) Current Conditions
Washington, DC does have a number supermarkets and grocery stores in the city.
However, many of them are not located in predominately African-American neighborhoods. The two wards (Wards 2 & 3) with a majority white population have the highest number of food store employees. Conversely, Wards 6 & 7 have extremely low number of employees serving local residents.
Ward
1
Overall
Population
White (%) Black (%)
69,886 30,273 (43.3) 36,400 (52.1)
# of
Grocery
Stores
85
# of Grocery store employees
497
2 69,644 42,481 (61.0) 21,669 (31.1) 129 1359
3
4
5
6
69,054 61,583 (89.2) 3,088 ( 4.5)
66,076 12,318 (18.6) 52,490 (79.4)
63,169 6,917 (11.0) 55,373 (87.7)
61,367 18,623 (30.3) 41,585 (67.8)
40
42
87
37
720
389
504
113
7
8
63,002
60,926
1,992 ( 3.2) 60,627 (96.2)
5,390 ( 8.8) 54,609 (89.6)
30
39
213
535
B) Requirements
Large scale supermarkets need a large tract of available land of at least 4-6 acres to consider a site. One chain said they need the customer to spend a certain amount of dollars in the store, and if the store does not have parking or is not large enough building the store is not considered cost effective. This chain said they look to make between $4-6 million per store. Groceries also look very much at where other stores are located. If there are other stores in the neighborhood or area (generally a 1-3 mile radius) an incoming retailer will tend to look elsewhere. Grocery stores also need a reliable local workforce to hire from.
C) Indicators of Retail Potential
Based on our analysis we have developed a set of indicators that may be used to attract retail into DC neighborhoods. The indicators for grocery include:
 Number of similar stores in a 1 mile and 3 mile radius of neighborhood.
 Available grocery store sites in the neighborhood. Number of contiguous vacant lots in the area.
 Number of workers in a half mile radius with a high school education.
 Purchasing power of neighborhood (median income * population).
 Number of burglaries in a 1 mile radius of site.
 Traffic and foot counts.
 Leakage of food store dollars (dollar sales from local grocery stores-% of $ spent on food by local residents in community).
22 Grocery stores are SIC code 5411

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 17
2.
Apparel 23
A) Current Conditions
Despite the recent influx of retail development in the District, the city remains underretailed. Apparel retail is lacking citywide, most evidently missing in low income areas in the District. The lack of apparel retail is evident upon analysis of the city’s eight wards. In 2001 nearly half of DC apparel stores were located in Ward 2 which includes much of downtown DC. Wards 6,7, and 8 had significantly less apparel retail than any other ward. Ward 7 had the lowest number of apparel stores with 12
– five times less than the number of stores in Ward 5 and over twenty-two times less retail outlets than Ward 2.
Ward Overall
Population
White (%) Black (%) # of Apparel
Businesses
# of Apparel
Employees
1 69,886 30,273 (43.3) 36,400 (52.1) 43 242
2 69,644 42,481 (61.0) 21,669 (31.1) 268 2276
3
4
5
6
69,054 61,583 (89.2) 3,088 ( 4.5)
66,076 12,318 (18.6) 52,490 (79.4)
63,169 6,917 (11.0) 55,373 (87.7)
61,367 18,623 (30.3) 41,585 (67.8)
59
34
72
22
546
107
811
71
7
8
63,002
60,926
1,992 ( 3.2) 60,627 (96.2)
5,390 ( 8.8) 54,609 (89.6)
12
16
51
71
The lack of apparel stores in DC forces many consumers to shop outside their neighborhoods. In their 1995 study examining retail in four DC communities Abt
Associates found apparel and accessory stores to have the highest overall leakage, or outflow from the neighborhood, with leakage dollar amounts exceeding all other categories except groceries.
24 Valuable resources spent on apparel that may be captured with retail development are currently leaving DC communities in large numbers.
Interview respondents indicate that the District has great potential for retail development, and many barriers preventing retailers from coming to the city stem from poor information and misconceptions about DC. In addition, the government and developers must play a role in promoting apparel retail potential and making buildings suitable for development in the city.
B) Requirements
Interview respondents indicate that apparel retailers generally share similar site selection criteria. While all retailers examine median income, general population density, and land availability when considering sites for new stores, apparel retailers are also particularly interested in daytime traffic numbers and locating near other apparel stores that attract a similar clientele. Apparel retail success requires a strong customer base, and high population density in an area increases the likelihood of that stores will have a steady stream of shoppers. Greater numbers of stores in the area, especially those that sell “complimentary items” to an apparel
23 Apparel and Accessory stores are SIC 56
24 Action Plan for Community Retail and Economic Development in Washington, DC

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 18 store’s offerings, help attract customers to an area and increase daytime traffic.
Less emphasized in our interviews but also important to apparel retail are good streetscape maintenance and signage.
Other variables considered by apparel retailers include building infrastructure and parking. Buildings must have enough space for retailers to move in and, particularly for smaller stores, storage space. Parking availability is an issues for areas with less foot traffic and public transportation.
C) Indicators of Retail Potential
Based on our analysis we have developed a set of indicators that may be used to attract retail into DC neighborhoods. The indicators for apparel include:
 Traffic counts in less dense areas and pedestrian counts in higher density areas.
 Number of apparel retailers in the area.
 Number of apparel stores coming into the area during the next year.
 Number of vacant parcels, both total and contiguous plots
 Number of parking slots in areas with high traffic counts
 Distance to distribution centers.
3.
Restaurants 25
A) Current Conditions
The restaurant industry dominates the District’s retail sector. Ward 2 has by far the largest concentration of restaurants in DC, nearly six times the number of employees and five times the number of establishments than the next highest Ward. On the other end of the spectrum, the two southeastern wards, 7 and 8, have extremely low ratios of businesses and employees. Ward 7 is the most underserved part of the city with only 22 restaurants for its 63,000 residents. Anacostia lacks a white-table cloth restaurant, and previous reports suggest underserved areas in DC experience significant leakage of consumer dollars as well. The loss of potential restaurant spending in the city impacts tax revenues since the District has a 10 percent tax on all restaurant sales.
Ward Overall
Population
White (%) Black (%) # of
Restaurants
# of Restaurant
Employees
1 69,886 30,273 (43.3) 36,400 (52.1) 194 2173
6
7
8
2
3
4
5
69,644 42,481 (61.0) 21,669 (31.1)
69,054 61,583 (89.2) 3,088 ( 4.5)
66,076 12,318 (18.6) 52,490 (79.4)
63,169 6,917 (11.0) 55,373 (87.7)
61,367 18,623 (30.3) 41,585 (67.8)
63,002 1,992 ( 3.2) 60,627 (96.2)
60,926 5,390 ( 8.8) 54,609 (89.6)
651
131
65
122
77
22
43
16873
3154
299
1398
1071
162
355
25 Our restaurant calculations include all of SIC 5812 without ice cream stores, soft-drink and soda fountain stands (5812-02), fast food restaurants and stands (5812-03), and Pizzeria chains and stands
(5812-0601).

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 19
B) Requirements
Restaurants want other restaurants to open near them. Restaurants complement each other since each restaurant has a demographic it is trying to reach. Most restaurants target dual income couples with no children. Most respondents felt you need a critical mass of 30 to 40 year olds without kids to support restaurants because they eat out more and have more disposable income. Restaurants also tend to be near employment locations. One of the reasons cited for Anacostia not having any white-table cloth restaurants is that there are currently no major employers in the area to supply customers to local restaurants. Ward 2, which includes much of the downtown business corridor, is overflowing with restaurants.
The efforts made by the District government to move their department headquarters to different parts of the city is an excellent step in creating new employment centers and spurring new restaurant development in underserved neighborhoods
C) Indicators of Retail Potential
Based on our analysis we have developed a set of indicators that may be used to attract retail into DC neighborhoods. The indicators for restaurants include:
 Number of employees per sq. mile
 Number of restaurants in an area.
 Foot traffic counts
 Number of dual income couples without children in neighborhood
 Number of employed residents between 25-55 years old in neighborhood.
 Home price increases over last three years.
4.
Ice Cream/Coffee Shops 26
A) Current Conditions
Coffee and Ice cream stores are virtually non-existent outside of Wards 1, 2, and 3.
As of this year, only three stores existed in the five wards with over 300,000 residents. Ward 2 had the highest concentration of businesses and employees in this retail sector, which is not surprising given the large number of restaurants in this
Ward. Coffee stores are generally found around restaurants and where employees work. The low number of stores in DC outside of the downtown business district
(Ward 2) presents an opportunity for retailers to place their stores in new locations.
Ward Overall
Population
White (%) Black (%) # of Coffee/Ice
Cream Stores
# of Coffee/Ice
Cream Employees
1 69,886 30,273 (43.3) 36,400 (52.1) 3 23
2 69,644 42,481 (61.0) 21,669 (31.1) 32 337
3
4
5
6
7
8
69,054 61,583 (89.2) 3,088 ( 4.5)
66,076 12,318 (18.6) 52,490 (79.4)
63,169 6,917 (11.0) 55,373 (87.7)
61,367 18,623 (30.3) 41,585 (67.8)
63,002 1,992 ( 3.2) 60,627 (96.2)
60,926 5,390 ( 8.8) 54,609 (89.6)
10
0
2
1
0
0
172
0
NA
NA
0
0
26 This section includes ice cream stores, soft-drink and soda fountain stands (5812-02) and coffee shops (5812-0304)

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 20
B) Requirements
Coffee/ Ice Cream stores generally need foot traffic and tend to be found around employment centers. These stores complement restaurants, and they often open near restaurants with outside seating areas. Respondents feel neighborhoods need to have stores that attract evening consumers to bring coffee/ice cream stores to an area. These stores are often “front runners”, meaning they will often be the first to enter a neighborhood before other types of retail. Respondents feel that coffee/ice cream stores are not big risk takers, but some are still willing to take risks in certain areas. These stores will deviate from store size limitations, making them attractive to areas with smaller retail spaces (traditional retail corridors). One prominent retailer in this category is Starbucks. Starbucks is often seen as a sign of gentrification because of its ability to pay high rental prices, which can often drive businesses out of an area. When Starbucks enters a neighborhood it is often followed by complements who can pay higher rents. Respondents feel Starbucks looks strictly at income level and is therefore not a good store to attract to underserved areas.
Since people may not pay that much for coffee in certain neighborhoods, smaller chains or new locally owned stores might be a more attractive alternative.
C) Indicators of Retail Potential
Based on our analysis we have developed a set of indicators that may be used to attract retail into DC neighborhoods. The indicators for ice cream/coffees stores include:
 Number of employees per sq. mile
 Number of vacant store fronts
 Foot traffic counts (especially in the evening)
 Proximity to metro stop.
 Number of residents between 20-35 years old.
 New construction permits in area.
 Number of Ice cream/coffee stores in a .5 mile radius.
5.
Hardware 27
A) Current Conditions
An examination of hardware in DC suggests that the District is significantly underretailed. According to the table there are only 22 hardware stores in the city, and the majority are located downtown and in wards 1, 2, 4, and 5. In contrast, only two hardware stores are found in wards 3, 6, 7, and 8 serving over 250,000 people.
No hardware stores are located in Ward 8, forcing nearly 61,000 residents to purchase hardware outside the ward. Abt Associates argues that this is not uncommon in low and middle income DC neighborhoods. Hardware stores have
27 Hardware stores are SIC 5251

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 21 very high leakage in the city.
28 Despite recent retail development, the District remains a largely untapped market for hardware franchises and entrepreneurs.
Ward
1
Overall
Population
White (%) Black (%) # of Hardware
Businesses
69,886 30,273 (43.3) 36,400 (52.1) 4
# of Hardware
Employees
30
2
3
4
5
6
7
69,644 42,481 (61.0) 21,669 (31.1)
69,054 61,583 (89.2) 3,088 ( 4.5)
66,076 12,318 (18.6) 52,490 (79.4)
63,169 6,917 (11.0) 55,373 (87.7)
61,367 18,623 (30.3) 41,585 (67.8)
63,002 1,992 ( 3.2) 60,627 (96.2)
4
4
8
0
1
1
39
0
8
45
20
3
8 60,926 5,390 ( 8.8) 54,609 (89.6) 0 0
B) Requirements
Hardware retailers prefer to own the only store(s) in a given area. When choosing sites for stores hardware retailers seek out areas with a residential component and high population density. They also examine median income and other demographic characteristics. Many national franchises have certain requirements that must be met before they open a store in a neighborhood. These requirements include the availability of a quality workforce, parking for big box franchises, and land. Big box stores require a minimum of 40,000 square feet. Respondents indicate that stores such as Home Depot look for 45,000 square feet on the low end (Home depot's
"Villager" concept) to 120,000 square feet for prototypical boxes. Smaller stores, such as an Ace Hardware licensee, require less space, typically 5 - 10,000 square feet. Most hardware franchises are suburban oriented and do not like to take risks.
C) Indicators of Retail Potential
Based on our analysis we have developed a set of indicators that may be used to attract retail into DC neighborhoods. The indicators for hardware include:
 Traffic counts in less dense areas and pedestrian counts in higher density areas.
 Number of married couples and households in the area.
 Average age of housing stock and information on future housing development.
 Furniture sales numbers for the area.
 Number of hardware stores within a one mile radius.
 Number of vacant lots and their square footage.
 Parking availability for sites with high traffic counts and lower foot counts.
6.
Drug Stores 29
A) Current Conditions
There are approximately 100 drug stores located in Washington, DC. The majority of drug stores are located downtown or in northern parts of the District, and areas with large minority populations tend to be the most underserved. The table below reveals that Wards 6, 7, and 8 in Southeast and Southwest have the least number of drug stores per person in the city. Residents living in wards with few drug stores are
28 Action Plan for Community Retail and Economic Development in Washington, DC
29 Drug stores and proprietary stores are SIC 5912

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 22 often forced to travel long distances to purchase medication and other goods. Abt
Associates highlights this need in their 1995 study indicating that drug stores in four
District neighborhoods examined show signs of leakage. Though drug stores remain significantly under-represented in lower income District communities.
Ward
1
Overall
Population
White (%) Black (%) # of Drug
69,886 30,273 (43.3) 36,400 (52.1)
Stores
10
30
# of Drug Store
Employees
89
2 69,644 42,481 (61.0) 21,669 (31.1) 35 343
3
4
5
6
7
8
69,054 61,583 (89.2) 3,088 ( 4.5)
66,076 12,318 (18.6) 52,490 (79.4)
63,169 6,917 (11.0) 55,373 (87.7)
61,367 18,623 (30.3) 41,585 (67.8)
63,002 1,992 ( 3.2) 60,627 (96.2)
60,926 5,390 ( 8.8) 54,609 (89.6)
12
10
11
7
4
7
273
128
139
43
23
53
B) Requirements
Drug stores provide essential services to a neighborhood, mainly focusing on health and nutrition solutions. Store owners dislike competition prefer to open in locations with high population density and a large residential component. Retailers also examine median income, the potential to recruit a quality workforce, and, for big box retailers, parking availability. Drug stores do not require a great deal of space.
Generally pharmacies require 10,000 square feet, and most other stores require 8 –
10,000 square feet. Respondents indicate that some retailers seek out freestanding sites to accommodate drive-through prescription windows. The stores for these sites need a minimum of 11,000 square feet. Drug store franchises are not new to urban locations and can often take more risks than other retailers during site selection.
C) Indicators of Retail Potential
Based on our analysis we have developed a set of indicators that may be used to attract retail into DC neighborhoods. The indicators for drug stores include:
 Traffic counts in less dense areas and pedestrian counts in higher density areas.
 Counts indicating the size of the elderly and youth population in area.
 Number of married couples and households in the area.
 Number of drug and nutrition stores in the area within a 20 block radius.
 Number of vacant lots and their square footage.
 Parking availability in areas with high traffic counts and lower foot counts.
 Size and number of lots that may be used for stores with drive-through window
30 Action Plan for Community Retail and Economic Development in Washington, DC

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 23
E.
Conclusion
Increasingly, the economy of the Washington region is expanding outside the central city, with a growing share of jobs located beyond the Capital Beltway. Economic development in Washington, DC will come only from recognizing the potential advantages of its location and building on the base of existing companies while dealing frontally with the present disadvantages of the District as a business location. An economic strategy for the District needs to complement the many programs designed to increase human capital and meet the basic human needs of disadvantaged populations. Employment opportunities are a linchpin for the success of virtually all other programs designed to improve human capabilities, values, and attitudes in distressed communities.
Despite the continued decentralization of employment in our region, the consumer market of District residents represents the most immediate opportunity for inner-city based entrepreneurs and businesses. Despite low average incomes, high population density translates into a large local market with substantial purchasing power.
Making the market even more attractive is the fact that there tend to be few competitors serving it. While suburban markets are saturated, many District neighborhoods remain poorly served, especially in many types of retailing, and personal services. District based businesses that serve this demand will have an advantage over more distinctly located establishments because of their proximity to their customers. An opportunity is present for national retail and service chains focusing on inner cities, as well as large-scale manufacturing of tailored products to supply them.
Although inner-city populations present many workforce readiness challenges, innercity residents can also be an attractive labor pool for businesses that rely on a loyal, modestly skilled workforce. There is the potential to build on this resources, with new approaches to education, job placement, and training.
This study follows previous work of retail potential in Washington, DC in concluding that a number of barriers to attracting retail into the city still exist. Abt Associates’ report found three main “bottlenecks” to retail: land assembly, chain stores’ unfamiliarity with the demographics of DC’s low-income neighborhoods, and the perception of violent crime joined with real problems of theft and vandalism.
31
ICIC’s analysis of DC found similar barriers in its survey analysis of District businesses and retailers. The ICIC additionally listed parking, lack of capital, lack of jobs, an untrained workforce, and other non-wage costs including taxes, unemployment, cost of facilities/utilities, neighborhood cleanliness, and difficulties with the DC government as barriers to retail development.
32
City governments play an important role in retail development. Michael Porter argues that the vital role of government in economic development is to create a
31. Action Plan for Community Retail and Economic Development in Washington, DC
32. Berstein, T., S. Brown, J. Kelly, and The Initiative For a Competitive Inner City, “The Competitive
Advantage of Inner-City Washington, DC,” May 1995.

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 24 favorable environment for business.
33 Governments should work to market the city to retailers, deregulate and streamline processes, and improve traditional city services, such as reducing crime levels and improving schools, rather than focus on direct intervention. In addition, governments may provide subsidies to help attract retail to low-income communities. Porter feels it is a critical role of government to court, market, welcome, and assist companies, which they rarely do in inner cities.
34
The District government has begun to create such an environment.
Over the past two years D.C. government has significantly increased its attention on retail development. The government recently introduced a series of plans to promote retail throughout the city, and there are indications that retailers are beginning to return to D.C. However, despite the many gains made by the government, a number of barriers hindering retail development in the District still remain. Interview respondents indicated a number of areas in need of improvement, including governmental efficiency and regulatory reform. The main problem areas include:
 The District’s licensing/permitting and approval processes are extremely slow and cumbersome. In 1995 Abt Associates released a study arguing that the District’s problematic development approval process was so unpredictable project ideas were often discarded before they had a chance to begin.
35 still need a good expeditor to get things approved quickly.
Today many retailers
 Government incentives are not clearly defined, and incentives available are poorly marketed.
 Reliability and receptivity are important issues. Retail decisions must often be made quickly, but DC is often slow and indecisive to approve plans or return calls. Interview respondents indicate that agency employees in District offices do not seem to know all the policies in place.
 The District government can hinder the land acquisition process. Government agencies are sometimes slow moving and could help the process move along faster.
 There has not been a strong, city-wide vision plan. Retailers need to see the city is active.
 Zoning and regulations limiting signage often can turn away retailers from an area.
 The District government often fails to stay on property owners to ensure upkeep and maintain streetscapes.
33. Porter, Michael E. “New Strategies for Inner-City Economic Development.” Economic Development
Quarterly 11 (1997): 11-27.
34. Ibid.
35 . Action Plan for Community Retail and Economic Development in Washington, DC

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 25
Though many of the barriers to attracting and retaining retail in D.C. may be overcome by clearing up misconceptions, some problems can only be rectified by the government. The District government must continue their efforts to attract businesses, promote the city, and play an active role in facilitating retail development, particularly in low-income neighborhoods. This can be accomplished if the District government works to:
 Create a checklist of permitting/licensing processes for retailers to follow.
 Have staff available to play the role of an expediter. The Abt Associates study echoes this sentiment and goes a step further recommending that the District may want to consider hiring an ombudsman to guide developers through the approval process.
36
 Create a checklist of defined incentives available to retailers.
 Continue efforts to market incentives and the D.C. retail environment.
 Reduce regulatory burdens on businesses looking to open sites in the District.
ICIC’s analysis of retail in D.C. argues that businesses should be treated by the government as customers and partners. ICIC recommends that the government create a “one-stop shopping mechanism for businesses entering or operating in
D.C.” 37
 Ensure agency staff are well versed on regulations and policies to assist retailers looking to open businesses in D.C.
 Continue the current strategic planning and development occurring in the
District.
 Reduce zoning restrictions on signage to allow greater flexibility for retail.
 Step-up monitoring of property owners and streetscape maintenance.
This is an opportune time to develop retail opportunities in the District of Columbia.
The regional economy is booming; demand for retail of all types is strong; and the city appears to be regaining its appeal as a place to live. These conditions have the potential to help rebuild the city’s population, expand employment opportunities, and promote neighborhood revitalization.
The purpose of this report is to set the stage for the next phase of our retail study.
Our objectives were to (1) determine the overall barriers to retail development in the
District and (2) develop a set of neighborhood retail indicators that could be used by CDCs to help examine retail potential in their targeted neighborhoods.
36. Action Plan for Community Retail and Economic Development in Washington, DC
37. Berstein, T., S. Brown, J. Kelly, and The Initiative For a Competitive Inner City, “The Competitive
Advantage of Inner-City Washington, DC,” May 1995.

Retail Challenges in Washington, DC: An Analysis of Six Retail Categories 26
Our analysis confirms the findings of previous studies that retail development is slowed by a number of city-wide barriers. However, perceptions due to outdated information are also influencing retailers. Local developers and neighborhoods will have to provide up-to-date information on space availability, local workforce opportunities, and specialized retail requirements to accommodate the needs of these stores.
In the next stage of this project, we plan to quantify the retail indicators developed in this report for each of the 40 plus neighborhoods of the District of Columbia. The indicators will identify potential opportunities to developing a particular retail category, and the steps that the District can take to address them.
Today, many cities and non-profit agencies continue to buy inaccurate data from marketing research firms which may actually damage their local redevelopment efforts. These data products not only perpetuate stereotypes of poor neighborhoods but also typically underestimate the population, purchasing power and assets available to potential retailers and manufacturers.
Cities need to take advantage of the same federal data files used by marketing firms as well as often overlooked local and state databases to create their own market analysis of central city neighborhoods. Such an effort will help provide a more accurate, assets-based portrait of their residents.