Media Coverage

Shopping Center Business
March 2007
Mid-Atlantic Builds On Positive Job Growth

Rife with government and military expansion that’s fueling new jobs, Virginia and Maryland are seeing new projects and new retailers open.

Randall Shearin

With Washington, D.C. as its epicenter, retail in the Mid-Atlantic states is seeing an incredible boost of development. New projects are so plentiful that it is tough to keep up with all of them. Retailers have shown no interest in slowing down their expansion plans. From Maryland to the Tidewater area of Virginia, the Mid-Atlantic has more than 70 projects that are recently completed, under construction or in the planning phases.

“The entire market is hot,” says Geoffrey L. Mackler, principal of Timonium, Maryland-based H&R Retail. “It has been crazy here. Rents have gone up and vacancies have continued to go down over the last 8 years. There are retailers ranging from small specialty retailers and restaurants to big box retailers, such as Target, who are seeking space.”

WASHINGTON, D.C.

Shopping Center Business has followed the success of Washington, D.C.’s retail scene for the past 9 years in a series of roundtables we held in the area. From being under retailed in 1998, the city now has a number of national retailers in place and open, and a number of new projects serving its affluent and industrious citizens. Recent years have seen the addition of Barney’s Co-op to the city. Next year, a 168,000-square-foot multi-level Target will open in the city as part of the DC USA project.

One of the largest projects underway in the District is Forest City’s The Yards project, located on the waterfront of the Anacostia River. The mixed-use project will offer up to 400,000 square feet of retail and restaurants, and will be developed in phases over the next 10 to 15 years. The first phase will start construction later this year and will open mid- to late 2009. The project is about 1 mile from the Mall and is adjacent to the new baseball stadium for the Washington Nationals that will open in spring 2008. When complete, Forest City’s project will have about 30 buildings that comprise The Yards, with everything from residential to retail to office. Forest City presented the project at MAPIC, the European retail real estate show in November 2006, to great response from European retailers.

“We are creating a unique neighborhood district here with an industrial character,” says Harriett Edwards-White, vice president of leasing for Forest City Washington. “We have had a lot of interest from national, regional and local retailers.”

One of the most significant deals affecting retail in Washington, D.C., was the recent sale of the ground lease of Union Station to New York-based Ashkenazy Acquisition. Union Station Venture II, a consortium of investors controlled by Boston-based AEW Advisors, sold the ground lease to Ashkenazy in a transaction valued at $160 million. Granite Partners represented AEW in the transaction. Union Station has 213,000 square feet of retail and restaurants, 109,700 square feet of office space and a 63,800-square-foot Amtrak concourse.

In the Washington metro area, which includes suburban Prince George’s, Charles and Montgomery Counties in Maryland and Fairfax, Prince William and Loudoun Counties in Northern Virginia, Mackler reports retailers like LA Fitness, Whole Foods, PetSmart, Circuit City, Sports Authority and Penn Camera are looking for space.

MARYLAND

Maryland is growing by leaps and bounds. Maryland and Virginia have both benefited from the Base Realignment and Closure (BRAC) process, which is estimated to send 16,000 new jobs into Maryland alone. Primary beneficiaries of these jobs are Fort Meade and the Aberdeen Proving Ground.

“There is huge growth in Maryland,” says Tom Maddux, president of Baltimore-based KLNB Retail. “In Frederick, just as an example, both malls are undergoing redevelopment and there are three new centers planned for the north side of Frederick alone.”

Prince George’s County

One of the shining spots in Maryland is Prince George’s County. This suburban Washington, D.C., county is about to hit its development stride, says Kwasi Holman, president and CEO of the Prince George’s County Economic Development Corporation. For years, the county, which is the nation’s wealthiest minority-majority county, was underserved when it came to retail space. In 2004, the county had an average household income of $68,000. By 2009, average household income will climb to $76,000. About 37 percent of the county’s households have incomes over $75,000. The Prince George’s County Economic Development Corporation has made a strong presence at ICSC events and has actively engaged retailers and retail developers to locate in the county. Now, a slew of projects are under construction.

“Starting in 2008, a number of projects will be up and running,” says Holman. “They will complement a lot of projects that are already providing commercial vitality. We are at the brink of the most exciting period in development in the county’s history.”

The largest project under development in Prince George’s County is National Harbor. The Peterson Companies is master planning the major waterfront project, which is being built on 300 acres of land located near the intersection of Interstate 295 and the Capital Beltway (I-95 and I-495). The site plan calls for six hotels, 10 high-end restaurants, 500,000 square feet of office space and 1 million square feet of retail, dining and entertainment. Housing units are also planned. The project is designed to make Washington, D.C., a major destination for conventions and vacations, as well as a place for locals to live, dine and shop.

One of the most talked about projects in Prince George’s County is Woodmore Towne Centre, a joint venture of Petrie Ross Ventures and Greenberg Gibbons Commercial in Landover. The center will contain 700,000 square feet of retail, 1 million square feet of office, two hotels and 600 residential units. The county’s first Wegman’s will anchor the retail.

“Maryland has one of the healthiest economies in the country,” says Brian Gibbons, president and CEO of Greenberg Gibbons Commercial. “There is significant demand for mixed-use type projects and it is going to be a continuing trend in the area.”

Greenberg Gibbons has several projects on the drawing board for other Maryland suburbs, including ones in Howard County, Frederick County and Charles County, that it has yet to announce.

Another significant development in Prince George’s County is University Town Center (UTC), in Hyattsville, which is being developed over the Prince George’s Plaza Metro station. The owner of the property, Herschel Blumberg, has owned the site for 50 years and has wanted to build a town center on it since the 1960s, even going as far as having famed architect Edward Durrell Stone, who designed the Kennedy Center for the Performing Arts, to draw up plans. While that iteration never came to fruition, Blumberg’s dream is now coming to light. Three office buildings from the Stone drawings were built, and now the rest of the town center is taking shape.

“The county recognized the potential of these sites near the Metro stations and they changed our zoning so that we are now mixed-use transit-oriented,” says Tim Taylor, vice president of leasing for Prince George’s Metro Center, Inc., the entity that is developing University Town Center.

Based on the rezoning, UTC had new site plans conceptualized that were approved by the county. The project, which will be built in phases over the next 10 years, will have up to 350,000 square feet of retail, two hotels, and 1,800 residential units when completely built out. The first phase, consisting of 227,000 square feet of retail, has started construction. Safeway will anchor that phase with its new lifestyle concept. A 14-screen, 3,300-seat Consolidated movie theater will also anchor the first phase. Some retail will open this September, with more following in 2008. The center is located 1 mile from the University of Maryland, which serves as another driver for the project.

“This area has been tremendously underserved in terms of retail for years,” says Taylor. “It is really exciting for us to see this develop.”

Also in Hyattsville, PREIT continues to make improvements to The Mall at Prince Georges, an 836,000-square-foot mall anchored by JC Penney, Macy’s, Old Navy and Target. In 2006, the center added Ross Dress For Less, Olive Garden and Marshall’s.

In Laurel, General Growth Properties and Somera Capital Management are redeveloping Laurel Mall. Plans call for the center to be transformed into an indoor/outdoor lifestyle center. The renovation is expected to be complete in 2008.

Baltimore

Demand from Washington seems to be spilling over to the Baltimore market.

Retailers looking for space in Maryland include Best Buy, Wal-Mart, Blockbuster Video, Carmax, Chick-fil-A, Cosi, TJX, DSW Shoe, FedEx/Kinko’s, Filene’s Basement, Five Below and Kohl’s. Best Buy plans to double its store count in the market, according to KLNB Retail’s Maddux, and Wal-Mart has announced three supercenters in the Baltimore area.

Baltimore-based Manekin is developing a 75,000-square-foot center in Baltimore called Anchor Square. The center is anchored by Shoppers Food Warehouse. Wal-Mart plans to open centers at Osprey Property Company’s Quarterfield Crossing in Glen Burnie, David S. Brown Enterprises’ Lansdowne Station near BWI Airport, and a new freestanding location in Hunt Valley. Lansdowne Station, being leased by KLNB Retail, will also include 190,000 square feet of retail shops.

David S. Brown Enterprises is also developing Metro Centre at Owings Mills, a mixed-use project that will contain more than 225,000 square feet of retail and restaurants. The town center development will be built on the parking lot of a Metro station. Residential, office, hotel and other uses are planned for the development. CBL & Associates Properties also completed a lifestyle expansion and renovation to its Harford Mall in Bel Air during 2006. Manekin is also developing a 120,000-square-foot lifestyle center in Bel Air, called Park Avenue. Lifestyle centers and town centers of various sizes are popping up everywhere in suburban Baltimore, says Maddux.

“All the various jurisdictions are hot on lifestyle and main street developments,” he says. “There are variations of that showing up everywhere. Sometimes it’s in front of a power center or a strip center. Instead of having traditional pad users, it seems developers have switched to having a small service strip and a small lifestyle or main street environment.”

One successful lifestyle center in the market, Hunt Valley Towne Centre, developed by Greenberg Gibbons Commercial, is in the process of adding a 200-unit apartment complex to the center. Greenberg Gibbons is also in the process of expanding its Village at Waugh Chapel in Crofton. The mixed-use center currently has 425,000 square feet of retail, 75,000 square feet of office and 300 residential units. Greenberg Gibbons will add another 600,000 square feet of retail, 135,000 square feet of office and 225 residential units to the center. Anchors at the center include Wegman’s, Target and an unannounced movie theater.

In Howard County, Manekin has a grocery-anchored center under development.

Annapolis

In Annapolis, Greenberg Gibbons Real Estate is developing Annapolis Town Center at Parole. The 2.2 million-square-foot mixed-use urban-style project is being developed on 33 acres on the site of the former Parole Plaza. The project will have 900 residential units in buildings ranging from 12 to 16 stories, office and hotel uses, and 675,000 square feet of retail anchored by Whole Foods and Target. The project is under construction and will open in October 2008.

Westfield is making a $150 million reinvestment to its Westfield Annapolis center, adding 240,000 square feet for two mini-anchors, improvements and upgrades to the food court and center court, and a new lifestyle precinct with exterior facing retail and restaurants. The center is also adding three new parking structures. In 2006, the company completed a $140 million renovation project at Westfield Wheaton, where Macy’s and a new food court, as well as 50 new stores, were added.

Montgomery County

On the other side of Washington, D.C., in Montgomery County, Maryland, activity is also taking shape in Bethesda and Rockville. Prices for retail assets along Rockville Pike in Montgomery County have risen, according to H&R Retail’s Mackler.

“People are buying strip centers along Rockville Pike at crazy numbers like $1,000 per square foot,” he says. “By doing so, they are banking on being able to get the zoning changed to go vertical. Developers are creating pocket cities similar to the way Tysons Corner [Virginia] was created 30 years ago.”

Combined Properties is currently renovating its College Plaza Shopping Center in Rockville.

“Long term, we see that center going to some sort of mixed-use forum,” says Combined’s president, Cathy Roberson. “We’re not there yet, because we have long term tenancies in place. We are updating and upgrading the façade.”

One developer who is already developing mixed-use along Rockville Pike in Rockville is JBG Rosenfeld Retail. The company is developing White Flint Crossing, a mixed-use center that has 225,000 square feet of retail, anchored by a 60,000-square-foot Whole Foods, and 400,000 square feet of residential space. The company plans to locate four or five upscale restaurants at the center, according to Billy Orlove, leasing director for JBG Rosenfeld. The company plans to open the project in 2009.

JBG Rosenfeld Retail is also developing Twinbrook Commons in Rockville for delivery in 2009. The 2 million-square-foot mixed-use project will have 1,600 residential units, 207,000 square feet of retail and 300,000 square feet of office.

In Bethesda, Westfield has plans to invigorate its Westfield Montgomery center, adding 500,000 square feet of new and reconfigured space in a new shopping area. New shops and restaurants, as well as a new food court and fashion wing, theaters and two structured parking decks will be added. Westfield owns three centers in the region, and once Westfield Montgomery has been completed, all three will have received significant reinvestment and redevelopment since 2006.

Just over the border from Washington, D.C., in Chevy Chase, Maryland, New England Development, Boston Properties and Archstone-Smith are creating Wisconsin Place, a 1.1 million-square-foot retail, residential and office project. The project will feature The Shops at Wisconsin Place, at 305,000 square feet, anchored by Bloomingdale’s, specialty retail and a Whole Foods Market.

VIRGINIA

Development is rampant throughout the state of Virginia, says Gerald Divaris, chairman and CEO of Virginia Beach-based Divaris Real Estate, Inc. As where development used to be confined to Northern Virginia, Hampton Roads and Richmond, new retail projects are springing up in southern and western Virginia as well. Areas like Charlottesville, Roanoke and Danville are seeing activity. Meanwhile, already active markets like Northern Virginia and Richmond have exploded with new projects.

Northern Virginia

As in Maryland, Northern Virginia has seen a lot of additional jobs move in as part of BRAC. In addition, as government continues to increase its presence, so too do government contractors who have offices in the area.

“In Fairfax, Prince William and Loudoun Counties, the growth is still driven by sprawl into those areas with jobs and housing,” says Tom Maddux, president of Baltimore-based KLNB Retail.

The Macerich Company has a long-range plan to make Tysons Corner Center a mixed-use environment that includes adding office and residential to the area. The super-regional, 2.2 million-square-foot mall is anchored by Nordstrom, Bloomingdale’s, Macy’s and Lord & Taylor. An expansion to the center that opened in 2005 added a 16-screen AMC Theatres complex, a 10-unit food court, and Barnes & Noble among other space. Macerich has long term plans to add up to four office buildings comprising 1.4 million square feet of space, 1.6 million square feet of residential space and 200,000 square feet of additional service retail to the area around the center. The company has launched a Web site, www.tysonsfuture.com, to showcase its long term plans for Tysons Corner Center.

Combined Properties, which owns a number of centers in Northern Virginia, has been focusing on repositioning and upgrading its portfolio of 28 centers in the metropolitan D.C. area. The company is also looking to increase its acquisition program in the area, according to President Cathy Roberson.

“We are focused now on acquiring good core and redevelopment centers in the Washington, D.C., marketplace,” says Roberson. “The Washington market is so strong and we are seeing a lot of bifurcation of assets — it’s either upscale and lifestyle or more value oriented. In some cases, we are renovating and going more upscale or we are making the centers more value oriented.”

Combined is currently evaluating a renovation of Courthouse Plaza in Fairfax, which it acquired in 2006, to a more upscale center. Also in Fairfax, the company is renovating the facades at two of its centers, Sully Plaza and Chantilly Plaza.

In Reston, JBG Rosenfeld Retail is developing a 35-acre parcel that will have up to 400,000 square feet of retail in its Reston Heights project. The mixed-use project will have about 4 million square feet in total. The retail component will open in 2009.

Also in Reston, JBG Rosenfeld Retail has recently completed Woodland Park Crossing, a Harris Teeter-anchored center.

In Loudoun County, Columbia, South Carolina-based Edens & Avant has opened its 100,000-square-foot The Shoppes at Ryan Park, a new neighborhood center in Ashburn. The center is anchored by Giant Food and is situated in the middle of Ryan Park Center, a mixed-use development. Ryan Park Center is located next to Market Square at Loudoun Station, a 50-acre development that will include a Metro stop, 1,500 condominiums and 1 million square feet of office space. Also in Loudoun County, The Peterson Companies is developing Moorefield Station, a mixed-use development that will have 550,000 square feet of retail in Phase I when it opens later this year. Tenants for Phase I include Target, Hudson Trail Outfitters and P.F. Chang’s China Bistro. At full build-out with all uses, Moorefield Station is expected to have 9 million square feet of commercial space.

In Leesburg, The Peterson Companies has plans for Crosstrail, a 1.8 million-square-foot mixed-use development that will contain 775,000 square feet of retail and restaurant space.

In Dulles, Lerner Enterprises is developing Dulles 28 Centre, a 300,000-square-foot retail project that will be anchored by an existing 135,000-square-foot Wegman’s that opened in 2004. A 125,000-square-foot Target will co-anchor the center when it opens in July, and smaller retail shops will fill the balance.

In Manassas, Edens & Avant is developing Center at Innovation, a 280,000-square-foot center anchored by SuperTarget and T.J. Maxx. The center is scheduled to open in the first quarter of 2008. In Front Royal, Edens & Avant is developing Riverton Commons, a 465,000-square-foot center anchored by Wal-Mart Supercenter and Lowe’s Home Improvement Centers. Opening of the project is scheduled for the fourth quarter of this year.

In Prince William County, The Peterson Companies continues development on its Virginia Gateway project. The mixed-use center plans to add hotel, office and further retail development over the next few years.

In Winchester, Virginia, NVRetail and Tetra Partners are developing Rutherford Crossing, a 500,000-square-foot center anchored by Lowe’s Home Improvement Centers and Target.

In Fredericksburg, The Cafaro Company is underway with a massive renovation and expansion. The company is transforming Spotsylvania Mall into Spotsylvania Towne Centre by making a $100 million reinvestment in the property. As part of the transformation, a 280,000-square-foot lifestyle component will be added to the center.

Richmond

Many retailers have awakened to what Richmond has to offer, reports Connie Jordan-Nielsen, first vice president at Thalhimer/Cushman & Wakefield in Richmond. Retailers expanding in the market include REI, Borders Books, Ross Dress For Less, Staples and Kroger. Whole Foods has also signed a deal in the market, marking its entry.

“Retailers have done well in this market,” she says. “Richmond used to be considered a second-tier market, but now we are very popular among retailers because the success of Short Pump Town Center has shown retailers how great this market is.”

Development is also on a spree, according to Jordan-Nielsen, who says that nearly every area of the city has a project planned. West Broad Village is one of the most highly anticipated developments in the area. The 495,000-square-foot mixed-use center will bring Whole Foods’ entry into the area when it opens in early 2008. The center is being developed by Orlando-based Unicorp.

Activity is especially fierce around Forest City’s Short Pump Town Center, the city’s newest regional center. Dallas-based Archon Group has acquired a parcel of land across from Short Pump Town Center to develop a mixed-use project that will include 10 acres of retail, 25 acres of office and 5 acres of assisted living space. Another Short Pump area project will be the 175,000-square-foot Towne Center West, being developed by The Breeden Company. Atlanta-based Collins/Goodman Development is also in the market, developing Short Pump Station, which will be anchored by Petco.

Another development hotspot in the Richmond market is at the intersection of Routes 288 and 60 in Midlothian. Ohio-based Zaremba Group is developing Westchester Commons, a 975,000-square-foot center. Richmond-based The Rebkee Company is also planning the Shoppes at Westchester, a 300,000-square-foot mixed-use center in the area. Nearby, Charleston, South Carolina-based James Doran Co. has Midlothian Town Center planned. The 35-acre mixed-use project will include 320,000 square feet of retail and restaurants.

In Chesterfield, more development is taking place. Local developer Marchetti Properties is planning the 250,000-square-foot Stonehenge Village.

Forest City has a proposed project, called The Shops at White Oak Village, which it plans to build in Eastern Henrico County at Interstate 64 and Laburnum Avenue. The 900,000-square-foot power town center will be the largest open-air center in that part of Henrico County. Collins/Goodman has plans to build a center across from The Shops at White Oak Village.

In Chesterfield County, Charlotte, North Carolina-based Crosland has partnered with the county to raze Cloverleaf Mall and develop a 200,000-square-foot mixed-use project called Chippenham Place. Demolition of the existing mall and construction of the new project will begin in 2008. The Richmond office of Divaris Real Estate is handling the leasing of the project.

In Hanover County, Crosland is developing a grocery-anchored center at the corner of Atlee and Chamberlayne Roads called Rutland Commons. Divaris is also handling the leasing of that project.

Hampton Roads

“Tidewater Virginia continues to be pretty buoyant in terms of commercial real estate,” says Divaris. “It continues to benefit from the economy and the job market. We have so many government components and military installations that are very active now. The economy is strong and that has translated into new retail development.”

Williamsburg is seeing activity. Birmingham, Alabama-based AIG Baker is developing Settler’s Market at New Town, a 350,000-square-foot office and retail center along Monticello Avenue at Route 199. Indianapolis-based Premier Properties is also developing a 1 million-square-foot power town, Marquis, at Interstate 64 and Route 199. Anchored by JC Penney, Best Buy and Dick’s Sporting Goods, the project will open later this year.

“We are seeing a number of power towns springing up in Hampton Roads, and we are involved in a number of them, including the Marquis,” says Divaris.

In Newport News, the Jefferson Avenue corridor is the hotspot for retail development. The latest center to open is Florida-based The Goodman Company’s Jefferson Commons. At 450,000 square feet, the center is anchored by Kohl’s, Ross Dress For Less, Trader Joe’s, Ulta Cosmetics, Petco and OfficeMax. The center also includes a smaller lifestyle component. On the other side of Jefferson, Columbia, South Carolina-based Kahn Development is under construction with Patrick Henry Place, a 183,700-square-foot mixed-use center that will open later this year. PREIT has recently completed a renovation of the Dillard’s department store at nearby Patrick Henry Mall, and brought in some new retailers, according to Divaris.

One of the largest projects to open in Newport News in recent years is Oyster Point City Center, owned by Northwestern Mutual. A mix of office and retail uses, the center recently saw the opening of a new Marriott hotel. The retail street component has tenants like Chico’s, Ann Taylor Loft, Coldwater Creek and J.Jill.

In Hampton, Steiner + Associates and Mall Properties are developing The Peninsula, a redevelopment of the former Coliseum Mall. Hecht’s and JC Penney will anchor the open-air center, which will stand at 1 million square feet. Opening is set for this fall.

Across Mercury Boulevard from The Peninsula, plans are underway to redevelop Riverdale Plaza into a 750,000-square-foot project. The center is owned by a local family.

“That will be a strong project that will really complement The Peninsula project,” says Divaris.

On the opposite side of Interstate 64 in Hampton, The Cordish Company’s The Power Plant of Hampton Roads project continues to add tenants. BJ’s Wholesale recently opened at the center, which is anchored by Bass Pro Shops and Lowe’s Home Improvement Centers.

On the south side of the water in Hampton Roads (Norfolk, Virginia Beach and Chesapeake), development continues on the Town Center of Virginia Beach. A development of Armada Hoffler, a new, 38-story Westin Hotel and Residences is under construction. A new performing arts center will join later this year as well. More apartments will also be added. Retail is housed on the ground floor of most buildings, so new construction brings new retailers, says Divaris, whose company is handling the leasing for the project. Recent additions include Brooks Brothers, Origins and Ann Taylor Loft. Restaurants at the center include Ruth’s Chris, The Cheesecake Factory, P.F. Chang’s China Bistro and Gordon Biersch. McCormick & Schmick’s will join later this year. A new office building is scheduled to begin construction this year, with retail on the ground floor. A cinema will also be added in the near future. The project has been an outstanding success, says Divaris.

“We have not one square foot of office space available, and our rates are the highest in the market,” he says. “The whole concept of the town center — to live, work and play in one place — has really taken off here.”

Also in Virginia Beach, at the corner of Princess Anne and Dam Neck Roads, Florida-based The Goodman Company is developing Landstown Commons, a 500,000-square-foot mixed-use center. The company has leased 90 percent of the space at the center, which is scheduled to open later this year. Anchors include Kohl’s, Ross Dress For Less, OfficeMax, Bed Bath & Beyond, Best Buy and Five Below.

General Growth Properties has plans to invigorate Lynnhaven Mall in Virginia Beach. New restaurants and retailers will be added, and an expansion to the center is planned as part of a three-phase renovation.

In Chesapeake, Kahn Development is underway on Town Place at Greenbrier, a 150,000-square-foot retail center. Kahn Development Corporation, in cooperation with CBN, has a 1.2 million-square-foot mixed-use center off I-64 called Blenheim in the early planning stages in Chesapeake. The center will include power, department store and lifestyle retail uses.

Suffolk is also seeing new growth. Harbour View Station is a 1.5 million-square-foot mixed-use project that will have retail, residential and office space. Chicago-based Landonomics is developing the center, while Divaris Real Estate is handling the leasing for the project. A new retail center, Harbor View Station Town Center, is planned. Landonomics has developed Harbour View East, a retail center anchored by a Wal-Mart Supercenter, located across Interstate 664 from Harbour View Station.