Retail MONTGOMERY COUNTY Retail Strategy Q3 2017
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a retail MONTGOMERY COUNTY Retail Strategy Q3 2017 Montgomery County Retail Study | Q3 2017 b ACKNOWLEDGMENTS SPECIAL THANKS TO THE FOLLOWING PEOPLE WHO CONTRIBUTED THEIR KNOWLEDGE TO THIS STUDY: Judy Stephenson - Office of the County Executive - Montgomery County Lily Qi - Office of the County Executive - Montgomery County Gary Erenrich - Montgomery County Department of Transportation CLIENT TEAM (MCDOT) Gwen Wright - Director, Montgomery County Planning Department Rose Krasnow -Deputy Director, Montgomery County Planning Department Rick Liu - Montgomery County Planning Department Roberto Ruiz - Montgomery County Planning Department Amy Lindsey - Montgomery County Planning Department Caroline McCarthy - Montgomery County Planning Department Jacob Sesker - Montgomery County Council (formerly at Montgomery County Economic Development Corporation [MCEDC]) Richelle Wilson - Montgomery County Economic Development Corporation CONSULTANT TEAM (MCEDC) Robert Kronenberg -Montgomery County Planning Department Patrick Butler - Montgomery County Planning Department Matthew Folden - Montgomery County Planning Department Christina Sassaki - Montgomery County Parks Department Patricia McManus - Montgomery County Parks Department Kathie Durbin - Montgomery County Department of Liquor Control Simni Rasolee - Montgomery County Department of Permitting Services Matthew Shanks - Montgomery County Department of Permitting Services Montgomery County Retail Study | Q3 2017 INTRODUCTION 1 c PURPOSE 2 ROCKVILLE 54 SETTING THE STAGE 3 SILVER SPRING 59 SUPPLY-BASED TERMINOLOGY 4 WEST COUNTY 64 DEMAND-BASED TERMINOLOGY 7 WHEATON-GLENMONT 68 WHITE OAK 73 RETAIL ENVIRONMENT 8 RETAIL TRENDS 9 REGULATION IMPACT ANALYSIS 77 RETAILER DECISION MAKING 14 REGULATORY RECOMMENDATIONS 78 COUNTY RETAIL TOPICS 16 MONTGOMERY COUNTY RETAIL HISTORY 17 CONCLUSIONS 84 MONTGOMERY COUNTY REGIONAL STANDING 18 METHODOLOGY 87 REGULATORY ENVIRONMENT 19 INVENTORY SUMMARY 20 TECHNICAL APPENDIX 90 SUBMARKET ASSESSMENTS 23 LOCAL RETAIL INTERVIEW FINDINGS 91 BUSINESS AID ORGANIZATIONS 98 SUBMARKETS DEFINED 24 SUBMARKET DEMAND TABLES 101 ASPEN HILL 25 BETHESDA 29 contents EAST COUNTY 34 GAITHERSBURG 38 GERMANTOWN-CLARKSBURG 42 KENSINGTON 46 OLNEY 50 Montgomery County Retail Study | Q3 2017 EXECUTIVE SUMMARY MAJOR FINDINGS that serve a diverse range of populations. eventually become oversaturated with The County can continue to distinguish aging or underperforming retail. This Following a ninth-month study and analysis itself within the DC area by embracing this condition contributes to higher levels of of existing, under construction, proposed, diversity as part of its market distinction. vacancy, lower rental rates, and declining and potential retail throughout Montgomery These diverse populations contribute to the overall sales. The County should prioritize County, the following conclusions were overall spending economy and are integral the repositioning of existing space in reached. to developing an equally diverse range tandem with new development to avoid this 1. Montgomery County is in good retail of retail to serve Montgomery County’s phenomenon in future years. health. Unlike other counties across the neighborhoods and businesses. The United States, Montgomery County has County will benefit from focusing on the 3. Continue to condense retail at major Retail in Montgomery reined in retail development to a larger development and support of these unique intersections. County has historically clustered at major degree, which has resulted in maintaining small businesses, as these businesses are intersections—roads that once were critical relative equilibrium currently and at 5- market differentiators for the DC area. trade routes and are now major commuter and 10-year increments for most of the Additionally, as supportable retail square thoroughfares. Moving forward, clustering 12 submarkets studied. Retail demand footage continues to shrink, these small will remain a sustainable retail development is condensing all over the United States, businesses will become the viable option to strategy. This development goal is which is having a particularly heavy effect best serve the neighborhoods throughout particularly relevant in areas with upcoming on large format, national retailers. These the county. development, such as Germantown- retailers are dealing with the repercussions Clarksburg and White Oak. of overexpansion and shrinking demand. MAJOR RECOMMENDATIONS Montgomery County submarkets, generally, Major recommendations for each submarket The major findings and recommendations are not over-supplied to an extreme fall within the following three major themes: within this report provide context and a deeper degree—a plight that other Metropolitan understanding of how the various submarkets DC jurisdictions are facing right now. 1. Encourage the repositioning of are functioning independently and how they underperforming retail into Neighborhood interact with one another. All together, these 2. There is an opportunity to redistribute Goods & Services retail. Many submarkets major findings present the broad view of how the retail categories. There is room within are oversupplied in the General the County can continue to manage its retail the Montgomery County retail supply Merchandise, Apparel, Furniture, and economy and take advantage of opportunities to shift uses away from general goods Other (GAFO) retail category in part due for innovation and advancement. retail (e.g. clothing, household furniture, to the large number of large format stores electronics) to neighborhood-serving retail throughout the county. As stores within (e.g. grocery, pharmacies, and salons) this category continue to decrease overall within every submarket. This finding square footage nationally and e-commerce presents an opportunity for Montgomery trends continue to threaten brick and County to serve as a model within the mortar sales, these retail locations should DC Metropolitan area as a municipality transition into neighborhood-serving retail. that effectively manages its retail stock to maximize the benefit to its constituents. 2. Prioritize the redevelopment of aging 3. Montgomery County should embrace its or outdated retail space. When new diverse retail supply. Montgomery County development is built while existing contains a true wealth of small businesses development is left to age, retail markets Montgomery County Retail Study | Q3 2017 LIMITED GROWTH IN RETAIL DEMAND Throughout Montgomery County, the retail supply compared to demand is generally at equilibrium. The chart below demonstrates supply and demand for each submarket currently, in 2020, and in 2025. Several submarkets, notably Bethesda/Chevy Chase/North Bethesda, Rockville, Silver Spring, and West County, are currently under supplied, while Gaithersburg should reposition a portion of its supply to other street-activating uses such as medical offices, daycares, and office space that opens onto the street. The Bethesda and Rockville submarkets are projected to experience the most substantial demand for growth. The breakdown of demand by retail type can be found in the Submarket Assessments section starting on page 23. Aspen Hill Bethesda/Chevy Chase/North Bethesda East County Gaithersburg Germantown/ Clarksburg Kensington Olney Rockville Silver Spring West County Wheaton- Glenmont White Oak SQUARE FEET 0 500 1M 2M 3M 4M 5M 6M 2016 2020 2025 2016 Demand Demand Demand Supply Montgomery County Retail Study | Q3 2017 This page is intentionally left blank. one INTRODUCTION 2 PURPOSE OF THIS STUDY Retail establishments have a critical impact on The purpose of this study is to: • What national trends are emerging daily life – from providing goods and services that will spur or stall retail growth in to serving as places where residents, office • Identify Montgomery County’s retail Montgomery County? workers, visitors and students intersect on a submarkets from a macro perspective regular basis. that broadly describes its retail • As one of the most desirable environment; retail submarkets in the country, Traditionally, retail space has been an Montgomery County is frequently a afterthought in the planning and development • Document the type, location and first location for retail prototypes. How processes, often added to supplement amount of retail in the county; can the County maintain a balanced other uses or activate the ground level of a supply and demand of retail within • Perform a series of diagnostic building. Among other DC area jurisdictions, each submarket in light of trends assessments of the county’s existing Montgomery County has emerged as a disrupting traditional, brick-and- retail conditions, including submarket- pioneer in using development practices mortar retail environments (such as level analysis of sales and spending; to minimize the oversupply of retail. The e-commerce, transition to retail as connection between sales and need, • Process and evaluate the data entertainment, placemaking, etc.)? ever-changing market conditions, and gathered; Which submarkets will be most the importance of remaining regionally impacted by these changes? competitive in metropolitan Washington, DC • Project future performance given local are all factors that play a role in retail viability and national trends; This study provides information and direction within Montgomery County. for Montgomery County’s stakeholders of • Recommend a series of strategies for every definition to make informed decisions County agencies, developers, property