Appendix D: Retail Planning Study In 2013, the Montgomery County Planning Department and the Maryland-National Capital Park and Planning Commission (MNCPPC) initiated an effort to update its 1994 Bethesda Central Business District Plan. As a component, the project team sought a retail study to address: • the relative positioning of each district’s existing retail and future needs (over 20 years) to identify market supportable strategies to improve the area’s retail environment; • the phasing of retail for build out to guide the formation of development, zoning, and growth policies, and develop synergies with other land use functions; and, • the strategies to improve conditions for existing retailers and eliminate any obstacles that might dissuade tenants from locating in any of the study areas. Streetsense and BAE Urban Economics – two local consulting firms – undertook this study and planning document. The project kicked-off in August 2014. The work effort to complete the Retail Planning Strategy for the Bethesda Downtown Plan included extensive field survey, data analysis, market analysis, and observation of specific conditions existent in each of Bethesda Downtown’s subdistricts. The following document provides a clear direction for Bethesda’s retail future. RETAIL PLANNING STRATEGY FOR THE DOWNTOWN BETHESDA PLAN BETHESDA, MD | SEPTEMBER 2014 2 Information conveyed, data gathered and analyzed, and recommendations made within this report are intended to provide information in regard to the subject matter covered. The content presented and conclusions reached are, on the date presented, believed to be an accurate representation of facts and conditions. 3 FINAL DRAFT | OCTOBER 20, 2014 4 TABLE OF CONTENTS EXECUTIVE SUMMARY 7 INTRODUCTION TERMINOLOGY METHODOLOGY 16 BETHESDA DOWNTOWN OVERVIEW 24 DISTRICT MARKET ASSESSMENTS ARLINGTON SOUTH BETHESDA ROW METRO PEARL WISCONSIN NORTH WISCONSIN SOUTH WOODMONT TRIANGLE 88 IMPACT OF CATALYTIC PROJECTS 90 RECOMMENDATIONS 96 TECHNICAL APPENDIX 5 FINAL DRAFT | OCTOBER 20, 2014 EXECUTIVE SUMMARY Within the Bethesda Downtown submarket, collections of retail establishments in 7 districts were identified through the Bethesda Downtown planning process. These districts included Arlington South, Bethesda Row, Metro, Pearl, Wisconsin North, Wisconsin South, and Woodmont Triangle. Quality of retail space varies widely throughout Bethesda Downtown. Most of the recently constructed spaces meet the requirements of modern tenants, while other spaces – especially some older locations and residential buildings converted to retail uses – do not. As the Bethesda Downtown submarket currently operates, Bethesda Row has a regional customer base, followed by Woodmont Triangle in terms of distance traveled by patrons. For the most part, the remaining retail districts serve customers at the neighborhood or City-wide levels. The Metro district’s primary customer base is more transient than the others – its patrons are largely office workers and tourists – thereby complicating any strategy to support consolidated, long-term retail solutions there. While most people would regard Wisconsin Avenue as Bethesda’s “main street” environment, this roadway no longer serves this function for the City. Typically, Main Streets have retail on each side and easy, safe pedestrian crossing routes. The traffic volumes on Wisconsin Avenue make this condition practically impossible. Consequently, Wisconsin Avenue serves as a boundary for many of the retail district’s trade areas, rather than as a point of unification. Although this situation could be slightly improved with sidewalk improvements and pedestrian crossing enhancements, it is worth considering that the traffic burden Wisconsin Avenue bears allows the surrounding retail districts to maintain better vehicle/bicycle/pedestrian ratios. Of the districts studied, Arlington South, Bethesda Row, Wisconsin North, and Pearl District were determined to have unmet retail demand. Within each of these areas, market conditions will support the redevelopment of inferior quality retail spaces as well as the construction of new retail spaces. The Metro District, Woodmont Triangle, and Wisconsin South were determined to have more retail space than they can support, given expectations for solid retail sales performance. In these areas, emphasis should be placed on redevelopment of underperforming retail spaces and even the conversion of less appropriate retail locations to non-retail purposes, such as professional offices, studio spaces, and educational uses. Because these retail districts are all located within the Bethesda Downtown submarket, it is critically important that planning strategies for these areas are created comprehensively. If each district attempts to recreate the success of another one, the retail market will become unclear. Tenants will have difficulty understanding where they belong and why. Sales for similar types of establishments will be split. Instead, each retail district needs to build upon its initial point of market distinction within the Bethesda Downtown retail submarket. In doing so, these retail districts will prosper as individual components of a City-wide, vibrant network of shopping, eating, and community experiences. 6 INTRODUCTION INTRODUCTION In 2013, the Montgomery County Planning Department and the Maryland-National Capital Park and Planning Commission (MNCPPC) initiated an effort to update its 1994 Bethesda Central Business District Plan. As a component, the project team sought a retail consultant to address: • the relative positioning of each district’s retail currently and over 20 years to identify market- supportable strategies to improve the area’s retail environment; • the phasing of retail for build out to guide the formation of development, zoning, and growth policies, and develop synergies with other land use functions; and, • the strategies to improve conditions for existing retailers and eliminate any obstacles that might dissuade tenants from locating in any of the study areas. The client team selected Streetsense and BAE Urban Economics – two local consulting firms – to undertake this study and planning document. The project kicked-off in August 2014 and concluded three months later. The work effort to complete the Retail Planning Strategy for the Bethesda Downtown Plan included extensive field survey, data analysis, market analysis, and observation of specific conditions existent in each of Bethesda Downtown’s subdistricts. With the guidance of the client team and the expertise and knowledge of the consultant team the following document provides a clear direction for Bethesda’s retail future. 8 Over the past 250 years, the Bethesda For each downtown district, the total amount retail market has changed dramatically. Its and level of quality of the city’s existing retail commercial beginnings are located at the stock (supply) is inventoried and measured. intersection of two dirt roads marked by a The total amount of potential expenditures by structure known only as the “old stone tavern.” residents, employees, visitors, commuters – Today, these two streets – Wisconsin Avenue even high school students on lunch break – is and Old Georgetown Road – serve as the calculated for each district (demand) as a point physical focal point for a collection of seven of comparison. The difference between these retail districts that include over two million two figures equals the total amount of potential square feet of shops, restaurants, and services. new retail space that could be redeveloped and reconstructed throughout Bethesda Downtown. During this sestercentennial, Bethesda’s position as a regional commercial hub In addition to this economic equation (supply experienced several leaps forward by advances – demand = unmet demand), broader market in transit – first, heavy rail; then, trolley; and questions are examined. First, how does most recently, Metro. As the city and county Bethesda Downtown compete within the look toward the next 20 years, transportation regional retail economy? Second, do the retail is extremely likely to play a primary role in districts within Bethesda Downtown compete Bethesda’s continuing retail evolution. With among themselves? The evaluation and the growing importance of non-vehicular answer to these important questions set the movement throughout the region, Bethesda parameters in place for the city’s future ability Downtown’s location along the Capital Crescent to attract retail tenants and customers. Trail and Metro’s proposed Purple Line stands to factor prominently in the growth, character, and customer bases for the city’s commercial clusters. As a component of the Bethesda Downtown Plan, this retail market strategy seeks to complement the ongoing evaluations of the city’s open spaces, transportation network, land use, built environment, and sustainability. In the context of these other considerations, this strategy will provide market-appropriate guidance to future retail expectations, development, and prosperity. 9 FINAL DRAFT | OCTOBER 20, 2014 TERMINOLOGY RETAIL CATEGORIES From the grocery store to the jewelry shop to the coffee shop, retailers have different requirements in terms of customers, space, parking, competition, exposure, and potential sales. In general, however, the following categories represent groups of retailers with similar needs. NEIGHBORHOOD GOODS & SERVICES (NG&S) GENERAL MERCHANDISE, APPAREL, Neighborhood Goods & Services retailers rely FURNISHINGS & OTHER (GAFO) on spending from nearby