Yesterday I talked about the challenge of finding quality retail space in Kent, and I can talk about that because I have personally played real estate agent and walked through empty buildings with prospective retail tenants trying to tell them what a great deal the owner’s got for them. I have to say, real estate is a thankless job and it’s often a hard sell. A lot of the space is small, dark and windowless, yet it’s still $12 a square foot, which isn’t cheap. Now, I am not a real estate agent and the City doesn’t actually own the buildings but I figure it’s worth my time to help prospective business owners see beyond the four walls in empty rooms to imagine what they could do with this space. I read a good article that describes the same process going on in Washington DC (that mentions a developer that grew up here in Kent, Jim Abdo) which goes to show it doesn’t matter how big or hot the retail market is, you have to continuously work to make it it better.
Road to a Retail Makeover
D.C.’s Plan to Revive Shopping Areas Leads Through H Street NE
By Ylan Q. Mui
Washington Post Staff Writer
Monday, June 25, 2007; D01
On H Street Northeast, there are hipster bars that draw weekend crowds large enough to rival those of U Street. There is a dance studio that teaches ballroom, ballet and Afro-Caribbean. A massive red-brick luxury condo building is rising on the western end, touting the slogan “DC’s next great quarter.”
The corridor once infamous for race riots and crime is in the midst of an urban revival. But one critical piece is missing: the shopping.
A few veteran mom-and-pop stores have survived the decades of neglect. A handful of national chains, such as Payless ShoeSource and Rite Aid, have staked out ground. But retail along H Street has not caught up with the rest of the development. Check-cashing stores, tax preparers and liquor stores dominate.
The District is looking at the street as one of the first places where it can influence the shopping landscape. Recently, Mayor Adrian M. Fenty (D) and Planning Director Harriet Tregoning said the District will develop a citywide plan to keep and attract retail, and stem the $1 billion in sales tax they say is leaked to surrounding jurisdictions. The plan will target 20 neighborhoods where stores have failed to take hold.
H Street is on the list, along with Georgia Avenue, Shaw, M Street SE, Nannie Helen Burroughs Avenue, East Capitol Street and Bladensburg Road. The other neighborhoods have not yet been identified.
Each faces its own challenges. Some require redevelopment from the ground up, others resemble suburbia. But H Street is perhaps the closest to a turnaround.
The community hopes the city’s plan will create a better environment to attract retail. Among their requests are tax breaks for restoring old buildings, an expedited permitting process and cleaner streets.
“They talked about H Street in the theoretical and now we’re here,” said Joe Englert, who owns several popular bars in the neighborhood. “Now they’ve got to get in a different mind-set.”
During a bumpy van ride through the corridor, Tregoning and Neil O. Albert, deputy mayor for planning and economic development, spoke about their visions of higher-quality stores on the street.
Over the next 10 years, the city thinks the neighborhood could support 300,000 square feet of retail. Through its Great Streets program, the city plans to spend $27 million sprucing up the corridor with wider sidewalks, more trees, flattering lighting, bike racks and signs for community attractions. There are plans for a trolley to ferry residents along the 1 1/2 -mile stretch.
Build it and they will come seems to be the prevailing philosophy. There are hopes for more apparel retailers, a jewelry store, book shop, pet store. The blocks from 7th to 12th streets are designated as the retail epicenter. To the west is the residential neighborhood that, with any luck, would feature a grocery store like Trader Joe’s. To the east is the arts-and-entertainment zone, ending at Hechinger Mall.
“You can almost never begin with retail first, because retail wants customers,” Tregoning said.
About 40 to 45 of the street’s 300 buildings are vacant, according to Anwar Saleem, head of the city’s Main Streets initiative on H Street, which aims to spur business. That’s an improvement from the roughly 150 that were empty four years ago, he said. A slew of new businesses have moved to the area — clothing boutique and salon Stella Bleu, coffee shop Sidamo, a gym called WillPower that advertises pilates classes. There’s also a Subway, Rainbow clothing store and GameStop.
Retailers that can keep up with the $2 million condos going up down the street are still several years away by the most ambitious estimates. A strip shopping center called H Street Connection dominates the corridor’s retail district — not quite the historic feel that residents and city officials envision.
Henry Fonvielle, executive vice president of the Rappaport Cos., which owns the center, said he just now is starting to think about remodeling.
He would eventually like to raze the building and replace it with a mixed-use development with retail on the bottom floors and residences above. But rents have to rise substantially to make it worth the effort, he said.
Still, Fonvielle said he is excited by the changes underway. It’s all a matter of timing.
“Every time a storefront turns over on H Street, it’s going to be a turnover for the better,” he said. “It’s just an evolutionary process.”
High Costs of Change
City officials say they envision a shopping district on H Street populated with lots of small, unique shops and a few national retailers. But independent businesses have struggled to gain footholds in the corridor because of the age and poor conditions of many of the buildings, as well as their small footprints.
Englert was one of H Street’s pioneers, opening several trendy bars and restaurants in the past two years. Englert estimated that he spent $500,000 to get Rock and Roll Hotel off the ground — nearly double the cost to open his businesses in more upscale neighborhoods such as Dupont Circle and Cleveland Park. Most of the money went to rehabilitating the building, with $85,000 for the heating and air-conditioning system.
“It’s like you need an advanced degree or an incredibly astute permit person to get the littlest thing,” he said. “In reality, you’re not going to get a lot of breaks.”
But Englert helped prove that people would make H Street a destination. Now he is planning a Belgian restaurant with mussels and frites in the 1200 block of H Street, and an indoor mini-golf place in the 1300 block.
“I know we’re going to do well there when all’s said and done,” he said. “But you have to be a realist and say that’s tough going. Really tough going.”
Space is another issue. Many of the properties are small and narrow, with the tiniest at about 1,250 square feet — too small for most national retailers to even consider. The average restaurant needs at least 2,000 square feet. A drug store such as CVS is generally 5,000 to 9,000 square feet. Even a small grocery store such as Trader Joe’s claims about 40,000 square feet.
That means most property owners are searching for small, independent retailers to lease the space. But as property values rise, so do taxes — and rent. And many merchants have found it difficult to sell enough merchandise in their small spaces to pay off the growing rents.
There have been several casualties as well. The pet shop. The bookstore. The women’s specialty store, all felled by high rents and slow sales.
“What can you do about that?” Saleem said. “If they can’t pay the rent, they aren’t coming.”
Smokey Maye has owned the building that houses his barbershop, at 1338 H St. NE, since 1999. It’s been in business at the same location since 1966. People in the neighborhood know him by name.
In 2005, Maye said, his property taxes were $2,100. Last year, they more than doubled to $5,400. At this rate, he figures he will have to increase his prices by a few dollars just to stay in business.
Still, he said, he is glad that change is coming to H Street.
“It’s bringing people down here,” he said. “It’s just been a few businesses down here for so long.”
‘I Don’t Want to Evolve’
Developer Jim Abdo is building Senate Square, a luxury condo building on 3rd and H streets NE that will begin to deliver this fall. He said the corridor is strikingly similar to 14th Street NW.
Abdo watched change come slowly to the businesses on 14th Street, like the liquor stores that once sold 40-ounce beers and switched to stocking expensive wines instead. They adapted to the needs of the new residents.
“This is a whole new level of buying power that we’re bringing you,” he said. “Look at ways to respond to that to allow your business to grow, not leave the neighborhood.”
But not everyone wants to change. One H Street merchant, who spoke on condition of anonymity for fear of jeopardizing his business, said his core clientele are low-income residents. He said it is easier to leave H Street and follow them than to rethink his business model.
As for the residents moving to H Street? They don’t want to shop at the stores there now, he said, even though they might carry products they need. The new folks want stores that look fancy, he said. His is not among them. He figures he can last seven to 10 years.
“I don’t want to evolve,” he said. “It’s the haves and the have-nots, and they would like the have-nots to please leave.”
Saleem is trying to bridge that gap. He grew up in the neighborhood, and his parents, family and friends still live there. He doesn’t want the moms-and-pops who stuck with H Street during the hard times to leave. But he also wants to see new life breathed into the corridor.
“You may not get what you want today. But they may morph into what you want tomorrow,” he said. “It’s a whole lot better than it was.”