The crux of their analysis for the retail sector is based on DC's strong long-term employment prospects. Delta Associates is expecting the Washington-metro area economy to "moderate" this year with few employment gains and a rising unemployment rate. Still, though, the local economy should grow 1.3% in 2009, thanks to federal spending activities. In consultation with Dr. Stephen Fuller of George Mason University, Delta Associates projects that 9,800 new payroll jobs will be created in the Washington area in 2009. Job growth will rise in 2010, with 34,100 new jobs, and gain steam in 2011 with 42,400 new jobs.

"Right now it is apparent everyone is sitting tight, waiting out the recession. But I do believe that there are retailers out there that have an eye on the longer term and are making plans for expansion."

Currently the Washington-metro area has over 117 million square feet of retail space in more than 1,000 shopping centers. Northern Virginia is home to over half of the total metro retail inventory. For various reasons the metro area--especially the District itself--is under-served by retail, compared to the national average. The District of Columbia has 8.7 square feet of retail space per capita; the national average is 20. The metro area as a whole has 25.1 square feet per capita of retail space--but it is still considered under-served given the higher income levels here. Also just over half of the Washington area shopping centers are over 25 years old; only 15% are aged ten years or less.

If there is any category likely to first show signs of health in the retail sector it is bound to be the grocery-anchored shopping centers. Indeed, these have not suffered as badly as centers anchored by big box stores. Furthermore, the scarcity of retail stores is particularly acute in this sector. The national average for grocery stores on a per capital basis is 8,700. In the DC area as a whole that number is 17,800. In Maryland it's 10,800 and Northern Virginia, 8,300.

Such figures should provide comfort to developers and retail owners as they wait out the storm. Delta concludes its report by noting the obvious: tenants will control the market this year. The transition to a landlord's market should begin as early as next year, it said. Therefore developers should:

• Start planning for the next expansion now;
• Start site assembly in 2009-2010;
• Start construction in 2010;
• Deliver product in 2011 when the market shifts towards the landlord's favor.