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WASHINGTON, DC-Driven by what it characterizes as the strongest metro economy in the nation, a new report by the research arm of Virginia-based Transwestern Commercial Services, Delta Associates, on the Washington, DC, retail market as the strongest in the nation, too. “The retail market in the Washington area is strong and growing,” the report says. “Major national retailers continue to enter this market due to high per capita income and an expanding employment base. The retailers interested in Washington run the gamut, from discount retailers like Wal-Mart and Target, to electronics stores like Best Buy and Circuit City, to higher-end home furnishing stores like the Container Store and Storehouse Inc.”

Underpinning this retailer-friendly business climate is that holy grail of economic development, job growth. Citing U.S. Bureau of Labor Statistics numbers, the report says that the Washington metro area economy generated 65,600 new payroll jobs in the 12 months ending in September. This represents a 2.3% rate of growth, compared to 1.3% nationally.

These jobs aren’t just any jobs. Many are well paying. “Professional and business services firms–particularly contractors who serve the federal government–added 22,700 net jobs to the Washington employment base over the last 12 months, bolstering the local economy and maintaining job growth well above the long-term average of 50,000 per year,” Delta notes. Moreover, the BLS puts the Washington area unemployment rate at 3.2% in August 2004, down from 3.5% 12 months before and well below a cyclical high of 4.0% in June 2002. This is the lowest rate in the nation among major metro markets and compares favorably to the national rate of 5.4% in August.

The impetus for this job creation is, of course, the federal government, as it ramps up defense and intelligence spending, a process that “should continue for years,” says the report, “gradually driving job growth higher as contractors expand to address new assignments for the government. And as people flow to the region and jobs proliferate, the retail sector, food services, and the construction sector will continue to churn out jobs to support the region’s growing population.”

Retail real estate owners are well-placed to benefit from this economic strength. The Washington area has over 112 million sf of shopping centers, of which 63.3 millionsf is in 664 grocery-anchored neighborhood shopping centers. According to Delta, rental rates at neighborhood centers rose 1.4% in 2004 on lower vacancy. Metro-wide, average rents are $24.60 per sf at year-end 2004, and “rents are likely to riseapproximately 2% in 2005, as insufficient new product is being developed.”

Some big box retailers have noticed, apparently, that parts of the District of Columbia itself are underserved. Before its bankruptcy, Kmart had been looking at sites in DC, but that fell through. Eventually, Target decided that it would open a store in the Columbia Heights neighborhood of the District, with construction to begin in the spring of 2005 and completed in 2007. The District is providing $42 million in public financing toward the project, Delta notes, which will probably be used to build a nearby, 1,000-vehicle parking garage.

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