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Market Report

Washington, D.C. Retail Investment Forecast

2022 Outlook

Rising Wages Contribute to Increased Disposable Income, Restoring Retailer and Investor Confidence

Consumer spending encourages retailer expansion. Fundamentals steadily improved throughout the final nine months of 2021, providing optimism for the metro's retail sector. Increasing wages and excess savings, due to government stimulus, enhanced consumer spending power, prompting a surge in retail sales. This elevated demand for available space among vendors, with tenants absorbing nearly 1.3 million square feet over the last three quarters of 2021. Several factors indicate this momentum will carry over into 2022. Employers will add nearly 100,000 positions this year, and the metro's plethora of high-paying jobs continue to stimulate in-migration, supporting a further rise in retail spending. Additionally, many firms are planning to return to their offices this year and business travel should continue to rebound. This will notably improve foot traffic and consumer activity, especially in submarkets with a large office inventory like Downtown D.C., Alexandria, Fairfax County and the Dulles Corridor. Although supply additions are expected to increase this year, completions still remain below the region's trailing 10-year average and roughly two-thirds of this space is already pre-leased. Elevated space demand and limited supply pressure will allow for slight vacancy compression this year.

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