Washington, D.C. Retail Market Report

Limited supply and tourism growth aid retail stability. The Washington, D.C., metro faces widening submarket disparities as government downsizing and office lease terminations weigh on consumer spending and weekday foot traffic. The District, recording retail vacancy above 5 percent entering 2025, will likely be most affected. Rising tourism should support future retailer demand, however, with the CBD’s hotel occupancy above 70 percent last year for the first time since 2019 and an upcoming $800 million renovation planned for Capital One Arena. Minimal new supply will also help contain vacancy risks. Deliveries are concentrated in Virginia’s suburbs, where rates are nearly 200 basis points lower. Steadier population and job growth in these areas and affluent Maryland suburbs like Bethesda — which posted record multifamily net absorption last year — should uphold tenant demand. Meanwhile, vacancy in lower-income parts of Montgomery and Prince George’s counties remains above 7 percent, but declined in 2024 as grocery stores, discount retailers and fitness centers backfilled spaces. Experiential concepts moving in this year should strengthen fundamentals.