Washington, D.C.'s retail sector is moving in the right direction as the year closes out and its vacancy rate drops, according to an executive at EastBanc, a developer that oversees a portfolio in the city’s Georgetown neighborhood.
Philippe Lanier, a principal at the multinational real estate investment company, said his outlook for the market is optimistic, and he expects consumerism to be on the rise in the area in 2026.
In a conversation with CoStar News, Lanier described where the District’s retail market stands and lessons learned from the past year.
His remarks come as the area's retail vacancy rate dipped below the national average for the first time since 2020, an insight from CoStar at the end of November found.
The area's retail vacancy rate declined to 4.1% in the third quarter, according to CoStar data. That's below the national rate of 4.3%. Also, asking retail rents have climbed 2.6% over the past year, outpacing the 2.2% increase nationwide.
Corridors including U Street and Georgetown command rents above $80 per square foot on triple-net leases where tenants are responsible for the expenses associated with their proportional share of occupancy of the building. Some lease rates in recent deals have exceeded $150 per square foot, according to a CoStar market analytics report.
EastBanc’s portfolio in Georgetown includes the location that tech giant Google chose for its planned brick-and-mortar store in the District.
The following conversation with Lanier has been edited for length and clarity.
How would you describe the state of DC's retail market headed into 2026?
I am optimistic on 2026. I think real estate remains very textured regionally. I don’t think that you can find any accuracy in predictions on whether our economy nationally will be strong or troubled next year. There are reasons to believe in both. It has a lot to do with government decisions and where interest rates are going and the faith of the consumer.
So, when you’re speaking to retail specifically, a retail investor has to pay a lot of attention to that because any continued weakness in the consumer affects purchasing patterns, affects retail strength and therefore the value of retail.
Washington as a submarket is one that doesn’t give me any great concern because our economy here does thrive on government and disruption. Even if we had a consumer downturn next year, I think the local consumer will still be strong and growing.
I do expect the headlines by the end of next year to be talking about people moving to the city and population growth and strong job numbers in D.C. specifically.
Any other lessons learned for retail from the past year?
This year has been extremely strong for retail, from my perspective. Our company is very heavily concentrated in Georgetown, and Georgetown’s probably doing better than it’s done in the last 25 years.
We have very strong foot traffic, strong sales every day of the week, not just weekends.
I have seen lots of demand of retailers wanting to come in. I think that Georgetown in D.C. remains a top-five market in America for new stores.
I just don’t see any cracks in that pattern. I think it’s going to continue. I think if you look at downtown retail that’s a different story because it’s still slowly rebuilding the return-to-office momentum.
What is your firm's focus moving forward?
My company, at the core, we’re a commercial developer. We have our first crane up in six years in Georgetown.
I think more of the work we’re going to be doing as a [developer] is fixing existing buildings [rather] than building brand-new ones. The brand-new ones are just so much more expensive than taking an old one at current prices and fixing it.
As a developer we tend to look at deals in the terms of basis. Right now, when you have buildings that are trading at under $200 a foot as an existing structure, that is twice as inexpensive as any other market in America. So you’re starting at just a tremendous basis, and when you start at that basis you have a lot more avenues with which to create value.
So we are extremely optimistic about being active in this market because we can start at a good starting point.
What type of interest do you see from investors?
Washington is not attracting a lot of new investment dollars. And that’s the missing piece: How do we establish new partnerships and create pipelines for investors to come in and be part of that restructuring of the city? That’s what we’ve been focusing on all year, and we’re beginning to see positive trends there. It’s another reason why I think next year will be better, as you’ll find that more investors are willing to come back.
I would say that the mood of the European investor is more favorable to America than is evident in the deal volume, the reason being America is still one of the largest and most transparent investment markets in the world.
Any other trends or challenges ahead for next year?
The trends that are most relevant to the speed of recovery [include] whether the D.C. government makes it easy for new companies to move to D.C. That means new offices and the speed at which you see people hiring in D.C., both government and nongovernment.
I wouldn’t be surprised if D.C. gets increasingly younger in the next three to five years. That’s my expectation.