I generally shy from events that are hot off the presses, not only because I’m not a good journalist for breaking news, but because I like things to simmer a bit. My work is less reporting and more empirical analysis. Forming a conclusion before the dust has settled is usually unwise, since the passage of time allows calmer heads to prevail. But I will make an exception this time, because it comes from what has been America’s largest retailer for decades, a subject I have featured numerous times on this blog. This time the topic hits closer to home literally: a Washington Walmart has closed, specifically the one in DC that is closest to me, and it is one of only three within the municipal boundaries of the nation’s capital. The announcement came in late February that Walmart would close a handful of locations due to “underperformance”; others include sites in Georgia, Florida, Hawaii, Illinois, Indiana, Minnesota, New Mexico, Oregon, Washington, Wisconsin, the mega-chain’s home state of Arkansas, and a smaller “neighborhood market” concept in Texas.
But it’s a slow burn. Since February, Walmart corporate has announced the closure of a few other locations beyond the dozen or so grouped with the Washington Walmart: the shuttering of Cahokia Heights tallies a fourth closure in Illinois, but this time in the St. Louis metro; the other three come from Chicago. It’s also laying off 600 people at a distribution center in Bethlehem, Pennsylvania, near where I used to live, as well as similar distribution sites in New Jersey, Texas, California, and Florida. While the closure of distribution centers has little immediate impact on the local population’s access to essential goods, they are just as important of a node of employment as the super centers—if not more so.
But perhaps this is much ado about nothing. A company as large as Walmart closes shops all the time, including a similar number last year. And the current wave of closures still pales in comparison to early 2016, when Walmart shuttered 269 locations in an attempt to shore up operations against Amazon’s increasing encroachment on its market. Over half of the 2016 closures were in the US, and the majority of those were the now-defunct Walmart Express prototype. (Most remaining 2016 casualties were in Brazil.) As a testament to the company’s scale, that 2016 closure—likely the biggest in the company’s history—represented less than 1% of total global revenue. The handful of closures in 2023 may comprise the overture of something on par with 2016, but even that wasn’t huge in the grand scheme of things.
Nonetheless, the Washington Walmart touches a nerve perhaps because it’s the closest one to me and it’s one of the few that got nixed. I only patronized it about three times in the last five years, but it’s easy enough for me to explore the surroundings and apply a sort of post-mortem beyond the press coverage and corporate-speak. The company spokesperson offered the usual: “difficult decision” “not taken likely” but this location “did not meet the company’s financial expectations”. Distilled to its semantic core, I can’t imagine such a statement is a lie; no well-run company would ever retain a non-profitable location for long, amidst a generally profitable portfolio. So what, if anything, about the surrounding conditions of the Washington Walmart on H Street NE would prompt its closure—it among a hapless group of a dozen or so locations (at least for the time being)? A quick photographic exploration of the building itself and its immediate surroundings should reveal the obvious: this Washington Walmart never suffered from a lack of population density nearby, so customer base certainly wasn’t the problem.
This Washington Walmart—by far the most densely urban of the three locations—used to rest on the generous allotted retail space within a mammoth apartment building called 77H (the address) completed in late 2013, with Walmart as its anchor tenant.
Back around 2010, Walmart announced its intention to build six locations in the District. It only ended up developing two, and the company had to settle $1.3 million to the city for reneging on a deal to serve as an anchor at the Skyland Shopping Center in the Anacostia area, home to some of Washington DC’s lowest-income census tracts. As indicated before, the other two Washington Walmarts are in lower density areas featuring primarily duplexes.
This location, easily accessible by interstate, metro, regional rail, streetcar, and even Amtrak, couldn’t endure for even a full decade, far shorter than the average depreciation cycle of a Walmart building. The entrance at the corner of H Street and 1st Street NW allowed visitors to take an escalator that foisted them to the second floor, yielding a “showroom” with 76,000 square feet of gross leasable area, about half the size of the average Walmart Supercenter (182,000 s.f.), and visibly smaller to anyone who’s spent much time at the standard Supercenter typology. It still got the job done and for many in Northwest Washington DC, it represented a much-needed infusion of big-box retail into the District, which, together with the location at 5929 Georgia Avenue NW (near the Maryland border), represented the first ever Walmart locations. And this one had a population base sharing the same floor plate: four additional stories above the Walmart host the building’s 300 residential units, while the back part of the first floor offered a reasonably sized garage for Walmart patrons, with up to two hours free parking.
Meanwhile, the frontage of the first floor of 77H (facing H Street NW) features an array of smaller in-line tenant space, mostly catering to fast food and fast casual restaurants. At the time of my survey (earlier in April), the frontage featured Quickway (a Japanese Hibachi fast-casual place with tons of locations in the Mid-Atlantic), Smoothie King (a national chain), and District Rico (Peruvian fast casual with one other location, also in DC). Scrolling the history of storefronts over 77H’s decade in operation using archived Google Street View, it appears this Washington Walmart was, not surprisingly, the most stable entity: previous inline tenants have included a very short-lived dry cleaners, Capital One Bank, and a Starbucks. Given that these latter two are typically highly coveted because of their tendency to accept long leases and to pay their rent reliably, it’s easy to speculate if the property was vulnerable for other reasons.
But why? It certainly isn’t for lack of density of activity. In keeping with the old adage “retail follows rooftops”, the immediate area had tons going on: less than a half-mile north of the US Capitol Building, a mere two blocks from Union Station, and less than a ten-minute walk Penn Quarter (the heart of DC’s downtown private-sector office district) and Chinatown. The unusually long block of H Street itself had similar urbanism on both sides of the street at the corner of H and North Capitol, where office buildings of a similar massing to 77H flank the street. But the first-floor retail there seems flimsy as well: the building on the north side of H street, just to the west of 77H, has only been able to support a Subway restaurant consistently over the years. Other tenants, like a convenience store and Au Bon Pain, called it quits a few years ago.
And it happened, despite the fact that the immediate view from outside the shuttered Au Bon Pain was this:
Maybe not Midtown Manhattan urban, but certainly more dense than the average suburban site that supports a Walmart.
But if the area near this shuttered Walmart is floundering, the real estate market sure has a funny way of showing it. In the middle of the H Street megablock, on the former site of a surface lot, Georgetown University built a new grad student apartment building during the peak of COVID-19 lockdowns just to the east of our Washington Walmart; Georgetown Law is just two blocks away. The new student housing, every bit the size of 77H, is just finishing its first school year of occupancy. While it’s reasonable to confer that Georgetown law students aren’t the target for a retailer that typically attracts a more lower-middle and working class demographic, it certainly doesn’t hurt to have a few hundred more people living within a 90-second walk. And, in the other direction (to the west), directly across 1st Street NW from the Walmart, this building, Capitol Vista, only achieved occupancy after the COVID lockdowns began.
It has a much higher floor-area ratio (FAR) than the Georgetown Housing or 77H, reaching close to the maximum height permitted in DC of around 13-14 floors.
Meanwhile, the Alta 801 complex, on the right side of the view featured here to the left, only began occupancy within the last month or two. It’s brand new.
About the only major plot of land in the area that still remains primarily devoted to surface parking is the southeast corner of H and 1st.
I can only imagine the development proposals for this lucrative site. Only a matter of time. And it’s important to note that, just a decade ago, this intersection of H and 1st involved vast surface parking lots the stretched across multiple blocks. The area has been booming.
None of the development activity in the last few years would suggest that a Washington Walmart would “not meet the company’s financial expectations”, and the local media’s coverage routinely references how “devastating” this is for seniors in the area. And if yuppie apartments and Georgetown law don’t overlap much with the “senior” cohort, it’s important to remember that, two blocks to the east, as the busy road bridges itself across the massive rail yard leading into DC’s Union Station, the historic H Street corridor begins: a 13-block urban main street franked by neighborhoods of 19th century and early 20th century rowhomes that, for much of the last 75 years, housed Washingtonians of moderate income. The corridor has gentrified considerably in the last twenty years, but no doubt many of the seniors in the area survive on modest means. Walmart chose this location not just because of the density of activity, but because it claimed a sizable core of Walmart’s less affluent prime demographic within a three-mile radius. Though that share of the population is diminishing, plenty of other working class folks could take the metro, the H Street Streetcar, or even simply drive up the I-395 tunnel and get off at the Massachusetts Avenue exit; after all, this Washington Walmart offered two hours of free parking. As many people noted when news crews interviewed them on the sidewalk, “It never seemed to be hurting for customers.”
But, against all odds, the Washington Walmart closes as more businesses and residents move in. Truly baffling, unless, of course, it isn’t. While the media outlets and the PR spokesperson for Walmart itself will tell us part of the issue, it requires the ground-truthers to state the obvious: this Walmart is facing an undue amount of retail theft, and the prevailing culture in the city is either unable or unwilling to do anything about it. The developers of 77H designed this unusual second-floor retail space with a huge parking precisely for Walmart’s tenancy. While it’s possible another retailer could take the space, if it remains vacant three years from now, as I suspect will be the case, we all know what Walmart is implying: it’s not going to be a sustainable model for any retailer. I’ve noted recently how much smaller in-line shops in malls will only keep one entry door open to the public. This Walmart, with people arriving by escalator, elevator from the garage, or perhaps even internally from the apartment building, no doubt cultivated an atmosphere of confusion and distraction, making it difficult for security. And the exact degree to which a Walmart pursues and prosecutes shoplifters probably comes down to management decisions.
Try as urbanists might to hate Walmart, this was a well-designed typology for its mixed-use area, and its everyday low prices were no doubt a godsend to the less affluent people living just north of H Street in transitional neighborhoods like Trinidad. Even as these neighborhoods gentrify, there remains a base who appreciates Walmart’s cost-cutting measures. I can’t imagine its closure will help the franchise owners for Quickway or Smoothie King. Furthermore, just a half mile further to the east, H Street offers two other grocery stores in similar structures, operating under multi-story apartment buildings: a middle-of-the-road Giant Foods, followed by the fancy Whole Foods. If a culture condoning shoplifting pervades H Street, how long before these big-name grocery stores announce the “difficult decision” to close?
I’ll concede that the widespread failure of small businesses might owe a great deal to the cataclysmic, largely negative impacts of COVID-19 lockdowns. But another commercial corridor nearby, Barracks Row (8th Street SE), doesn’t seem to be suffering anywhere near the vacancies. Some parts of town are more prone to retail theft than others, but no business can be expected to put up with such a degree that they sustain month-to-month losses. I think we’ll see many more uncomfortable closures than the Washington Walmart. Urban locations in Honolulu, Portland, Albuquerque, and Milwaukee are prompting those of us who don’t like corporate prevarications to ask the exact same question. Bricks-and-mortar retail was already feeling the pain from Amazon long before COVID and reimagined policing. What will become of revitalized urban districts with an endless row of vacant storefronts? How much longer will yuppies want to move to 77H or Alta 801? Or cities in general? I don’t like to end articles in rhetorical questions, so I won’t. I give the current trajectory five to ten more years—about the same time when developers probably first shook hands on the deals to get these projects off the ground, thinking fancy high-rise apartments in trendy neighborhoods would be foolproof. Only to learn that they can’t even support a Walmart.
12 thoughts on “Washington Walmart winnowing: why would the Waltons want to whitewash the weakness of their windowpanes?”
Re other operators willing to tackle this space: Target?
Maybe. DC has 5 Targets, at least one of which is the standard Target supercenter size, which probably is pretty much in keeping with the recently vacated Smallmart, since Targets do tend to be a shade or two smaller than Walmarts. Two of the Targets in DC replaced a Best Buy and a Petsmart, respectively, meaning they’re probably smaller than the usual Target and much smaller than the usual Walmart. Additionally, this part of town (H Street corridor) is not well represented with Targets, since the five are mostly in the north and west of DC.
That said, all the economic indicators around the area would suggest it could support a Walmart…but it didn’t, or couldn’t. “Inventory control” might have been the major issue, as I suspect it was. I wouldn’t be surprised if there was industry-coded language involved in Walmart’s PR statement which is meaningless to the layperson but easily discernible from/between Walmart and Target. Given the signals, Target would likely determine this is a spot where retail theft is beyond control. And why would Target have measurably better luck than Walmart?
Even if incomes are growing in the area due to gentrification, my suspicion is this location will only get downgraded to retailer with a higher profit margin (probably something that lacks a grocery store element), such as a Shoppers World or Ross or Marshalls, or a really large Dollar Tree. Or it will have to subdivide the floorplate and cater to multiple medium-sized tenants. Or it won’t find a replacement tenant at all.
Nailed it! Not a single one in the District. That should definitely give the H Street corridor some clout!
The bigger question: how much longer can the Giant and Whole Foods (just 5 and 7 blocks eastward down H Street, respectively) stay afloat before they go as well and create a food desert?
I’m pretty sure grocery delivery is a thing. I am also pretty sure that the level of access to “personal vehicles” is higher than just ownership.
So even as a left-leaning community development type who was a founding board member of a neighborhood grocery co-op, I am more than a little dubious about the validity of the “food desert” concept.
Yeah, I use the term sardonically, because the campaigners against food deserts treat the condition as though it occurs out of a a vacuum…as though the fact that many low-income and/or high-crime areas have nothing but corner convenience stores because of a hostility to the poor. A supermarket chain will blithely locate anywhere that is underrepresented in grocery stores that stands to run a profit–demand can only reach a certain elasticity. And if an underrepresented area cannot generate a profit, there are likely other conditions: “shrinkage” as Pete mentioned below. Corner convenience stores can still survive because, though they still most certainly suffer theft, they are a bit easier to secure and monitor due to smaller size and (probably more importantly), they sell mostly foods that don’t perish quickly, often marked up even beyond their intrinsically higher profit margin.
In this case, the people in the H Street Corridor will have other options even if the Giant closes, or the Whole Foods (as a year-old WF just did in San Francisco). Food delivery is a bit pricey, but so is getting all one’s food at a mini-mart. And if they deplete the area of good healthy food options, the surrounding market’s behavior (customer base, store management, and local law enforcement) will all have a hand in these grocery stores “not meeting financial expectations”.
Very good one Eric. It reminded me that when I worked security at Abraham and Straus in the early 1980s, the phrase “retail theft” was not dared spoken; it was called “shrinkage”. I learned this was the industry accepted term. It was a challenging management philosophy – security was supposed to be invisible, yet we were still supposed to prevent theft.
very interesting. I figured the coded language has been around for a long time. I assume that security had to avoid the actual words because otherwise shoplifters might determine that you’re “on to their case”. Makes me wonder how many plainclothes guards these stores hire.
I do think you’re on to something, but it also seems that Walmart never does well in urban environments. Multiple entrances/exits is a security factor for sure, but their suburban development pattern is so normative that they lose one of their efficiencies when pounding their round peg into the square hole of a multi-story multi-tenant building. Those urban rents require higher sales targets than their disposable buildings out in the burbs. The first Walmart didn’t open within the city limits of Chicago until 2006 for example, and many of them are now closing. Union labor requirements, city minimum wage laws, and a relative disdain for Walmart (and some other pillars of suburbia like Applebee’s, Olive Garden, your typical “mall” stores) is a factor too. Even when they are in cities, they seem to be at the periphery where land is cheaper and they can implement their suburban development typology.
Walmarts were definitely chary to explore the urban prototype. Even in urban settings, they’d often prefer to take the brownfield redevelopment into “neo-suburbanism”, building their conventional suburban model in an otherwise urban setting, as they did in Philadelphia and New Orleans, which is largely in keeping with your observation, though the two I know well (Philly and NOLA) aren’t really peripheral, but it’s definitely cheaper land with plenty of surface paring. The urban prototype is uncommon, much more so for Walmart than Target. And neither Brooklyn nor Manhattan have any Walmarts.
I appreciate that you mentioned the “relative disdain for Walmart” among that certain subset. It definitely has a presence in cities ranging in size from NYC to Grand Rapids. But I cannot help but wonder: even if they vocalize their disdain, do they put (or hide) their money where their mouth is? I mean, not too many among the anointed will ever admit a love for Walmart, but, much like virtually no one says, “I just really love social media”, they still Walmart and Facebook both from time to time.