Washington Walmart winnowing: why would the Waltons want to whitewash the weakness of their windowpanes?

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.