Washington, D.C.: Cautious outlook amid spending cutbacks

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Washington, D.C.: Cautious outlook amid spending cutbacks

By Mark Hamstra - 04/25/2018

The economy in the Washington, D.C., metro market has been on a significant upswing for the past several years, although some economists fear the good fortunes could be coming to an end amid an anti-government spending attitude in the Congress and the White House.

The federal government, which accounts for about 30% of the jobs, has been cutting back on the scale of government-funded programs, which is leading to a reduction in high-paying federal contractor jobs, according George Mason University professor Stephen Fuller.

“We are a company town, and our company stopped spending more money here,” Fuller said in a recent presentation at the university, according to Washingtonian magazine.

However, the Washington metro area’s population remains one of the most highly educated in the nation, and also one of the highest paid, with the highest proportion of doctoral degrees and a median household income of more than $75,000.

In support of the federal government, the region is home to law firms, lobbying firms, nonprofits, trade groups and professional associations. Retail groups, including the National Association of Chain Drug Stores, National Retail Federation and Food Marketing Institute, all have their headquarters in the area.

Many observers of the retail scene believe the local economy remains vibrant, despite government cutbacks.

“D.C.’s retail market is expected to remain strong as the metropolitan area’s economy is expected to grow by an average of 34,000 jobs per year for the next five years,” the Washington, D.C. Economic Partnership wrote in a recent report, citing data from HIS Markit and real estate firm CBRE. “In addition, it is estimated that D.C. will experience roughly double the nation’s percentage growth in food and beverage spending in the next five years.”

The Washington metro market is one the largest for CVS Pharmacy, which captures more than half the drug store market share, according to a 2015 research report from Barclays Capital. The chain gained a significant presence in the market through the 1990 acquisition of Alexandria, Va.-based Peoples Drug, which it converted to the CVS Pharmacy banner in 1994. Walgreens and Rite Aid each had a much smaller percentage of the Washington drug store market share before the recent sale of Rite Aid to Walgreens and Albertsons.

Ahold’s Giant Food division is the leading grocer in the market with about 100 area stores and a 20.2% market share, according to the Washington Business Journal — about double that of second-place grocer Safeway, whose 79 stores reflect a roughly 10.7% market share.

CVS Pharmacy was ranked third on the list with 255 locations and 8.7% of the grocery market. It was followed by Kroger’s Harris Teeter banner, which has 42 locations and 7.3% share, and Supervalu’s Shoppers Food & Pharmacy, which has 31 stores and just under a 6% share.

Whole Foods has several stores in the market and a few more in the pipeline. Wegmans Food Markets, which has long been active in the Maryland and Virginia suburbs, said last year that it was planning its first store in the District of Columbia itself. Reportedly one of the retailer’s smallest locations, it is expected to be twice as large as the nearby 40,000-sq.-ft. Whole Foods.

While the suburbs and higher-income areas of the region have seen a boom in supermarket development, the market also has struggled with a high level of food deserts — or areas underserved by grocery retail.

One retailer seeking to tackle that challenge is Good Food Markets, which opened one small store in an underserved area in 2015 and has since been in discussions to expand to other underserved communities in the area.