Silver Spring's Once-Vibrant Downtown Is Stuck In The Past

In late October, Denizens Brewing in Silver Spring poured its last beer of the night for the final time.

The suburban Maryland staple had served craft brews for a decade, but when its lease came due, founder Julie Verratti decided she wasn’t willing to commit to another 10 years.

She says her decision to close was fueled by uncertainty — about the neighborhood, about the economy and about consumer behavior. Her uncertainty is a symptom of a larger plague spreading across Silver Spring, where a once-vibrant downtown commercial district is now lined with vacant storefronts and half-empty office buildings. 

“There's nobody there,” Verratti said. “It's crazy.”

Silver Spring, a dense suburb abutting D.C.’s northern border, has around 6M SF of offices and 3M SF of retail space, but those sectors have been stuck in a downward spiral. With its office stock averaging 50 years old and featuring no new buildings in the last two decades, Silver Spring has fallen behind other D.C. suburbs in attracting and retaining businesses. 

This has led to a steady stream of occupancy loss, and it has had a domino effect on the area’s retail sector. 

Denizens is one of several local businesses that have closed in recent months, and some owners of operating businesses tell Bisnow that foot traffic has been below their expectations. Meanwhile, several national retail bankruptcies like Forever 21 and Red Lobster have led prominent Silver Spring storefronts to become vacant. 

Those closures have changed the feel of downtown Silver Spring. A dozen business owners, brokers, researchers and community leaders tell Bisnow that the commercial district clearly lacks the vibrancy it once enjoyed. 

“It was great. It felt like there was a lot of stuff going on and people walking around a lot, lots of events going on, and it just felt really vibrant,” Verratti said. “And it's just not recovered. I think it's just not where it was. Let's just put it that way.”

And there’s additional instability lurking under the surface. Silver Spring has a huge federal government exposure. Three federal agencies inhabit about 30% of all the occupied space in Silver Spring, and they each have leases expiring within the next 4.5 years — leases likely to be significantly chopped.

Silver Spring’s downtown took a “gut punch” one year before the pandemic when Discovery Communications vacated its downtown headquarters, leaving more than half a million square feet vacant. The entertainment company had been in its custom-built offices, which became known for its eye-catching Shark Week display, for two decades before moving to New York. 

“The market has never really recovered from that,” CBRE Senior Vice President Niel Beggy told Bisnow. “That was really the start of the acceleration of the slide in Silver Spring’s CBD.” 

With about 1,000 Discovery employees gone — about 300 stayed in the region —  shops and restaurants saw less foot traffic. Silver Spring’s retail, totaling 3.7M SF, is now 25.5% vacant, according to KLNB.

The offices have also been hollowed out, with the region losing out on business to its neighbors like Bethesda that have new trophy mixed-use developments.

Silver Spring has suffered five straight years of negative net demand, with a net occupancy loss of 248K SF since the beginning of 2020, according to CBRE.

“It's a perfect storm of a lot of occurrences that have kind of piled up on each other that have put us where we are,” Greater Silver Spring Chamber of Commerce President Stephanie Helsing told Bisnow. 

Silver Spring’s heyday came in the mid-2010s, researchers, brokers, retail owners and community leaders told Bisnow, when more local and national restaurants and retailers were open and people were flocking to the neighborhood to work, shop, see a movie or get a beer.

“I see the change. It has a flavor, the city. It was good, beautiful,” said Bereket Tewelde, who has lived in Silver Spring for three decades and owns a photography studio at the Ellsworth Place shopping center. “But now I walk downtown Silver Spring, I didn’t see that. I hope it comes back.”

‘A Little Long In The Tooth’

At the entryway to downtown Silver Spring, the giant V-shaped office building that was once home to Discovery is still only 53% occupied, according to KLNB.

The property has changed hands twice since the anchor tenant left. Foulger Pratt and Cerberus Capital Management purchased the property for $70M from Discovery upon its exit, renaming the 10-story behemoth Inventa Towers. American Real Estate Partners has since taken control, as indicated by the firm’s press releases and website, after the lender offered it up for public sale in October. The sale hasn’t been recorded in Maryland land records, and AREP declined to comment on the sale. 

Inventa Towers isn’t alone. It is one of seven downtown office properties with more than 100K SF available, Beggy said. 

Several additional buildings closest to the Silver Spring Metro station have large blocks of available space. Across from the station, the three 1980s-era Silver Spring Metro Plaza office buildings, owned by Brookfield, are 61%, 84% and 20% leased, according to KLNB. Brookfield didn't respond to requests for comment. 

Across from Inventa, the three 1980s-era buildings that make up the Station Square office complex are 96%, 88% and 56% leased, according to KLNB. They were scheduled for a foreclosure auction this summer that has since been canceled.

Meanwhile, the 1970s-era 801 Roeder Road is just 19% leased, according to KLNB. A JLL listing for the 92K SF property says it is under contract, but a sale hasn't been recorded in land records.

Silver Spring’s office market, which totals 6M SF across 58 buildings, was 24.1% vacant as of the second quarter, CBRE reported, above the 21.8% vacancy rate in Montgomery County overall. KLNB pegs the office vacancy in downtown Silver Spring at 29%.

“The problem is it's a little long in the tooth,” Beggy said.

Attracting new tenants is difficult. The average age of a Silver Spring office building is 50 years old, according to CBRE. The last office building delivered in 2004: Foulger Pratt’s 180K SF building at 8515 Georgia Ave., across from Inventa Towers.

Office stock dating back to the Vietnam War era means the area has a difficult time battling for tenants with nearby competitors like Downtown Bethesda and Pike & Rose that have new, glistening trophy offerings. 

“It makes Silver Spring less competitive. It’s actually that simple,” Montgomery County Economic Development Corp. President Bill Tompkins said of the lack of new offices. “Everybody is competing with Bethesda, or Pike & Rose in particular, and that’s the nature of the market.” 

Of suburban Maryland’s 10 largest leases last quarter, one was in Silver Spring: a deal that represented a contraction of a tenant within the submarket. The American Nurses Association took 53K SF at Brookfield’s Silver Spring Metro Plaza 2 across from the Metro, down from its previous 83K SF lease. Eight of the 10 were in either Bethesda-Chevy Chase or North Bethesda-Potomac.

“We know we're losing businesses to places like Bethesda and Rockville, who have those Class-A, brand-new, shiny buildings,” Helsing said. “We also know from history that if there is any sort of uptick in the market that Silver Spring is still going to be looked at last.”

United Therapeutics is a rare example of growth in the area. The biotech company and Montgomery County announced a new partnership in December that would expand the company’s headquarters in downtown Silver Spring by 40% with a $100M joint investment. Its existing footprint spans 415K SF at 1000 Spring St.

The downside is that the company's culture tends to keep its 230 employees self-contained, Beggy said. 

“They're like this unbelievable $[2.5B] company,” he said. “But they're like the FBI. They don't go outside their four walls.” 

As dire as the office market seems now, an even bigger threat — in the form of federal government leases — is on the horizon. Three federal tenants occupy 20% of Silver Spring’s entire 6M SF office inventory and 30% of all occupied space, according to CBRE. The majority of the leases expire at the end of 2028, including the National Oceanic and Atmospheric Administration's 1M SF lease, which it renewed in 2013.

If precedent holds, a significant chunk of those footprints could be cut upon renewal. Over the last few years, the General Services Administration has been routinely reducing its leases by between 20% and 40%. 

“Depending on what they do … Silver Spring could be in a lot of trouble from a commercial office standpoint,” Beggy said.

The Domino Effect

For a market as office-heavy as downtown Silver Spring, dwindling tenancy and demand have widespread impacts across the entire economy.  

As empty as these buildings are when it comes to the leased footprints, the number of employees actually coming in daily is much lower than its leasing figures depict. Return to office in the D.C. metro area has hovered under 50% of prepandemic levels for the last year and a half, according to Kastle Systems data.  

That means the number of employees frequenting surrounding businesses — getting coffee, going out to a working lunch, picking up essentials at the local convenience store or dinner before they go home — is also much lower.

Getting customers in Denizens was always a “fight for every body,” Verratti said. The brewery, next to a dialysis center and a church, never had heavy foot traffic.

But over the last few years, that fight was even more difficult, and Denizens’ revenue never recovered to its prepandemic level. 

“There was just lower foot traffic,” said Verratti, who grew up in Silver Spring and lives there today. “You just didn't have as many customers because there just weren’t as many people out.”

The Luggage Center, which has been in Ellsworth Place for years, has seen about half the business it had prior to the pandemic, Manager Usha Shrestha told Bisnow. She said the drop in traffic has put the business at risk of closing. 

The center, which is owned by GBT Realty Corp., took a hit when Discovery departed, GBT Managing Director of Operations Trey Culpepper said. Then came the pandemic.

Daytime traffic is still down from prepandemic levels, Culpepper said, though it has seen an uptick over the past few months.

In addition to Denizens, several retail businesses have shuttered. Record Exchange on Colesville Road in May announced it would be closing, citing “financial and personal reasons.” Underground Pizza Co., which was open for just over two years, closed its Georgia Avenue location last month.

In January, Sip & Develop closed on Fenton Street after being open for less than two years. Owner Rashon Robinson traded that location in for one at National Harbor where there was better access to tourists, conventiongoers and residents, he told Chain Store Age. Dance studio Footlights closed in May after being open for 12 years, with its announcement saying that its regular clients preferred traveling to its Frederick, Maryland, store for its “local and unique small-town advantages.”

Crave Cafe, down the street from Denizens’ former location, also appears to have closed after being open for less than a year. A photo posted on Reddit last week shows an eviction notice for failure to pay rent. Its number has been disconnected and website shut down.

The area has also been impacted by a significant number of large retail bankruptcies: Forever 21 at the end of 2019, New York & Co. and Guitar Center in 2020, and Shoe City in 2023. Red Lobster, which closed on Georgia Avenue last month, is the most recent addition to the list.

“We lost what we would consider anchor businesses and anchor storefronts because they themselves went bankrupt and left us with empty space,” Helsing said.

Meanwhile, new businesses are finding the area slower than expected. All-day restaurant Java Nation this spring opened on the ground floor of the three-building Station Square complex, which was previously slated for foreclosure, and store Manager Patricio Gamboa told Bisnow business is slower than he anticipated.

The restaurant reaches between 40% and 50% occupancy Monday through Wednesday, but up to 80% on the weekends given the residential crowd, Gamboa said.

“I expected it to get a little bit busier. It wasn’t as I expected,” he said. 

The Silver Lining

While Silver Spring has suffered a series of setbacks, people familiar with the area and its history say they are hopeful it can withstand this moment and come out the other end.

The area has a bounty of public transit options. It already feeds the MARC commuter train system, the Metro’s Red Line and a 30-bus-bay transit center. But it will also get a stop on the new Purple Line, an east-west light rail line that has been under construction since 2017 and is now projected to open in late 2027. 

Silver Spring has boasted strong residential demand, and there are several new apartment buildings underway, demonstrating bright spots for demand, investor interest and tax revenue.

On Georgia Avenue, Roadside Development is undertaking an adaptive reuse of the historic Tastee Diner, which it plans to turn into 525 apartment units with ground-floor retail while preserving the facade of the 80-year-old diner.

At Ellsworth Place, GBT Realty has plans to build a 450-unit apartment development on top of the shopping center. The original vision was for an office building, but the developer is now moving through county approvals for the residential development, which would add 19 stories atop the five-story center.

Atwell on Spring, a 375-unit development from Stonebridge, is expected to deliver this summer. The two seven-story towers are set to include 25K SF of ground-floor retail, including a 17K SF Mom’s Organic Market.

The all-affordable 98-unit Silgo Apartments from TM Associates and Green Street Housing broke ground late last year, and Enterprise is partnering with senior housing nonprofit Seabury Resources for Aging to add 91 units to a 146-unit age-restricted home along the Purple Line. 

And for some tenants, a market like Silver Spring may be preferable to neighboring areas like D.C., Bethesda and Rockville. With its older buildings asking for cheaper rents, the area is optimal for smaller businesses, startups and other companies that can’t afford the rates for the highest tier of spaces, KLNB Director of Research Chris LeBarton said. 

There have been some recent wins: GoodVets signed a lease this winter for the former Sip & Develop space, Ellsworth Place welcomed Outback Steakhouse this past spring, and Roaming Rooster is set to open next to the former Red Lobster.

Ellsworth Place is repositioning a former Forever 21 space into a 13K SF food hall branded as Commas. Expected to open in late summer, plans call for 11 food stalls and two bars.

Meanwhile, AREP announced last month that it inked three new leases at Inventa Towers totaling 25K SF, helping to make a dent in the more than 200K SF of vacancy at the building. It signed childcare concept Two Birds for 14K SF, business management solutions provider Laisar Management Group for 5K SF and nonprofit Community Multi-Services for 6K SF.

“The one thing that I think Silver Spring has proven time and again is that we are scrappy, and we are OK with that, and that we are here and we have a lot to offer,” Helsing said. “And our job now is just articulating that in a post-Covid world, which looks a little different than it did before.”

CORRECTION, JULY 16, 10:20 A.M. ET: A previous version of this story misstated United Therapeutics' annual revenue in a quote from CBRE’s Niel Beggy. This story has been updated.