Still Growing Rapidly, DC's Restaurant Scene Is Pushing East

In recent years, DC's core office market has shifted east as the East End and other emerging submarkets have blossomed. As this shift takes place, DC's exploding restaurant scene has also tracked east, often leading the way for new development.

One of the clearest ways to see this shift is by looking at the Michelin Guide released for DC last month. Of the 30 restaurants that received Michelin recognition, just eight of them were west of 14th Street, a report from Dochter & Alexander Retail Advisors found. As the map above shows, many of the restaurants Michelin picked were clustered in the East End, with others in emerging submarkets like Shaw, Union Market and H Street. 

"The established core of downtown, Golden Triangle and Georgetown hasn’t seen the same amount of new growth," the firm's principal, Dave Dochter, tells Bisnow. "That new growth from local and national chefs has been in emerging markets and new areas, and all of that is pushing east."

Dave says restaurateurs are attracted to the unique physical properties of some of the real estate in developing neighborhoods. While new restaurants continue to open up in the downtown core, the new neighborhoods are offering a different feel and business opportunity that some restaurateurs prefer. 

"For a long time, it was just the downtown core," Dave says. "But now you have these neighborhoods like 14th and Shaw and as they mature, those areas will continue to infill and populate with more options."

The question for developers to consider, Dave says, is whether restaurants are a leading indicator opening ahead of development waves, or a lagging amenity that comes in after a neighborhood is built up. 

"It’s a little bit of a combination of both," Dave, on the left with partner Matt Alexander, says. "Some of these restaurateurs have come into individual projects that allow them to cement into the neighborhood, while others are retrofitting buildings to make them their own. What is apparent is restaurants and new development go hand in hand."

In the Union Market area, popular restaurants appear to be popping up in advance of a major development wave. 

Nick Stefanelli opened his Italian restaurant, Masseria, above, last summer two blocks from Union Market. The restaurant was one of just 12 in DC to earn a Michelin Star in October.

Surrounded by old warehouses, the restaurant does not have the neighborhood atmosphere you would expect from a Michelin-rated dining spot, but that will soon change. It sits adjacent to where Edens, along with Level 2 and Trammell Crow, broke ground this summer on a major development. The 432-unit mixed-use building at 1270 4th St NE will be anchored by a 20k SF Latin marketplace created by chef Jose Garces. 

As long as DC's developing areas continue to create new retail opportunities, the restaurant supply will be there to fill it. Dochter & Alexander's report identified a staggering 250 active restaurants in the market for new space. These food and beverage retailers are seeking roughly 940k SF, a major chunk of the 3.2M SF of retail users the firm is tracking. 

"Food and beverage is completely driving DC right now," Dave said. "That's all different types of users from very small to national chains and everything in between."

Another major trend happening in the food and beverage space is the growth in popularity of craft coffee shops like Compass Coffee and La Colombe.

Starbucks still holds the largest share of DC's coffee market, but given how active some craft coffee brands have been, the report expects that will soon change. It estimates craft coffee will grow from its current market share of 29% to roughly 37% over the next 18 months, matching the size of Starbucks' presence.

Of the 20 coffee shops the report identified as looking for space, Dave says 18 of them are craft brands, an indication of how popular the trendy upscale shops have become.

"They’re a place to connect and they create an experience," Dave says. "That's the big driver. They are proving to be a magnet for the creative class and for Millennials."

These shops are increasingly drawn to up-and-coming neighborhoods. For example, after seeking a coffee shop to complement its Hecht Warehouse building in Ivy City, Douglas Development landed on Compass Coffee. The shop will open in about nine months at 1401 Okie St NE, rendered above.

In response to the growth of craft coffee, Starbucks last month announced it would open 1,000 locations of its Reserve brand, a more upscale offering aimed at competing with sophisticated craft coffee shops.