A couple of Walmart-related development items:

Large Retailer Accountability Act

By now, most have surely heard about the op-ed by Walmart regional general manager Alex Barron, stating the retailer will not proceed with three previously announced District stores that have not broken ground (Skyland, Capitol Gateway, and New York Avenue NE), if the city council passes the proposed Large Retailer Accountability Act of 2013 (LRAA).  The LRAA, commonly known as the living wage bill, would raise the minimum wage for employees of retail employers with at least $1 billion in sales and that operate in spaces of at least 75,000 sq ft., from $8.25 per hour to $12.50 per hour.  The DC council is scheduled to vote for a second time on the bill on July 10, 2013.  On the first reading of the bill, the council voted 8 to 5 in favor of the bill.  According to the Washington Post, Mayor Vince Gray issued a statement encouraging the council to reconsider the bill and its stated purpose.  The Washington Business Journal reports that the Skyland developer stated that project will be on hold indefinitely if Walmart pulls out as an anchor for the development.  Mayor Gray personally lobbied Walmart to anchor the development.  Prior to Walmart’s July 9th op-ed, the Washington Post published an editorial against the bill.  That editorial followed media reports, in which Walmart executives stated they believed the city was pulling a bait and switch by soliciting Walmart’s business and then changing the business conditions under which the retailer would operate through the LRAA.

With the Washington Post editorial against the bill, the Walmart op-ed, and Mayor Gray’s statement, it is hard to see a path to enactment for the LRAA.  There are policy and technical reasons not to support this particular iteration of what some call a fair wage law, but a few questions remain.  Does Walmart’s threat now mean that even if the bill fails, any future attempt by the council to raise minimum wage across the board will be met with threats to shut down stores?  Will Walmart decide not to proceed with the three stores not under construction even if the bill fails because conceivably, according to Walmart’s logic, the council could always later introduce a bill to raise the minimum wage before all six stores have broken ground?

These questions lead nicely to the second bit of Walmart development related news since Walmart executives also stated the LRAA could affect even the three stores that are already under construction, which includes the store planned for Fort Totten Square.

Buyers sought for First and H Street Development 

The Washington Business Journal reports that the JBG Companies is seeking buyers for the Walmart-anchored mixed-use development at First and H Street NW.  That project is scheduled for a fall 2013 completion.  No other retail tenants have been announced so far.  It is not too surprising that JBG has listed the development since the developer tends to put up several of its projects for sale.  However, this is noteworthy because JBG is also part of the team developing the Walmart-anchored Fort Totten Square, along with Lowe Enterprises.  This is one of the reasons we have always believed it is important to get the Fort Totten Square project right from the beginning in terms of design and retail mix.  JBG could very well exit the project at some point.

Of course, these two Walmart-anchored projects are in different neighborhoods with different market conditions, so it is not a given that the developer will do with Fort Totten Square what it has done with First and H.  And in fact, JBG has treated the two developments quite differently.  According to the Washington Business Journal, the Walmart lease for First and H is only 20 years, while we know the retailer’s lease for Fort Totten Square is 60 years.  While both developments are mixed-use projects, the Walmart store at First and H is significantly smaller than the planned store at Fort Totten Square (80,000 square feet versus 120,000 square feet).  The First and H project does not incorporate Walmart’s typical blue branding in the building’s design.  However, the Walmart blue branding, which has appeared less frequently in recent building designs, is incorporated a bit in Fort Totten Square .

As we mentioned in a previous post, having a Walmart-anchored development in the city can carry certain risks depending on a developer’s goals.  It is interesting to see how these two projects by the same developer are shaping up.  A couple of the differences were pointed out in the past and the developer provided rationales for the differences.

Now with Walmart’s announcement about the LRAA, it will certainly be interesting to see what happens with the Walmart-anchored developments.  Another Walmart store (the Georgia Avenue store) under construction less than two miles away from Fort Totten Square is scheduled to be completed this year, while Fort Totten Square is not scheduled for completion until 2015.  There have always been questions about how this dynamic will play out.  Supposedly, Walmart executives believe the planned Fort Totten Square store will be its most successful DC store of the six announced to date.  Given this dynamic and what we know about how the various stores currently under construction are designed, one has to question how many Walmart stores will end up in the city, no matter the fate of the LRAA.