Virginia's better-than-average economy casts a retail beacon on the Mid-Atlantic region. With impressive economic indicators that point toward growth, Virginia is for retailers. Hefty populations and employment rates, along with high per capita income, are pulling grocers, big boxes and drug stores into the Mid-Atlantic corridor. As a result, Washington, D.C., and Baltimore, where the economies fall short of Virginia's strength, are enjoying an influx of national and regional players.

Hampton Roads Hampton Roads, comprising Virginia's Norfolk/Virginia Beach/Newport News metropolitan statistical area (MSA), is particularly attractive for retailers. Although the area's latest (1994) per-capita personal income ($19,007) lags the national average ($21,696), its sheer growth is difficult to ignore. According to the latest (1995) estimates of the U.S. Department of Commerce/Bureau of the Census, the population of this area has hit the 1.5 million mark, representing 6 percent growth since 1990.

Russel Deemer, regional economist for Crestar Bank, Richmond, Va., predicts that growth will continue in the near future. "The Hampton Roads economy is going to benefit from an additional influx of around 11,000 people in 1997 due to the reassignment of naval personnel to Oceania Naval Air Station," he explains.

Measured in terms of employment growth, Hampton Roads' economy is growing 3 percent annually. The area is outpacing the nation, Deemer reports, noting that U.S. employment growth is 2.4 percent.

In addition to population growth spurred by Oceania, Hampton Roads has become a hub for telemarketing/ customer service "call centers." In fact, according to a March 27, 1997, report in The Virginian-Pilot, call centers are the area's biggest growth industry. "Dozens of such back-office facilities have opened in the region in the past decade," the newspaper reported. More than 10,000 jobs are attributed to the industry, which includes employers such as Bell Atlantic, TWA and Avis.

In response to the area's population and job growth, Hampton Roads retail has heated up. "We've seen a major explosion of new retailers coming to Hampton Roads in the past five years," reports Michael Divaris, executive vice president for Divaris Real Estate, Virginia Beach. Wal-Mart; Target; Circuit City; Barnes & Noble; Bed, Bath and Beyond; and PetsMart are among the area's active players, he notes.

Just as it has played out in other major metropolitan markets, the addition of new retailers has provoked a power struggle in the Hampton Roads arena, says Divaris. "There seems to be a war going on among the supermarket chains," he observes. Food Lion and Winn Dixie are expanding in an effort to overtake market leader Farm Fresh, and Hannaford Bros. and Harris Teeter are making their mark as newcomers, he adds.

Meanwhile, among freestanding drug stores, Rite-Aid and Revco are actively competing for sites throughout the metropolitan area. They are not alone, says Gerald Divaris, president of Divaris Real Estate. Major retailers such as Home Depot and Garden Ridge also are seeking prime locations in Hampton Roads and in other areas of southeast Virginia, he notes.

"This is a vibrant market -- the 26th largest metro area in the country -- with a growing economy and population base that makes it very attractive to all types of retailers," he says.

Richmond Like Hampton Roads, Virginia's Richmond/Petersburg MSA is producing impressive evidence of growth. The area's population grew by 7 percent during the first half of the 1990s, according to Census figures, and at year-end 1995 it stood at 927,435. In 1994, per-capita personal income was $24,358, which exceeded the national average.

The Bureau of Economic Analysis, Washington, D.C., reports that Richmond's strong economy is perhaps attributable to the presence of employers such as CSX, James River Corp. and Pittsdown. Although employment is growing at a relatively slow 1.9 percent, the pace may reflect "a calm before the storm," says Deemer.

Richmond anticipates 1,500 new manufacturing jobs when, later this year, White Oak Semiconductor plant, a joint venture between Motorola Corp. and Siemens Corp., opens. Deemer reports that Motorola has a second semiconductor plant in the late planning stages.

"We've heard reports of smaller, high-technology companies, perhaps potential suppliers for these plants, moving into Richmond," he says. In addition to the plants, these companies represent "a brand new industry for the Richmond economy," Deemer notes.

Brian Glass, vice president and director of retail brokerage for Richmond-based Harrison & Bates, has witnessed an influx of retailers into the Richmond market. "Target has been particularly aggressive, opening five new stores in the past year with a sixth under construction," he reports. Market entries by Home Place; Kohl's; Comp USA; Bed Bath & Beyond; and Dillard's are slated to take place during 1997 and early 1998, he adds.

New retail entries in the Richmond market have sparked a surge of retail construction, says Glass. As of year-end 1996, 1.7 million sq. ft. of retail space was under construction in Richmond; 1.3 million sq. ft. of that was located in the city's northwest quadrant.

Within the northwest quadrant, the Broad Street and U.S. 1 corridors are the hottest nodes of new construction and retail entries, says Glass. "We haven't seen that kind of activity out there since before the early 1990s recession," he notes. Later this year, as lease rates firm throughout Richmond, Glass predicts a development upswing in the city's southwest quadrant.

The supermarket and drug store wars that characterize Hampton Roads also are prevalent in Richmond/Petersburg. Ukrop's grocery chain, which holds 34 percent of the Richmond market, is trailed by Hannaford Bros. and Food Lion, says Glass. He adds that Wal-Mart is enjoying "fantastic success" following its conversion of existing stores into superstore formats that accommodate grocery lines.

Rite-Aid, CVS, Revco and Walgreen are fighting "a huge war" for freestanding Richmond sites, and Eckerd is reportedly ready to join in the battle, says Glass. "In this size market, having four major drugstore players beating each other's brains out for sites and market share is almost unbelievable," he notes.

Washington, D.C./Baltimore Typically considered a single market by retailers, Washington, D.C./Baltimore encompasses three distinct economic entities: the District of Columbia, Baltimore, and northern Virginia. Northern Virginia's economy is stronger, yet the entire region draws retailers.

The District of Columbia is in the midst of a recession that Deemer says "will probably continue for the rest of the decade," and declines in defense-related manufacturing have slowed Baltimore's employment growth to 2 percent. Nevertheless, Deemer predicts that upcoming gains in the service sector will quicken the area's growth.

Meanwhile, surrounding northern Virginia counties combine to create a buoyant economy of their own. Driven by federal government contracting and a burgeoning base of high-tech and telecommunications firms, employment growth in northern Virginia is proceeding at a 3.5 percent to 3.7 percent rate, says Deemer. "If northern Virginia were viewed as a separate economic entity, instead of being lumped in with Washington D.C., it would rank as one of the top five or six economies on the East Coast," he says.

The Washington, D.C./Baltimore consolidated metropolitan statistical area had a 1995 Census-estimated population of more than 7.1 million, reflecting a 5.7 percent increase since 1990. Population in the Washington, D.C., primary metropolitan statistical area (PMSA) grew by 6.8 percent during this period, while Baltimore's PMSA population grew 3.7 percent.

In 1994, Washington, D.C.'s per-capita personal income was $28,762. The figure dropped to $24,406 in Baltimore.

National and regional retailers are actively seeking entry into the Washington, D.C./Baltimore area, says W. Michael Gorsage, first vice president of retail investment properties for the Washington, D.C./Baltimore office of Los Angeles-based CB Commercial. For example, Target, Kohl's, Home Place and Galyan's Trading Place all made entries last year.

As the major retailers seek to move into the market, smaller players are being pushed out, Gorsage reports. "Smaller, homegrown operations have seen much of their business diverted by the bigger retailers," he explains, adding that they "cannot match the capitalization and aggressiveness of the giants."

As more retailers move into Washington, D.C./Baltimore, the demand for prime locations is likely to intensify. A strict land-use regulatory environment means retailers have trouble finding appropriately zoned sites in the area, explains Maury Levin, a partner in the Calverton, Va., office of Baltimore-based KLNB Inc. "For the big-box player especially, it takes a couple of years of hard work to generate enough sites to penetrate this market," he says.

With retail-zoned sites at a premium, the renovation of older centers comprises a major portion of development activity in this market, says Neil J. Simon, executive vice president for Carey Winston, Bethesda, Md. "A lot of activity revolves around re-doing and re-tenanting older centers," he says.

As in surrounding areas, skirmish lines are being drawn in Washington, D.C./Baltimore's grocery store and drug store markets. Giant Food is the market leader among supermarkets, says Larry Mekulski, a partner in the Towson, Md., office of KLNB. Safeway, Super Fresh and Metro follow in the grocery line, and Food Lion is making a "major impact" with a number of stores under construction, he adds.

The scarcity of freestanding sites has provoked "an absolute war" among the region's competing drug store chains, says Mekulski. He notes that auto-parts stores and theaters also are aggressively opening new facilities.

For the immediate future, the turf war between grocers and drug stores is expected to continue throughout the Mid-Atlantic states. Virginia's economy shines, and, as an influx of military and telecommunications jobs positions the state for additional growth, nearby Washington, D.C., and Maryland stand to gain a host of new players.

Martin Sinderman is an Atlanta-based freelance writer and a regular contributor to Commercial Real Estate South, a sister publication to Shopping Center World.

Virginia * Salem Crossing in Virginia Beach, a development of Chattanooga, Tenn.-based CBL & Associates Properties Inc., opened in April. The 289,382 sq. ft. shopping center is anchored by Hannaford Food & Drug, which opened in April, and Wal-Mart, which will open this summer.

* Development and leasing continues on Potomac Yard Center in Alexandria, according to the center's leasing and management agent The Charles E. Smith Cos., Arlington, Va. Phase I will open this fall, and phase II is expected to open in spring 1998. The power and entertainment center will total 600,000 sq. ft. upon final build-out. It features Target, PetsMart, HomePlace, Old Navy Clothing Co., and Barnes & Noble.

* Charter Oak Partners, Vienna, Va., and H/P Cos. L.C., Fairfax, Va., are developing Virginia Gateway Factory Stores in Gainesville. The 418-acre, mixed-use project includes factory outlet stores, office space, big-box retailers, restaurants and entertainment venues. Phase I will feature 250,000 sq. ft. of entertainment and factory outlet GLA when it opens in summer 1998. Tenants are in negotiation. The project is owned by New York-based Rothschild Realty Inc.

* Cleveland-based Developers Diversified Realty Corp. is in the process of renovating the newly expanded Apple Blossom Corners in Winchester. The shopping center grew from 96,852 sq. ft. to 239,216 sq. ft. this spring with the addition of Kohl's, OfficeMax and Books-A-Million.

* Divaris Real Estate, Virginia Beach, Va., has recently completed phase I of Columbus Center, a mixed-use "town center" under construction in Pembroke. Columbus Village Entertainment Center, the 156,000 sq. ft. first phase of Columbus Center, opened early this year and includes Barnes & Noble; Bed, Bath & Beyond; Lens-Crafters and a movie theater. Phase II, called Five Columbus Center, is under construction and will contain 27,000 sq. ft. of retail GLA and 27,000 sq. ft. of office GLA when it is complete. Phase III, called One Columbus Center, will break ground in early 1998 and will feature 100,000 sq. ft. of retail space. Additional development is planned at the site in the future. The project is expected to total approximately 3 million sq. ft. when it is complete.

Divaris Real Estate also is converting Newmarket Fair, a 875,000 sq. ft., enclosed mall in Hampton, into an educational/office/retail commercial center. While the project's total GLA will expand to more than 1 million sq. ft. as office space, a daycare center, gym and convenience store are added, the retail component will decrease to 300,000 sq. ft. Sears will remain the project's retail anchor. The reconfigured project will open this month.

* Bethesda, Md.-based First Washington Realty Trust Inc. is renovating the facade and common areas of Brafferton Shopping Center in Garrisonville and Four Mile Fork in Fredericksburg. Brafferton Shopping Center (94,731 sq. ft.) is anchored by Giant Food and Blockbuster Video, and Four Mile Fork (101,262 sq. ft.) is anchored by Safeway, Fashion Bug and RadioShack. The improvements will be completed this year.

In Centreville, First Washington has expanded Centre Ridge Marketplace from 69,854 sq. ft. to 104,154 sq. ft. New additions include a 55,000 sq. ft. Super Fresh grocery store, a 24,500 sq. ft. Sears Paint & Hardware, and 10,000 sq. ft. of small shop space. The project was completed in February.

* Build-out continues on Cascades Marketplace in Sterling. The mixed-use development by Landover, Md.-based GFS Realty Inc. features Giant Food supermarket, Old Navy Clothing Co., Linens 'N Things and Zany Brainy. Sports Authority will be added in phase II, which, upon completion this fall, will bring the project's total size to 420,000 sq. ft.

Also this fall, GFS Realty will renovate and expand The McLean Shopping Center in McLean. The 115,000 sq. ft. retail component of the mixed-use project will grow to 125,000 sq. ft. as office space on the second floor is converted to retail GLA. The center is anchored by Giant Food and CVS.

* Norfolk, Va.-based Goodman Segar Hogan Hoffler is renovating four shopping centers: Hilltop Square (247,136 sq. ft.) in Virginia Beach will be completed next spring; Colonial Square (167,000 sq. ft.) in Colonial Heights and Oyster Point Plaza (69,616 sq. ft.) in Newport News will be completed this summer; and Azalea Mall (334,476 sq. ft.) in Richmond will be finished next fall.

The company's new developments include Princess Anne Marketplace (209,500 sq. ft.) in Virginia Beach, which is expected to open in October, and Washington Square (224,000 sq. ft.) in Fredericksburg, which is scheduled to open this fall. A summer 1998 opening is planned for Blackstone Square (159,000 sq. ft.) in Blackstone, Pearisburg Square (159,000 sq. ft.) in Pearisburg, and Woodstock Square (209,000 sq. ft.) in Woodstock. In Norfolk, phase I of Broad Creek shopping center (170,400 sq. ft.) opened earlier this year.

* Bethesda, Md.-based Lerner Enterprises is constructing Dulles Town Center in Dulles. Phase I of the two-level, 1.2 million sq. ft. regional center will boast four mini-anchors, a multiplex theater and entertainment components. Two anchors and additional GLA will be added in phase II. The center will be anchored by Sears, Hecht's and JCPenney when it opens in spring 1998.

* McLean, Va.-based Petrie Dierman Kughn is developing The Centre At Winchester in Winchester. Tenants have not been announced for the 500,000 sq. ft. "regional power center," which is expected to open in summer 1998. Hicks & Rotner Retail Inc., Lutherville, Md., has been appointed exclusive leasing agent for the center.

* The Retail Group, Washington, D.C., is renovating Tall Oaks Village Center in Reston. The project will turn the center "inside out," reorienting many of its tenants out toward the street in order to improve the center's visibility to passersby. The 74,000 sq. ft. center's GLA will grow slightly as many tenants are relocated and rebuilt. The project will be complete later this year.

Also in Reston, The Retail Group is renovating Hunters Woods Village Center, the 119,000 sq. ft. retail component of a 15.28-acre retail and residential project. The retail space will be reconfigured in two phases. During the first phase, new retail buildings and parking areas will be constructed along the perimeter of the site. During the second phase, the remaining buildings and parking area will be demolished, and new buildings and parking areas constructed. The project is expected to be completed in April 1998.

Maryland * This year, Bethesda, Md.-based First Washington Realty Trust Inc. will complete renovation/expansion projects at Northway Shopping Center in Gaithersburg; Southside Marketplace in Baltimore; and Valley Centre in Owings Mills. Northway Shopping Center (91,276 sq. ft.), which is anchored by Metro Food, Rite Aid and Hallmark, will receive facade and common area improvements. Southside Marketplace (125,146 sq. ft.), which is anchored by Metro Foods, RadioShack and Goodyear Tire Center, also will receive a facelift. Valley Centre will grow from 229,200 sq. ft. to 246,000 sq. ft. with the expansions of T.J. Maxx and Weis Markets. T.J. Maxx was completed in January, while Weiss Markets is expected to be completed by the third quarter of this year.

* In Rockville, Landover, Md.-based GFS Realty is redeveloping the former Flagship Center to create Montrose Crossing. The project, which will feature residential and retail components, will be reconfigured on an urban grid with internal streets and outdoor cafes. The 355,000 sq. ft. retail component will be expanded to 467,000 sq. ft. and feature Giant Food, Old Navy Clothing Co., Barnes & Noble, Sports Authority and Lovett's. It will be completed in fall 1998.

GFS and The Rouse Co., Columbia, Md., are developing River Hill Shopping Center in Columbia. The 110,000 sq. ft. phase I, which is expected to open this fall, will be anchored by Giant Food.

Construction continues on Neelsville Village Center at Milestone in Germantown, a joint venture of GFS and Fairfax, Va.-based H/P Cos. Anchors at the 800,000 sq. ft. power center will include Target, Wal-Mart and Giant Food. A November opening is planned.

* In Hagerstown, construction has begun on The Centre At Hagerstown, a development of Petrie Dierman Kughn, McLean, Va. The 700,000 sq. ft. regional shopping center is expected to open in fall 1998. Tenants are currently in negotiation.

The company also is developing North Salisbury Plaza, a 300,000 sq. ft. power center in Salisbury. Still in the planning stages, an opening date has not been set and tenants have not been announced. Hicks & Rotner Retail Inc., Lutherville, Md., will lease both centers.

The Retail Group, Washington, D.C., is redeveloping Rockville City Center in downtown Rockville. The 1.5 million sq. ft., mixed-use project will be organized on a street grid and feature 200,000 sq. ft. of retail and entertainment space, including a 13-screen, 55,000 sq. ft., underground Regal Cinemas complex. Two new city parks will anchor the pedestrian-oriented Main Street. The 100,000 sq. ft. phase I is expected to open the first quarter of 1998.

* The Rouse Co. is expanding and renovating The Mall in Columbia. A new 170,000 sq. ft. Nordstrom store and 50,000 sq. ft. of small store space will bring the 938,000 sq. ft. mall's GLA to more than 1 million sq. ft. The center also will receive new lighting, flooring, escalators and elevators during renovation of the food courts and common area. The project is scheduled for completion in spring 2000.

Sears will join anchors JCPenney, Macy's and Hecht's at Rouse's Owings Mills Mall in Owings Mills. The 142,000 sq. ft. store will replace Saks Fifth Avenue at the 852,000 sq. ft. mall. A 16-screen General Cinema theater also is planned at the site.

Columbia Crossing, a 450,000 sq. ft. power center in Baltimore, is continuing to open in stages. Target and Toys "R" Us opened last fall, while tenants such as Dick's Clothing and Sports, Comp USA and Macaroni Grill are expected to open by the end of 1998.

The Rouse Co. also is remerchandising and reconfiguring the 136,000 sq. ft. Light Street Pavilion of Harborplace in Baltimore. Restaurants such as J. Paul's and Capital City Brewing are expected to open by summer.

Washington, D.C. * GFS Realty Inc., Landover, Md., is renovating the 55,000 sq. ft. North Building, part of the 115,000 sq. ft. North and South Buildings retail and office complex on Wisconsin Avenue. The renovation, which is scheduled for completion this fall, will include interior and exterior remodeling, making the building more residential in scale. The North Building features tenants such as Starbucks and CVS.

* Rockville, Md.-based Douglas Development Corp. is building Jemal's Chinatown, a 120,000 sq. ft. retail and entertainment complex located across the street from the city's new sports arena (MCI Center), which is currently under construction. Leasing for Jemal's Chinatown is underway, and the Washington Chop House restaurant has already signed on with the project.