The Capitol Riverfront neighborhood has been revitalized with new housing, parks, and restaurants.

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The sixth-anniversary annual luncheon of the Capitol Riverfront Business Improvement District, held this morning, was a festive occasion. The event took place in the PNC Diamond Club of Nationals Park, overlooking the empty baseball diamond, and BID president Michael Stevens trumpeted the revitalized neighborhood’s many recent accomplishments. Guests received a copy of the 2013 Capitol Riverfront BID annual report, which highlighted the area’s retail growth in particular.

“Retail in the Capitol Riverfront popped in 2013, with the opening of eight new restaurants, two more service retailers, construction of 88,000 square feet of new retail space, and the announcements of ICON Theater and Whole Foods opening in the neighborhood in 2016 and 2017, respectively,” the report stated. 2013 brought such buzzy new venues as Bluejacket Brewery and Osteria Morini, the report boasted; 2014 will see the opening of a Harris Teeter, Vida Fitness, Sweetgreen, TaKorean, and more.

And then Heather Arnold threw cold water on all that.

Arnold, the director of research and analysis for the retail and design firm Streetsense, delivered the keynote address at the event, and it was mostly a downer. The BID hired Streetsense to conduct a study of the neighborhood’s retail development, which has been led by a boom in restaurants that, according to Arnold, has been “overcompensating” for what was a retail shortage just a few years ago.

“Everybody always overestimates how much retail demand is going to come out of a new catalyst,” Arnold said.

Supply, Streetsense forecasts, will outpace demand by 2018. The neighborhood currently has just under 200,000 square feet of retail. By 2018, Streetsense predicts, that’ll rise to near 400,000, and when the neighborhood is fully built out, it’ll be 800,000. Demand, by contrast, which is currently under 300,000 square feet, will only to rise to 400,000 at full buildout.

As a result, Arnold warned, developers in the neighborhood shouldn’t just stick to the mixed-use model that’s generally popular (and desirable from the perspective of the pedestrian experience). “We’re not going to put retail on the ground floor of every building,” she said. “My greatest fear is that we’d build all these retail spaces and have a high vacancy rate.”

Instead, she said, the neighborhood would benefit from some ground-floor educational uses, offices, and perhaps a museum or two. Retail should focus on three main corridors: New Jersey Avenue (anchored by Whole Foods, the Metro station, and the U.S. Department of Transportation), Tingey Street (with the Harris Teeter and Vida nearby, and a focus on destination dining), and Half Street SE (centered on the baseball stadium, with “entertainment dining” to cater to fans).

Capitol Riverfront is certainly a neighborhood on the rise. But if these trends continue and Streetsense’s projections are right, vacancies could soon be on the rise as well.

Photo by Darrow Montgomery