Over the last decade Washington has emerged from its provincial food offerings aimed at visiting politicians, as a city dedicated to supporting homegrown coffee roasters, craft beer and spirits, rising restaurateurs, chefs and bakers. The pulse of its restaurant scene has been remarkably elevated with local brands and market concepts including Dolcezza Gelato, Vigilante Coffee, Union Market and the Rappahannock Oyster Bar, named by the Wall Street Journal, as one of the nation’s best. The Wharf is destined to become an amalgamation of these signature ventures anchored by two of D.C.’s best-known chefs Fabio Trabocchi and Mike Isabella.

Tabocchi, of Fiola Mare fame, will open the 11,500 square foot Del Mar at the Wharf, perhaps his most expansive project to date. Featuring an additional 1,900 square feet of outdoor space, Del Mar will focus on Spanish food and culture, an homage to Tabocchi’s wife Maria, a Mallorca native.

D.C. chef Mike Isabella and fellow Top Chef alum Jennifer Carroll are partnering to launch Requin, a French-Mediterranean seafood restaurant that will combine Carroll’s formal experience as Le Bernadin’s sous chef with locally sourced seafood and an expansive wine list. In an interview with the Washington Post, Carroll noted, “When the whole Wharf opportunity came up and became available, both Mike and I became super-excited about it because it fits my style and who I am and what I want to do.” In addition to Del Mar and Requin, Jamie Leeds, of Hank’s Oyster Bar will open Hank’s on the Water, featuring an “urban beach food,” concept, with an assortment of small and large plates. Joining the ranks is Restaurant Eve’s executive chef, Cathal Armstrong, who is slated to open a Filipino-themed restaurant on site in 2018.

New locations of recognized names including Taylor Gourmet, Rappahannock Oyster Bar, and Dolcezza Gelato, will open alongside entirely new entertainment and watering holes. Well-known local mixologist Todd Thrasher, from Alexandria’s Restaurant Eve and the PX Lounge, will open the Potomac Distilling Company, a two-story rum distillery and tavern. Irishman Mark Kirwan will open a namesake Irish pub at the Wharf, featuring live music and Irish pub fare. Perhaps, most notably, a major expansion of Seth Hurwitz’s legendary 9:30 Club will open with a 6,000 seat capacity for drawing large crowds to hear popular artists.

While several restaurants and retail opportunities haven’t been officially announced, the Wharf is rapidly building anticipation for re-invigorating new life and commerce into the southwest waterfront.

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One of the most dynamic urban development projects in the nation’s capital to date, the Wharf D.C. will fuse conceptual retail and local chefs with experiential hospitality and entertainment, for the nine million residents within an hour’s drive from what will soon be considered Washington’s premiere waterfront destination.

Construction crews broke ground on the $2 billion dollar project in Spring 2014 to begin the process of re-developing over 24 acres of land along a one-mile stretch of the Potomac waterfront in Southwest D.C. With retail, hospitality, business and entertainment partners, along with residential leasing surrounded by green spaces and piers, PLACES took a look at what it takes to build one of the largest urban development projects on the East Coast.

The Wharf will bring 1,000 new permanent service jobs to the District, and generate $40 million annually in taxes.

Construction and Development

Since the 2014 groundbreaking, construction crews removed 30,000 truckloads of dirt from the site. Seven tower cranes are visible from any point of entry and exit near the site, reminding the 64 million annual vehicles on the adjacent 14th Street Bridge of the enormous undertaking and opportunity to re-develop a vital piece of land in southwest.

Residential, Retail and Office

The Wharf is comprised of 3.2 million square feet of residential, hotel, office, restaurant, retail and cultural space. It will feature 1,375 residences at VIO and 525 Water, 675 rooms in three hotels including Carr Hospitality Groups Intercontinental Hotel, Canopy by Hilton and Hyatt House, 335,000 square feet of restaurant and retail space, and 945,000 square feet of Trophy and Class-A office space. Wharf Hall, a live music and events venue will have the capacity to hold more than 6,000 people.

The Wharf has 10 acres of parks, open spaces and civic areas, 550 boat slips, 4 public piers, a 2,500 capacity below-grade parking garage, 1,750 bicycle parking spaces.

Sustainability

The Wharf is being designed to achieve LEED-Gold ND certification including 14 LEED-certified buildings, more than 5 acres of green building rooftops, 99% retention and recycling of The Wharf’s storm water, and a 250 kilowatt co-generation plant for heating, cooling and electric.

The benefits of cogeneration and solar are equivalent to removing 215 cars from the road, or 2,400 barrels of oil as a result of carbon savings.

The Wharf DC is slated to open on Oct 12, 2017.

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But with $200 billion in disposable income per year, they’re too big a market to write off. It is possible to develop profitable retail, residential and office projects for millennials, but they have to be carefully designed for their very specific needs.

The Millennial Mindset

Millennials, born between the early 1980s and the early 2000s, pose an interesting contrast with the Baby Boomers who were born in the late 1940s to early 1960s and those in Generation X, born between the early 1960s and early 1980s.

Boomers are aging and starting to retire in large numbers.  They’ve shifted their lifestyles from accumulation of things to spending on experiences like travel and eating out. They’re also doing a lot of downsizing and are gravitating towards urban areas (like millennials). Gen Xers can be broadly defined as “Big Box” shoppers focused on value, sandwiched between saving money for retirement and often still subsidizing their millennial children.

Millennials are different in many fundamental ways. They tend to be trend conscious rather than brand conscious, are very technically literate and do much of their buying and socializing online. They are more heavily influenced by their peers through social media and gravitate more towards buying from socially responsible companies they feel they can connect with.

Development Wish List

In retail, office or residential space, the one word that sums up millennials is “efficiency,” whether that refers to a project’s size or its environmental impact.

In developing retail, millennials don’t always need a physical place to hang out with their friends. Gen Xers grew up hanging out in malls. For Baby Boomers, the gathering spot might have been the town square. Millennials are just as comfortable connecting with their friends on Facebook or other social media.  This means you need to create a compelling experience to attract them in a space that’s often much smaller but more technology-rich than a traditional retailer.

This is one reason we’re seeing a shift from large stores with extensive inventory to a hybrid of traditional retailing and “showrooms” where customers can see or try on products but have them delivered to their homes.  Ten years ago, what would have been a 5,000-square-foot store is now 1,500 or 2,000 square feet with no product in the store people can walk out with. You walk in, get fitted (if the product is clothing) and your purchase is shipped to you the next day.

At La Brea, Madison Marquette’s 90,000-square-foot adaptive re-use development project in Los Angeles, we’re seeing a lot of these trends take shape. One tenant, Bonobos Guideshop, has no cash registers. All transactions are done on an iPad. It features a “SELFY Mirror” that takes a customer’s full-length picture as they try on clothes, allowing them to text or email it to a friend for their approval. There’s no inventory, and all deliveries are shipped to the shopper’s home. That’s the sort of technology-infused experience it takes to keep millennials engaged.

As you think about the types of retail tenants you want your projects to attract, ask yourself if they are selling commodity or specialty items.  For commodity products, millennials can go to Amazon or elsewhere online and get it shipped the next day. But for specialty goods, you want to make the retail environment more of an experience, and you can use technology when appropriate to make it more interesting. That’s the way to get millennial customers out to the mall and visiting the other shops and restaurants in your development.

Another technology enhancing the retail experience is digital storefronts that use large LED screens alongside, or even instead of, merchandise that lets a retailer create a new look for a store with a flip of a switch. It’s a cost-effective way to “reinvent” a store almost on a daily basis to reflect the trends your millennial audience is following. We’re also seeing, of course, the increased use of social media to track customer preferences and draw customers into the store.

Since millennials are into efficiency, they also prefer smaller residential spaces, but with proximity to good jobs, quality shopping and entertainment. Access to mass transit is even more important to them than other age groups because of their reduced affinity for car ownership and driving which some claim is a result of millennials’ somewhat lower incomes and student debt.

One thing that’s worrisome, though, is whether developers are overbuilding tiny studios and one-bedroom apartments. There’s a multi-thousand-unit development in Los Angeles, for example, that offered less than a dozen two- or three-bedroom apartments.

What happens when millennials start making life-changing decisions like getting married and having children? If we haven’t built somewhat larger units for them, or those units are too expensive, these millennials will be forced to move to the suburbs as they age. The generation coming after them may not be large enough to fill these units.

On the flip side, there may actually be a market for larger, but still space-efficient, two- to three-bedroom units in urban centers for millennials as they age that also caters to the retiring baby boomer generation. Amenities such as quality shopping and dining, employment and mass transit will continue to be key influencers.

In the office market, millennials again favor quality experiences and connecting with their peers over space. They don’t need a corner office with a mahogany desk and walls. They’re fine with pods (cubes are on the way out) along with nice gathering spots for groups.

Just as retail footprints have shrunk, we’re seeing the traditional office space dropping from 250 square feet per person to 150 or even 100 square feet today. With increased density comes the need for more parking and better amenities. This means not just the quick sandwich you’d see in the lobby of a traditional office building, but a more gourmet sandwich offering at a higher price point. Think about an interesting sushi restaurant where employees can hold meetings and the kind of stores where employees will want to shop on their lunch hour. By providing such things at La Brea, we’ve been able to realize accretive rents.

Success Story

Our La Brea mixed-use development in Los Angelesis a good example of how creative use of a site can deliver a profitable development catering to millennials.

Millennials are socially and environmentally conscious and respond to a location that has a story behind it. We spoke to this by featuring the building’s wood truss ceilings and exposed brick and steel beams. With specialty retailers taking less space than traditional retailers, we “short-sheeted” the building with shallower retail stores and used the extra interior space for creative office units. Since employers want their employees to stay longer and work harder, we structured the offices with break out rooms and attractive gathering places.

By being flexible and creative, we’re able to achieve a premium in rents. Offering amenities and building creative office space allowed us to achieve rents in excess of market rate; today, the retail part of the project is currently 100 percent leased while the office space is 94 percent full.

It’s also important to note that millennials tend to avoid anything that feels like a cookie-cutter approach. Every project, every property and every urban core is different. To reach them, it’s critical to understand the nuances of the project and of the specific subset of millennials you’re targeting: A creative district of struggling artists or non-profit workers demands a different approach than a higher-income cohort of young professionals working in gaming or ecommerce.

Millennials have an enormous amount of spending power but are probably the most difficult generation to fully understand. Stay nimble and creative and you can serve them profitably.

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Millennials are far less loyal to particular brands than older generations have been.  They’re driven instead by their individual desires for rich, personal experiences.  Brand names mean much less to millennials who don’t need the “insurance” on their choices that a known name affords. Rather than stick with a familiar hotel or restaurant, they go online to get instant tips from their peers on what’s new, interesting and trendy. They will take more risk, looking less for the safety and security of a brand name and more for the upside in new experiences, interactions with their peers, and the ability to project a certain self-image associated with those experiences and surroundings.

When it comes to lodging, millennials demand more personalized, more casual and more rewarding choices than their older peers. In anticipation of these demands, the lodging industry has created a dizzying variety of “lifestyle hotel” choices over the last 15 years. Even the most mainstream hotel brands have unveiled their own lifestyle concepts, sometimes together with edgier partners who create emotional, even visceral experiences for guests.

Experience is King

“Lifestyle” hotels mean different things to different developers, but in general a lifestyle or boutique hotel provides the guest an experience that goes beyond just clean, comfortable surroundings and convenient food and drink. You know you’re at a lifestyle property when you see unique décor ranging from high-tech to recycled industrial coupled with inventive food and beverage offerings. There will be a “buzz” in the lobby as locals and visitors alike connect with one another in inviting surroundings rich with local culture and nouveau architecture.

Of course, the lifestyle hotel offers accommodations that provide the basics of comfort and safety, but it goes well beyond the well-known bland, corporate look, enhancing the experience with:

• Designs that reflect the unique history and culture of the surrounding area
• Sophisticated furnishings and appointments – especially those involving the latest technology – but not necessarily large amounts of room space
• A high-energy social environment with live music, drinks and comfortable, inviting common spaces in which to socialize
• Amenities that cater to Gen Y’s desire for healthy, authentic experiences ranging from loaner bicycles to vegetarian or vegan food 

Lifestyle Development

Obviously, creating a lifestyle atmosphere requires some new skills.  And since so much of the experience is about the surrounding area, the wise developer will pay sharp attention to local lore, eye-catching oddities and uniquely memorable pursuits available nearby.

To get a feel for how this works, look at The Wharf, a 50-acre redevelopment project in Washington, D.C., being co-developed by Madison Marquette and PN Hoffman & Associates. This development will revitalize the last remaining waterfront property in one of the nation’s top tourist areas by incorporating elements of a lifestyle destination in its featured hotels as well as in the overall design and selection of both its retail and its food and beverage offerings.

The Wharf will appeal to residential customers drawn by the waterfront location and the proximity to the Federal Triangle South complex of federal offices near the National Mall, but it will also be equally appealing to business travelers and tourists.

According to Daniel McCahan, Senior Vice President, Project Management with Madison Marquette, the key to the development is making The Wharf a lifestyle destination that will draw local residents whose very presence will make it more attractive to tourists and business travelers. The draws will include a rich mix of retail, food and beverage options as well as a 6,000-seat performing arts building that can double as a convention center.

The developers of The Wharf tweaked the design to create “found spaces” like those comfortable nooks in an older city, something which Brant Snyder, Madison Marquette Development Manager, describes as “cool side streets with a more intimate environment.” Additionally, Madison Marquette is working with the operators of the 9:30 Club, a highly popular club in northwest Washington, to recreate that experience in a larger physical space at The Wharf.  Snyder says Madison Marquette wants to make The Wharf attractive to people from Maryland or Virginia as well as Washington, D.C. – anyone who wants a night on the town or to go to a show or just take a walk along the water. “Because the locals will think it’s cool, people both in the region and nationally are going to want to come here,” Snyder explains.

For a different experience, a ferry will take visitors across the Potomac River to East Potomac Park which features a golf course, a tennis facility and paths for running, walking and cycling. McCahan says the goal with The Wharf is to allow people to model it to their lifestyle: “It will be different things to different people from the extroverted tenant to the introverted tenant, the business traveler and the tourist.”

The developers are also investing more money up front to create spaces that can be easily converted to other purposes, such as a pier that can be used as either a boat landing or a restaurant.  Loews’ lifestyle brand, the OE Collection, would have been a perfect fit for The Wharf, and if the OE Collection had been launched a year or two earlier, we would have competed for a site in The Wharf to complement our more traditional DC offering, Loews Madison Hotel.

Making Lifestyle Work

Making the lifestyle concept work requires careful choices as well as some tradeoffs. For example, The Wharf will include an InterContinental Hotel serving a high-end clientele as well as two less extravagant hotels – one an extended stay, the other a lifestyle – with a combined 400 beds.

So how does one pick the right lifestyle hotel for a given project’s desired look and feel? According to McCahan, it takes many rounds of interviews with various brands and operators. The hotel brands selected had aesthetics that matched the developers’ vision, including designs that look like a redeveloped older industrial space rather than a brand-new concept.

According to McCahan, one important clue that a hotel operator understood the experience The Wharf’s developers wanted to achieve was when the hotel operator mentioned a retailer it hoped to attract – the same retailer McCahan was already luring into a prominent project location.

Step Out of the Box

Rather than focusing leasing efforts on national chain restaurants, to draw the kind of lifestyle-oriented diners The Wharf wants, Snyder says the developers focused their attention and negotiations on a variety of best-in-class local restaurants with star chefs at varying price points.  The idea is to offer a variety of styles from white tablecloth to sit-down to more casual atmospheres.  Similarly, the hotel development plan is to provide more than the familiar standard brands.

Retail and lodging are both areas where a lifestyle developer might need to be flexible and look past standard economic rules-of-thumb and expectations.  An example of that flexibility might be accepting a slightly lower rent to secure a retailer who will help create the “buzz” that will draw large numbers of visitors, something which justifies higher rental rates for other properties in the development.  In the hospitality realm, the best example may be Ace Hotel in New York, where the developer went with finishes and furnishings well beneath any four-star standards but has ended up with revenues dramatically higher than nearby four-star competitors.  “Retail drives the lifestyle concept and it’s how people are going to experience the site,” Snyder says. “You need a mix of users to unlock the overall value. That means you can’t be locked into what you had in the pro forma that projected the financial return or your original plan. To create a place people want to come to – whether it’s to shop or to stay overnight – you’ve got to be especially creative with the retail.”

Finally, developers need to walk a fine line between being trendy enough to draw attention from millennials, but not so far out that they turn off more mainstream or older customers. Snyder says the developers aren’t going for the safety and security of large national chains, but generally speaking, they are looking to work with people who have proven concepts and a track record of success: “It’s a balancing act. If you want something that’s more exciting, there is a little bit more risk, so you have to be diligent about who you partner with.”

The rise of the millennials and the subsequent need to change how we think about development is certainly a challenge. But it also brings some excitement and creativity to our vision for Loews Hotels and our ever-increasing focus on being a key part of great multi-use developments. Above all, millennials are our future customer base, and the developers that meet their needs soonest and most effectively will reap the highest rewards.

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