Walmart Economic Impact Study

Economic & Fiscal Impacts ofWalmart1 on Washington, DC

January 2015

Walmart at 5939 Georgia Ave. NW Walmart at 99 H St. NW

1 – Wal-Mart Stores, Inc.

HR&A Advisors, Inc. Economic Impacts of Walmart on Washington, DC 1

Table of Contents

Introduction 2

Executive Summary 5

Background 10

Key Findings 14


INTRODUCTION


About HR&A

�HR&A Advisors, Inc. (HR&A) is an industry leading real estate, economic development, and public policy consulting firm based in New York City, with offices in Washington, DC, and Los Angeles.

�The firm has worked with numerous public agencies, non-profit civic organizations, and private sector corporations across the country to assess the economic and fiscal benefits of business operations, real estate developments, tourism, infrastructure projects, and public policies.


Walmart engaged HR&A to analyze economic and fiscal impacts of its open and planned stores in the District of Columbia.

�HR&A investigated a series of hypotheses at the scale of the District and neighborhood levels.�The impacts HR&A studied included:

– Walmart’s role in providing retail offerings to a generally underserved market;

– Jobs created through construction and operations in open and planned stores;

– The benefit of bringing fresh and affordable food to neighborhoods lacking options;

– The anchoring impact of bringing a large retail amenity to neighborhoods; and

– The impact of Walmart and the Walmart Foundation’s charitable contributions.


EXECUTIVE SUMMARY


Executive Summary

• The District of Columbia has long lacked sufficient retail options for its diverse and growing base of residents. For years, District residents have had to travel to surrounding jurisdictions to shop for basic goods, costing the District lost sales taxes and undercutting the City’s efforts to support more vibrant, mixed-use neighborhoods. Unmet retail potential in Washington, DC is estimated at over $3 billion per year.

• Walmart’s arrival in the District in December 2013 is stemming that negative trend, while delivering an array of other benefits to the District and its residents. One year after the first two Walmart stores opened in the District, a study commissioned by Walmart and conducted by HR&A Advisors defines these benefits.


Executive Summary

• Walmart can save a DC family of four approximately $1,300 per year – 18% of the average DC household’s annual grocery store bill – on food and other typical grocery store items.1 In addition, each District Walmart will bring fresh food at affordable prices to areas identified by the U.S. Department of Agriculture as “food deserts.” Every District Walmart store is or will be in locations where healthy food shopping options make up less than 10% of the current neighborhood retail offerings.

• Walmart will generate more than $6 million in taxes to the District this year based on the operations of its 2 open stores. These net new revenues can help the District meet a wide array of needs. By way of example $6 million in District revenue could support the annual costs of:

• Salaries for nearly 120 teachers or police officers;• Refurbishments of 6 playgrounds; or • Debt service on bonds for the construction of 6 new or significantly

modernized community centers.2

1 - Based on HR&A analysis of industry benchmark market comparison data published in 2013.2 - Assumes a level-debt service payment over a 20 year period with a 5% interest rate.


Executive Summary

• Construction of the first two stores and the Fort Totten store, which is currently under construction, supports 630 direct and multiplier jobs. In addition to direct construction industry employment, ancillary jobs are supported in the architecture, engineering, food service, and health care industries.

• Walmart’s two stores employ more than 700 people, of which 65% are District residents. Walmart is responsible for half the growth in retail jobs in the District in 2013. Walmart stores in the District hire more people per foot of store space than other grocery or convenience stores on average. A higher percentage of Walmart employees live in the same ward as the store than is typical for all employment in the 2 wards with open stores.

• 810 total jobs (direct employment by Walmart plus multiplier jobs) are supported by Walmart’s first two stores. In addition to direct retail industry employment, ancillary jobs are supported in the real estate, food service, and health care industries.


Executive Summary

• Walmart is catalyzing additional community investment in parts of the District that need it. More than 26,000 SF square feet of additional new development –including restaurants, banks, and retailers – and more than 300 new residential units are directly attributable to the open Walmart stores.

• Walmart and the Walmart Foundation’s support for District community-based social service organizations has also generated significant economic and fiscal benefits for the city. HR&A estimates that Walmart and the Walmart Foundation’s $14 million philanthropic investment in the District between FYE 2010 and FYE 2014 has generated 160 jobs and $16.5 million in total compensation at more than 200 organizations.* These organizations generate additional benefits to the District through their activities.

• For example, the Walmart Foundation’s $3 million investment in the Washington@Work customer service training program was created to help District residents get the skills and training they need to gain employment. The Community Foundation for the National Capital Region has reported that Washington@Workhas resulted in 618 job placements and 30 promotions since 2011.

*Note: Walmart's fiscal year starts Feb. 1 and ends Jan. 31.


BACKGROUND


Walmart opened two stores in the District of Columbia in December 2013 and plans to open three additional stores.

Georgia Ave NWOPENED: December 2013

105,000 Sq. Ft.

Fort TottenUnder Construction

118,000 Sq. Ft.

H St NWOPENED: December 2013

85,000 Sq. Ft.

Capitol GatewayPlanned

130,000 Sq. Ft.

SkylandPlanned

125,000 Sq. Ft.


These stores will be highly accessible to over half the District's population.

CapitolGateway

Skyland

H St

FortTotten

GeorgiaAve

Trade areas cover 42 of the District’s 68 total

square miles.

370,000 of the 647,000 DC residents live in these

trade areas.

62% ofthe City

57% ofthe Residents

Source: KLNB Retail; US Census; HR&A


Walmart store locations are or will be easily accessible by public transportation, facilitating access by residents and workers.

Compared to nearby suburban locations, all the Walmart locations in DC are more accessible by transit. Having reliable access to employment helps workers obtain and keep jobs.

CapitolGateway

Skyland

H St

FortTotten

GeorgiaAve

Walmart LocationAverage

Buses / HourAverage

Trains/Hour

Urban Locations

Georgia Ave, DC 22 0

H St, DC 61 0

Fort Totten, DC 46 14

Capitol Gateway, DC 6 10

Skyland, DC 31 0

Suburban Locations

Landover, MD 8 0

Alexandria, VA 7 0

Source: WMATA; HR&A


KEY FINDINGS


Finding #1: Walmart is providing much needed new retail in

Washington, DC.


The District loses out on approximately $3 billion in spending each year due to a lack of shopping opportunities.

Note: A 2008 study by Social Compact estimated that the District misses out on $1 billion per year on retail spending. Publically available

information on this study does not describe the methodology employed by this study. A similar recent study has shown a retail gap estimate of

$2.8 billion for the District (DC Development Report, Washington, DC Economic Partnership, 2014).

Source: ESRI, 2013; ICSC; U.S. Census Bureau LEHD; HR&A

Potential Spending Current Spending

Lost Spending$6 B

$3 B

$3 B


$0

$5

$10

$15

$20

$25

$30

Washington, DC Charlotte, NC Chicago, IL San Francisco,CA

Seattle, WA

Billi

ons

Potential Spending Current Spending

Like many, but not all, other cities, the District is experiencing a shortage of retail options.

$7.3 B$2.2 B

$12.6 B

$2.2 B Surplus

$4.6 B

Source: ESRI, 2013; HR&A


$(4,000)

$(2,000)

$-

$2,000

$4,000

$6,000

$8,000

Washington,DC

Charlotte, NC Chicago, IL San Francisco,CA

Seattle, WA

Retail Gap, per Individual

On a per resident and worker basis, the District is more under-retailed than other cities.

Source: ESRI, 2013; HR&A


Retail growth in DC has primarily been in specialized sectors, with a decline in supermarkets and department stores.

Source: US Census County Business Patterns; HR&A

-100% -80% -60% -40% -20% 0% 20% 40% 60%

Sewing and NeedleworkDiscount Department

FloristsNursery and Garden

HardwareSpecialty Food

ClothingSupermarketsHome Centers

DepartmentBeer, Wine, and Liquor

ConveniencePet and Pet Supplies

Cosmetics and BeautySporting Goods

Office Supplies and Stationery

Percentage Change in the Number of Stores, 2006-2012


The shortfall in potential spending in the District is seen across all major Walmart supply categories.

Potential SpendingCurrent SpendingSource: ESRI, 2013; HR&A

$-

$500

$1,000

$1,500

$2,000

$2,500

Grocery Health &Personal Care

GeneralMerchandise

Clothing Electronics &Appliances

Mill

ions

Current Spending vs. Potential Spending


Walmart’s market entry aligns with the priorities of several key District wide retail initiatives.

2010 – Retail Action Roadmap

• Filling in the gaps in neighborhood markets;• Creating new business concentrations;• Cultivating and strengthening locally owned small businesses.

2012 – Retail Action Roadmap

• Providing a greater selection of products and services;• Supporting thriving retail streets in the District.

2012 – Retail Action Strategy

• Strengthening the city’s retail base at both the citywide and local scale;• Promoting vibrant commercial districts with a broad range of retail

businesses;• Creating expanded opportunities for small and local retailers.


Finding #2: Walmart is providing needed affordable shopping to the

District.


Between 2011 and 2013, DC housing costs grew steadily, while disposable income flattened, driving the need for affordable retail.

2010 2011 2012 2013

Household Income vs Housing Cost

Housing Cost1

Disposable Income

1 - Indexed housing prices are uses as a proxy for housing cost.

Source: Housing Prices - HFHA House Price Index; Disposable Income - Bureau of Economic Analysis, Disposable Income Summary, DC; HR&A


GEORGETOWN

PENN QUARTER

CITY CENTER

14th STREET

Retail growth has been concentrated in higher end stores.

Images: BadWolfDC; DC UrbanTurf; Washington CityPaper; ThreadConscious.com


Items for sale at Walmart are more affordable than in most grocery stores in the District.� In a comparison of a basket of off-brand items, Walmart offered the lowest price

when compared to the largest competitors in the DC market.

$75 $83 $88 $93 $94 $95$54

+11% +17% +24% +25% +27%- 28%

Off Brand Basket Price

Difference from Walmart

0%

Source: Estimates are based on 2014 HR&A analysis of October 2013 industry benchmark data from Checkbook.org, Super Market Comparison as reported in "Guess Which DC Grocery Store is Cheapest and Which is Most Expensive", Anthony Sodd, October 2013, Streetwise Media. http://dcinno.streetwise.co/2013/10/24/guess-which-dc-grocery-store-is-cheapest-andwhich-is-most-expensive/; HR&A.


$7,300

Walmart can save a DC family of four approximately $1,300 per year, based on industry benchmarks.

=Average annual cost of food for a

household in the District

18%=Average discount below other DC

chain grocery stores

=Average annual savings for a DC

household $1,300

Source: Estimates are based on 2014 HR&A analysis of October 2013 industry benchmark data from Checkbook.org, Super Market Comparison as reported in "Guess Which DC Grocery Store is Cheapest and Which is Most Expensive", Anthony Sodd, October 2013, Streetwise Media. http://dcinno.streetwise.co/2013/10/24/guess-which-dc-grocery-store-is-cheapest-andwhich-is-most-expensive/;Washington, DC Economic Partnership; HR&A.


Finding # 3: The economic and fiscal benefits from Walmart in the

District begin with store construction.


Source: Walmart; IMPLAN; HR&A

The construction of 3 Walmart stores will support 630 jobs over the construction period.

630Jobs

480DirectJobs

150Multiplier

Jobs


Finding # 4: The opening of 2 stores in December 2013 has producedimmediate benefits to the District.



The two open Walmart stores currently support 810 jobs in the District from direct and multiplier impacts.

810Jobs

740DirectJobs

70Multiplier

Jobs


Corporate Business

Tax


The two open stores will generate approximately $6.4 million in annual tax revenues to the District.

$6.4 MillionAnnual Tax Revenues

SalesTax

PropertyTax

Personal Income Tax


$6.4 Million in taxes can fund a range of ongoing District costs and initiatives.

Salaries for nearly 120 Police officers

Salaries for nearly 120 teachers

6 playground renovations

Debt service on bonds for the construction of 6 new or significantly modernized community centers*

Note: *Assumes a level-debt service payment over a 20 year period with a 5% interest rate. Source: Walmart; IMPLAN; DC Office of Tax and Revenue; Alex Waza (Icon); DCPS; MPDC; HR&A

For example:


Finding # 5: Walmart’s two stores are employing DC residents.


Walmart is bringing jobs to the District.

Source: Walmart; Image: Massa Montalto Architects

� Over 700 people are employed at open locations

� The majority are full-time employees

� Over 65% of current associates are DC residents


9%

19%

5%

14%

10%

5%

8%6%

11%10%

0%

5%

10%

15%

20%

25%

Ward4

Ward6

Ward1

Ward2

Ward3

Ward5

Ward7

Ward8

Walmart is supporting local hiring by employing a higher percentage of ward residents compared to the average in all wards.

Percentage of Workers Living and Working in the Same Ward

Source: Walmart; U.S. Census Bureau LEHD, 2011; HR&A

% Walmart Employees

% Ward Workers that Live in Ward

Ward 1:Adams MorganColumbia HeightsHoward UniversityLeDroit Park

Ward 4:BrightwoodCrestwoodFort TottenPetworth

Ward 6:Capitol HillCapitol RiverfrontNoMaSouthwest Waterfront

Ward 2:DowntownDupont CircleGeorgetownWest End

Ward 3:Cleveland ParkFriendship HeightsTenleytownWoodley Park

Ward 5:BloomingdaleBrooklandEckingtonTrinidad

Ward 7:BenningCapitol ViewHillcrestSkyland

Ward 8:AnacostiaCongress HeightsDouglassWashington Highlands

14,930 123,952 23,312 369,258 37,102 48,386 5,461 11,953Workers in Ward


Walmart accounted for over half of the growth in retail trade jobs in the District of Columbia due to its two store openings in 2013.

-3.8%

3.4%

1.1%2.2%

5.3%

2009 2010 2011 2012 2013

Percentage Change in Employment, Retail Trade, 2013

WalmartEmployment

Source: BLS; HR&A

17,800 18,400 18,600 19,000 19,300

Total Retail Jobs


Jobs at the open stores contributed to the retail trade sector outpacing total job growth by almost 4x in 2013.

-0.3%

1.5%2.0%

1.2% 1.4%

-3.8%

3.4%

1.1%

2.2%

5.3%

2009 2010 2011 2012 2013

Total Retail TradeSource: BLS; HR&A

Employment Changes


Each Walmart in the District supports more employment than an average grocery or food store.

Source: Walmart, Progressive Grocer, U.S. DOE Commercial Buildings Energy Consumption Survey; HR&A

Notes: • Buildings used for retail or wholesale of food: grocery store or food

market, gas station with a convenience store, convenience store.• The average grocery store is 33,000 SF• Data include all jobs, full time or part time, not full time equivalents.

3.6

2.0

1.1

Walmart DC Store Average Grocery Store Convenience Store

Employees per 1,000 Square Feet

(Grocery, food mart, & convenience store)


Finding #6: Walmart and the Walmart Foundation are providing significant support to DC charities.


Workforce Development

$6.6 M

Health & Wellness $3.7 M

Other $2.3 M

Education $0.9 M

Community Development

$0.4 M

Environment & Sustainability

$0.2 M

Source: Walmart; Walmart Foundation; HR&A

Between FYE 2010 and FYE 2014, Walmart and the Walmart Foundation have awarded over $14 million to not-for-profit organizations in DC.



HR&A estimates these contributions have created and supported jobs at recipients, affiliated not-for-profits, and local businesses.

185Jobs

$16.5 MEmployee Compensation

$197,000Tax Revenue1

1 – Sales + income tax. Income tax from employees and sales tax from multiplier activities.

140Direct +

45Multiplier

$13.0 MDirect +

$3.5 MMultiplier

$93,000Direct +

$104,000Multiplier


Source: The Community Foundation for the National Capital Region

The $3 million Walmart Washington@Work Work Readiness Initiative supported a range of individuals in the District.

1,047Program Graduates

739Individuals

Improved their Basic Skills

618Job Placements

464Earned a Credential

370Enrolled in Post-

Secondary Education or

Training

30Earned a Promotion

Note: Education and employment results as reported by The Community Foundation for the National Capital Region. The Community Foundation

received $1.5 million from the Walmart Foundation. The University of the District of Columbia (UDC) also received $1.5 million. The numbers

reported above do not include data from UDC's grant award.

As reported by the Community Foundation for the National Capital Region, based on the $1.5 million grant they received:


Source: The Community Foundation for the National Capital Region

As a result of the Washington@Work partnership, the Community Foundation's five subgrantees successfully raised $13.7 million from additional sources.

Walmart Washington@Work Additional Grants


Finding #7: Walmart is increasing access to fresh and healthy foods.


Source: U.S. Department of Agriculture (USDA) Economic Research Service (ERS); Food Environment Atlas; HR&A

Each Walmart is located in a USDA identified food desert, meaning the areas have limited access to grocery stores.

Residents live more than 1 mile from a grocery store

Residents live more than ½ mile from a grocery store

Food Desert:A census tract with a substantial share of residents who live in low-income areas with low levels of access to a grocery store or healthy, affordable food retail outlets.


In fact, Walmart stores are in locations where healthy food shopping options make up less than 10% of the local retail offerings.

No healthy food

0.1% - 5%

5.1% - 10%

10.1% – 37.5%

Modified Retail Food Environment Index

Modified Retail Food Environment Index (mRFEI):The CDC’s Division of Nutrition, Physical Activity and Obesity, measure of the number of healthy and less healthy food retailers in an area.

Source: United States Centers for Disease Control and Prevention; HR&A


Access to healthy food is a pressing problem, but 4 out of 5 Walmart stores are located in wards with obesity rates over 60%.

Source: DC Department of Health; HR&A

Ward 1: 62%

Ward 3: 44%

Ward 4: 66%

Ward 5:69%

Ward 6:43% Ward 7:

86%

Ward 8:76%

Ward 2:52%

Percentage of Overweight or Obese Residents per Ward


41%

59%

Walmart provides a range of grocery items and sales in this category are 41% of the total.

Source: Walmart; HR&A

GrocerySalesNon-grocery

Sales


Finding #8: Walmart enhances economic development in

neighborhoods.


Anchoring a largescale development.

Integrated within amixed-use building.

Freestanding alonga retail corridor.

Walmart stores in the District are serving as development anchors and bring a range of development types.

H St NW&

Fort Totten

Georgia Ave NW

Skyland&

Capitol Gateway

Georgia Ave NW

Fort Totten

Capitol Gateway


Benefits are derived from the construction of Walmart stores, but also as anchors to larger developments.

� Walmart stores at H St. and Fort Totten provide a retail amenity to over 650 residential units.

� At Capitol Gateway Marketplace, Walmart is anchoring 26,000 square feet of retail and 312 residential units.

� The Walmart at Skyland Town Center will anchor over 200,000 square feet of retail and 476 residential units.


There is a precedent of big box retail development in the District revitalizing neighborhoods.

Columbia Heights is located in NorthwestDC and is considered today to be one of theDistrict’s most diverse and economicallystrong neighborhoods. Facing economicchallenges between the 1970’s and 1990’s,the area was designated an Enterprise Zonein 1997 and Columbia Heights received arange of tax-incentives and District financingto encourage private development.Redevelopment was focused around theColumbia Heights Metro stop, which openedin 1999 and served to anchor futureresidential, retail, and commercialdevelopment.

In early 2008, DCUSA opened the largest retail development in DC at the time, with 890,000SF of retail adjacent to the Columbia Heights Metro. The retail building is anchored by a two-story Target, along with other retailers such as Bed Bath & Beyond, a Best Buy, and aWashington Sports Club. Since opening, the DCUSA site has served to anchor the developmentof 1,300 multifamily units with ground floor retail, and a 55,000 SF Giant supermarket open24 hours a day.


The successful redevelopment of Columbia Heights serves as a benchmark for the anchoring effects of affordable big-box retail.

CapitolGateway

Skyland

H St

FortTotten

GeorgiaAve

Columbia Heights

0123456789

10

ColumbiaHeights

H St. GeorgiaAve

Ft. Totten Skyland CaptiolGateway

Num

ber

of S

tore

s

Retail Stores per 1,000 Residents

Columbia Heights

� Residents around Columbia Heights have up to 10x more retail stores than residents in other areas of the District.

� Compared to established retail areas, Walmart is entering into under-retailed neighborhoods.

Source: CoStar; site surveys; Walmart; HR&A


�Walmart’s arrival brings foot traffic, and signals to other retailers the potential strength of a location.

A diversity of business types co-locate around Walmart stores.

Source: Walmart; HR&A

Art Supplies Beauty Supplies/SalonBooks & Comics Childcare ServicesClothing Related FloristsFood & Beverage Home Furnishings

Mail/Shipping PetProfessional Services Stationary

Specialty Grocers Vitamin and Nutrition


The new Walmarts are catalyzing new retail investment in the surrounding neighborhoods.

Georgia Ave WalmartNew retail establishments have opened in the commercial area adjacent to and around Walmart, including a bank, restaurants, a gym and a salon.

99 H St. Walmart4 out of 5 store spaces in the 10,000 SF of ancillary retail are occupied by a range of businesses serving local residents and workers.

The FitnessFactory

CH BriteCleaners

B ForeverFlawless Salon

DecadenceRestaurant

Source: Walmart; JBG; HR&A

Economic & Fiscal Impacts of Walmart on Washington, DC

HR&A Advisors, Inc.2101 L Street, NWSuite 800Washington, DC 20037202-903-0725

Documents

Walmart Economic Impact Study