Is East Asia's Vertical Retail Model Wave of Future for U.S.?

Is East Asia's Vertical Retail Model Wave of Future for U.S.?
Jul 22, 2009
By: Barbra Murray, Conributing Editor, Commercial Property News

Vertical retailing--building retail destinations higher instead of wider--has long been a success in cities like Hong Kong and Shanghai, but the trend has yet to catch on in the United States. However, given the country's growing population and dwindling pool of developable land in major cities, the time may be just right for the nation's metropolises to jump on the bandwagon, or so believes Charles Chan, president of commercial real estate brokerage firm Harvest International.

"It's a good model for places like New York, Chicago and San Francisco, where it's very densely populated and there's a limited amount of space," Chan told CPN. "I think this is a very timely model for future retailing because not only is space limited but rent, even though it's declining with the downtown of the economy, it's still expensive. So the only way to go is up... and going up, you can have an atrium, a level for food, a level for women's wear, a level for menswear--it's very easy to configure."

Indeed, the vertical retail premise has proven to be a winning endeavor in some major cities overseas. As real estate services firm Colliers International notes in a research paper on vertical retailing in Hong Kong, for retailers that rely on repeat clients--and are not dependent on the exposure a street-front location provides--the upper-floor retail unit is the most appropriate environment. Among the types of retailers that benefit the most from the arrangement are food and beverage businesses, salons and spas and learning centers.

The vertical mall concept certainly provides economic advantages for the retailer, but it presents coveted benefits for the shopper, too. "Nowadays when transportation is so expensive, you can shop and get your groceries at the same place," Chan said. "It's an easier way of living, and it's more cost effective. Additionally, it will work very well in very severe weather; you don't want to drive around and risk chances of getting in a traffic jam or getting hit by a car."

Harvest International is in the process of putting its money where its mouth is. The firm is planning to convert the former Caldor Department store building near Main Street and Roosevelt Avenue in Flushing, N.Y., into a vertical shopping center mecca. The 240,000-square-foot structure, located practically atop a subway terminal and fronting a bevy of bus lines, features four floors for retail space and a two-level underground parking facility. The project, tentatively named New World Mall, is expected to feature everything from a "hyper mega food mart" to a children's play center. "If you are a mother with a child and have only two hours to do your shopping, you can go to a vertical retailing location and within two hours, you can get things done without wasting gas," Chan explained. "You could pick up your groceries, pick up your child and get in and out."

Interior plans for New World Mall are currently being finalized, and once that activity is wrapped up, interior renovation of the building will commence, with a target completion date for early spring of 2010. Already, Chan said, "we've had lots of interest from retailers."