Chain Reaction : Discounters Are Tapping the Urban Marketplace

It’s now a trend: Discount retail chains are breaking their architectural traditions to reach untapped urban markets.

Kmart, for example, opened its first Manhattan store in a multistory building a month ago because the typical discount store format--large one-story building and expansive parking lot--isn’t practical in areas where land is scarce and expensive.

However, trends tend to start in California, and the discount retailing move to vertical urban sites is no exception.

The experiment began in 1994 when Target Stores set up shop in a two-tier structure in downtown Pasadena, replacing a Robinsons that closed in 1993.

“The sales performance in Pasadena has been great,” said Gail Dorn, a spokeswoman for Dayton Hudson Corp., the Minneapolis-based company that operates Target Stores.

Meanwhile, Wal-Mart is close to a deal for a three-story structure in the San Fernando Valley at the site of a former Broadway store. It would be Wal-Mart’s first multistory store in the United States and its first store in the city of Los Angeles.

The proposed site is part of an emerging Wal-Mart strategy to reach more value-oriented consumers in Los Angeles and other cities, said Les Copeland, a Wal-Mart spokesman.

“We need 12 to 14 acres for a typical Wal-Mart store,” he said. “We have to be creative because that kind of space in cities is rare.”

Urban real estate is often pricier than suburban property, but those higher costs are often offset by higher sales, said Steve Soboroff, a Santa Monica-based retail real estate consultant.

Soboroff said other discounters--among them consumer electronics chains such as CompUSA and Best Buy and apparel retailers such as Ross Dress for Less and Marshall’s--are among those seeking more locations in Los Angeles.

Marshall’s has found a more innovative vertical option. The apparel retailer is expected to move into a newly constructed 300,000-square-foot facility at Sawtelle and Olympic boulevards in March.

That Westside location is relatively pricey. However, the cost of each square foot will be less because Marshall’s, which normally operates from one-story buildings in less expensive areas, will share costs at a two-story structure with co-anchor Linens ‘N Things.

The building, dubbed One Westside Place, is the brainchild of Los Angeles-based developer Robert Champion.

“Major retailers are looking for ways to gain access to affluent urban areas, and vertical structures are becoming a trendy and sensible option,” Champion said.