Is Heights Mercantile The Future Of Retail Or Just A Unicorn?

With 16 first-to-market specialty brands and four chef-driven restaurant concepts, Heights Mercantile has the Houston retail world abuzz. The experimental retail hot spot just hit 99% leased with the addition of a pop-up museum by the Museum of Fine Arts Houston. Will we see more retail centers like Heights Mercantile, or is it one man's inimitable labor of love?

With the White Oak Hike and Bike Trail as a foundation, Steve Radom set out to turn the space on Seventh Street between Heights Boulevard and Yale into a neighborhood-defining project in the Heights. Radom Capital assembled the tract over the course of about 15 months. It began renovating four buildings and constructing two others last year for a total of 40K SF of retail space. After years of legwork, Radom's vision is starting to pay off. 

MFAH's contemporary pop-up gallery will be a first in Houston and MFAH's first public-private partnership. Longtime supporters of the arts and education, Radom and his brother-in-law Evan Katz, a partner in the project's development, donated the space to MFAH, allowing the museum to expand outside of its main campus for the first time.

"MFAH will be both a cultural addition to The Heights and a great long-term driver of foot traffic," Radom said. 

Radom credits his colleagues Evan Katz, Barton Kelly and Evan Peterson for the project's success. Developing nuanced Inner Loop projects takes a certain acumen, Radom said. 

Part of what makes Heights Mercantile special is how just many Houston firsts it contains. Chubbies, Warby Parker, Marine Layer and Will Leather all made the move to Houston to be in this project. In a down oil market, that took some serious convincing. But Radom believes he has keyed into the perfect tenant demographic. 

"There’s this large, growing group of very small but socially adept and intelligent merchants that all want to be next to each other," Radom said. 

With additional tenants like Gypsy Wagon, Lululemon, Define Body & Mind, Melange Creperie and Rye 51, Heights Mercantile is one of the most Instragram-able retail developments in Houston. That type of marketing is paying off big. 

"All of the stores are extremely happy with their openings, most of the stores are new to Houston, they are super-excited about this market now," Radom said. 

The project has also attracted plenty of local tenants. Local Foods was one of the first tenants to sign onto the project. Restaurateur Benjy Levit was interested early on when Levit's architect, Michael Hsu of Michael Hsu Office of Architecture, told him about a new project he was working in The Heights. 

"I was immediately drawn to the design and location. The project was going to create a real destination in The Heights," Levit said. 

"Benjy is very astute when it comes to real estate and design. They wanted to be somewhere different, I knew this was going to be what he was looking for," Radom said.

"The project had the ability to create an enclave, a real sense of place. I took a leap with Steve because we see eye-to-eye. So far, everything has exceeded my expectations," Levit said. Local Foods will open in Heights Mercantile next year, its fifth location.

Despite its success, Radom said his vision has room for improvement. When he started the project, signing a bike company to leverage the bike trail was a major focus. That vision has not panned out.

"We found that sector had a lot of large-format stores and under-cap players. It was tough to make a deal. A bike shop with a coffee shop is something we still want," Radom said. 

It might be hard to replicate the success of Heights Mercantile. 

"Heights Mercantile is so incredibly unique, it's a stand-alone," NAI Retail Senior Vice President Jason Gaines said. Gaines is not involved in the project. "I know all the tenants have been blown away by their locations, I've been blown away by the reaction, but I don't think they're going to try and replicate it." 

The location is critical. It takes specific neighborhoods to achieve the type of placemaking at Heights Mercantile.

"Once you get west of 610, you start to lose customer-specific pull, making projects like this even more difficult," Gaines said. "You're not going to see a Vespa store on Voss." 

The Heights is a perfect fit for Heights Mercantile, and Heights Mercantile is a perfect fit for The Heights. In the world of placemaking, there are some intangibles that cannot be duplicated. A site like this on a bike trail in a neighborhood like The Heights is a unicorn, Gaines said. 

"These type of placemaking projects are labors of love," Gaines said. "They can only exist in a handful of places."  

Radom's passion and hours spent pounding the pavement could also be difficult to reproduce. For every deal he did, there were five or more deals that did not get done. Radom was flying coast to coast, meeting with tenants. At one point, a high-end fashion group wanted to take over the entire project and make it a high-end concept development. 

"There was a lot of shoe leather on this. A lot of people say it's a passion project, but there's no substitute for hard work," Radom said.  

It will take time to fully understand the numbers behind Heights Mercantile's success. The first tenants opened their doors just months ago. But already, standing between the buildings watching the businesses hum on a busy evening, it is easy to see how it is thriving. Replicating that success in other neighborhoods will not be so easy. 

CORRECTION, NOV. 20, 4:30 P.M. ET: A previous version of the story incorrectly stated Michael Hsu worked for SWA Group. He is the owner of the Michael Hsu Office of Architecture.