Malls are finding new life as offices for tech companies, as developers are repurposing space formerly held by retail tenants into workplaces with high-end amenities for firms like Google. In Los Angeles, part of the Westside Pavilion is set to be redeveloped into a 584,000-square-foot office for the tech company in a project that is slated to finish in 2022.
The mall, which is owned by Hudson Pacific Properties Inc. and Macerich Co., is still operating, but renovations will start later this year. After the office is finished, it will include open spaces, a garden deck on the roof and large terraces. And in order to make those amenities happen, the spaces will have to be reconfigured. “Walls will be taken down,” Hudson Pacific Properties Chairman and Chief Executive Victor Coleman told The Wall Street Journal.
The property, however, won’t be losing all of its retail: A Landmark Theatres complex with 12 screens will reportedly stay in the complex, as will some restaurants and stores. (The theatre will be connected to the office complex by a bridge, reports noted). But a Macy’s building that was sold in 2017 to a developer for $50 billion is reportedly not included in the project. At the same time, it was reported that both Macerich and Hudson Pacific will continue operating and owning that section of the mall.
In previous years, The Los Angeles Times said the mall was featured in productions like the 1989 Tom Petty music video “Free Fallin’” and the 1995 movie “Clueless.” And at one time, the paper said the mall was “one of the city’s premier shopping venues.” But the property “fell behind flashier competitors,” naming properties like the revamped Westfield Century City and The Grove as well as the advent of eCommerce merchants.
Westside Pavilion, however, is located near public transportation and highways in a well-to-do area of Los Angeles. For that reason, Coleman noted that it might have been an attractive location for offices, but added that “I’m not so optimistic that it can be replicated.” Beyond the Google project, other retail properties have been in the process of becoming offices: Lord & Taylor’s landmark Fifth Avenue store in New York City is set to become a new WeWork headquarters.
Coworking and Immersive Destinations
Offices in malls don’t have to be leased to only one company: Coworking could also be a space-filler for waning malls and other retail spaces. Those kinds of spaces are set for 25 percent growth through 2023 at retail properties, per Jones Lang LaSalle data. And in the next five years, those kinds of uses are set to fill approximately 3.4 million square feet of retail space. As Industrious CEO Jamie Hodari told CNBC in August, “we feel very confident that integrating co-working into retail will be a slam dunk in urban areas.”
But malls have also found other use cases for space. To bring in more customers to their properties, they have leased spaces to gyms and immersive destinations. Santa Fe, New Mexico-based company Meow Wolf was planning to lease 50,000 square feet to an “immersive bazaar” of shops, restaurants and event space scheduled to open this fall called AREA15. Meow Wolf Vice President of Communications John Feins said in August, per WSJ, “There’s a ripe opportunity for this thing to go big and change the future of retail.”
Bain & Co. Retail Consultant Mikey Vu, however, noted that it isn’t known if these kinds of uses can churn a profit, adding these uses might do well in large cities but could be a more difficult sell in smaller locales. Vu told WSJ in August that the “business model hasn’t been proven out.” He added, “I don’t think anybody knows how to do it extremely efficiently to generate profit margins.”
Will office and co-working space help save the U.S. mall? While mall vacancy rates have reached their highest levels since 2012 per one report, projects like Westside Pavilion suggest that landlords and tenants see potential in having workplaces in spaces once occupied by retail stores.