The massive old Sears property that occupies a prime spot on Santa Monica Boulevard in Hollywood is on the verge of a revival.
 
But the vacant department store isn’t poised for a fresh coat of paint and a new retailer. Instead, the space will be converted into a glitzy new studio complete with glossy white bungalows and mid-rise buildings with tons of windows and outdoor amenities.


West Hollywood-based Bardas Investment Group and Bain Capital Real Estate, the real estate investment group of Bain Capital, in early May submitted plans for a $450 million development at the site that will be named Echelon Studios.


It’s not the only Los Angeles retail site in line for a major makeover.

 
Tech giant Google will be moving into One Westside, formerly part of Westside Pavilion, which is being converted from a mall to a high-end, creative office space.


And Brentwood-based GPI Cos. is converting the former Westside Pavilion Macy’s into creative office space dubbed West End.


Elsewhere in Los Angeles County, developers are converting malls and retail centers into medical suites, offices, schools and multifamily buildings.


As more consumers turn to ecommerce sites like Amazon.com Inc., retailers are decreasing their footprints — and developers and property owners are taking advantage of the opportunity to fill vacancies at once vibrant shopping destinations.


“The overall sentiment of enclosed malls is that it’s an extinct animal as a product sector,” said Chris Maling, a principal at Avison Young Inc. “It’s not functional; it’s not going to be — for today’s retail environment — very conducive unless it gets repurposed with other uses.”


Maling was involved in the sale of a mall earlier this year in Oklahoma to a new owner who plans to turn an old anchor store into a concert venue.


“The idea is to create multiple uses that are synergistic to make these former enclosed malls now the center of the community,” Maling said. “The department store as we know it is becoming extinct. Retail has changed.”


Finding new uses for malls was a trend that was accelerated by Covid-19 and safer-at-home orders.

 
“The mall revolution was already underway. The pandemic really just sped things up drastically,” said Greg Rodgers, vice president at architecture firm Jerde Partnership Inc.


The downtown-based company has worked on retail projects, including the 2010 transformation of Santa Monica Place from a more traditional mall to an open-air center with restaurants.

 
Sandy Sigal, chief executive of Woodland Hills-based NewMark Merrill Cos. Inc., said his shopping centers, including some in areas like Inglewood, are morphing into community centers with uses like charter schools, medical offices and Covid testing centers.


Today, NewMark Merrill centers have 40% true retail and 60% service and medical uses.


Bill Bauman, a vice chairman at the Newmark Group Inc. said that while “there’s been a tremendous amount of repurposing of malls,” some individual shop owners also own their storefronts and put covenants in place specifying that the spaces may only be used for retail.


But Sigal said those restrictions prohibiting nonretail uses are disappearing now that tenants recognize the benefit of having other uses nearby.

 
“Tenants have very much started to realize the importance of having these businesses next to them,” he said.


‘Too many malls’

One increasingly common and buzzy product type for malls and retail center conversions is office projects.
 
Mark Lammas, president at Brentwood-based Hudson Pacific Properties Inc., said the decision to convert the Westside Pavilion into creative office space came down to market demand.


“Opportunities like One Westside don’t come along very often,” he said. “The minute the opportunity presented itself … it didn’t take long for us to quickly see the potential and begin the process of analyzing it and proving out what we could do there in terms of conversion and adaptive reuse for Class A office space.”


“Its premiere location and the potential to convert what are up to 150,000-square-feet floor plates into a vertical campus make that project somewhat of a rarity,” he added.


Hudson Pacific is undertaking the project with the property’s co-owner, Santa Monica-
based Macerich Co., and architecture firm Gensler. The space will be turned over to Google early next year.


Lammas said he thinks there is potential for similar adaptive reuse projects in L.A., as well as other markets.


“They’re structurally capable of conversion. They’re typically built with more than adequate parking for office or residential use among others. They actually convert pretty efficiently,” he said.


Lammas added that construction time is less than starting from the ground up on an office development and has a lower environmental cost.

 
Still, location is essential.


“If another retail opportunity in a prime location came around, we would certainly be interested in another adaptive reuse, but there’s really not a lot of opportunities to find a mall that’s this well located that can be adapted for office as elegantly as we were able to do One Westside,” Lammas said.


In 2019, GPI Cos. announced it would take on a $180 million project to convert the former Westside Pavilion Macy’s into creative office space designed by HLW International and named West End.


Henry Finkelstein, a partner in the real estate department of Greenberg Glusker Fields Claman & Machtinger, said there were “too many malls” in the area with the Westfield Century City nearby. Nordstrom and Macy’s, he said, consolidated in Century City and left the Westside Pavilion, with Macy’s closing its location there in 2018.


“That made Westside Pavilion available to be repositioned to a more appropriate use,” he said. “That’s an example where there was a rational consolidation, and the whole project got put to a different use.”


Industrial potential

One other use being contemplated for malls, big-box stores and retail centers is industrial space, especially as last-mile distribution centers.
 
A former Costco Wholesale Corp. warehouse in Torrance, for example, is being converted to an Amazon warehouse space.


The site sold for $81 million last year after having sold for $41.3 million in 2019, prior to it being leased to Amazon.


But some experts say the push from retail to industrial isn’t yet in full swing.


“It’s a little early in California, however, in other parts of the country it’s happening, and it’s mostly last-mile warehousing,” Maling said, adding that companies like Amazon and Wayfair could use big-box stores that no longer make sense for retailers.


He expects more industrial uses to happen at retail properties in secondary and tertiary markets before the trend takes hold in L.A.


Maling said he is seeing industrial conversions at stand-alone properties in other markets, like former Kmart stores.


“You might see a freestanding former anchor that isn’t part of a mall that may be repositioned for last mile,” Bauman added.


These facilities, he said, require a lot of parking and a large size, which some of these retail sites have.


“With the scarcity of land ... it’s a great option for them,” Bauman said. “Where we’re going to see those is more in an instance where there’s almost a complete failure of the mall.”


But not everyone is on board for industrial uses in retail areas.

 
“At a viable shopping center, I don’t want industrial,” said NewMark Merrill’s Sigal, who said he believes industrial conversions don’t mesh well with retail properties.

 
Experts say it’s not as complementary to other retailers in the area as products like multifamily and office.


“The blend of multifamily with a high-end open-air retail environment has proved to be a very effective strategy and is a very highly sought-after product type. Residential really benefits the retail,” Bauman said.

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