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Thursday, Nov 30, 2023

Rethinking the Mall

Charles Dunn Co. has begun marketing 45,000 square feet of former retail space at Northridge Fashion Center as creative office space. The Glendale-based brokerage’s Los Angeles Tri-Cities office signed a contract in mid-May with mall owner General Growth Properties to lease out the third floor at 9301 Tampa Ave. in Northridge. The space has sat vacant since 1994. “It’s very timely for where the economy is right now,” said Lauren Nesmith, who along with Todd Wuschnig at Charles Dunn Co., started marketing the open space on June 1. “It will enhance the asset value for the mall, especially in Northridge where there is not a lot of opportunity for this type of footprint.” The release of the mall’s dormant third floor into the marketplace represents an addition to area office inventory, which remains tight. According to data from Colliers International, during the first quarter, office vacancy in the central San Fernando Valley stood at 9.4 percent, compared to an L.A. County figure of 15.6 percent. “It’s an exciting time in our industry,” added Fashion Center General Manager Daniyel John, who has worked in her position for most of her 14 years with General Growth. “There are a lot of opportunities. We’re reinventing ourselves. Here at Northridge Fashion Center, we want to make sure we’re at the forefront of that.” Because the space has been unused for nearly a quarter of a century, any tenant will have a blank canvas in terms of design and décor. “It was empty space – concrete floors and steel beams,” John said. She added that retail centers such as Fashion Center “are set up to be a community hub” so by mixing uses and adding such components as office space, the mall will be “providing what the community wants.” Conversion of vacant mall space into non-retail usage is trending, said the Charles Dunn Co. office’s Senior Managing Director William Boyd Jr., who has worked in local real estate since 1981. “Some are converting to medical, some creative office space,” he said. Boyd said that the annual International Council of Shopping Centers convention, held in Las Vegas May 20-23, served as a barometer of the current state of the retail mall industry. “The attendance has gone from 60,000 (years ago) to 35,000 this past week,” he said. Until recently, Northridge Fashion Center had 90,000 square feet vacant. An incoming Dave and Buster’s will absorb a big portion of that space. Boyd is pitching the shuttered third floor as creative office because “45,000 square feet is too big for medical,” he said. “Creative space is nothing more than office space without a ceiling,” Boyd continued, noting that mall amenities already in place at Northridge Fashion Center will be desirable for incoming companies. “There’s plenty of parking for the tenant,” he continued, not to mention lunch options. “It will be extremely competitive.” In order for Dave & Buster’s to open this month at the Fashion Center, it had to undergo a change of use process with the city. John said that Charles Dunn Co. will work on landing a new tenant concurrently with General Growth applying for a change of use for the 45,000 square-footage. Matthew May, founder of Sherman Oaks-based retail brokerage May Realty Advisors, believes that creating office space in the mall can work well for office tenants who need parking and amenities. “Most of the office space in Northridge and Chatsworth is class C or B and is old,” he said. “The best project to look at in the area is the Harmon Campus redevelopment. This project has well over 100,000 square feet of newly renovated office and new retail pads. I know they did a Porto’s Bakery deal that will be great for the area.” Tenant transformations As reported by Bisnow in a May 24 report, the move for mall owners to replace department stores with hotel suites or multifamily units is trending nationwide. With age-old department stores such as JC Penney Co., Macy’s, Sears Holding Corp. and the recently bankrupted Toys “R” Us forfeiting millions of square feet, non-retail must take the place of brick-and-mortar brands. “You don’t have to fill retail with retail anymore,” JLL Retail Chief Executive Greg Maloney told CNBC on May 23. “The sky is the limit for what you can do (with dark mall space).” Chaos currently reigns in the world of traditional retail. After being hired as a turnaround man, JC Penney Chief Executive Marvin Ellison left to become chief executive at Lowe’s, while JC Penney lost $69 million last quarter. Last month Sears announced another round of store closures. Re-use of sites once decades-long vessels for a Sears or a JC Penney has already occurred in Chicago, Brookfield, Wis. and Tampa, Fla. According to Bisnow, JC Penney currently has about 875 locations remaining while Sears has contracted to 498 and Kmart retains 430 storefronts. Even Toys “R” Us corporate headquarters will be repurposed. A May 29 CoStar report said the Wayne, N.J. complex, which includes two buildings with a total of 575,000 square feet on nearly 200 acres, will be sold as part of the company’s bankruptcy liquidation. The site’s early 1960s buildings will be “reimagined”– mixing in new uses, like residential and retail with office space – to revive former corporate campuses through the cooperation of creative developers and local officials. Glendale-tested Back in Northridge, Boyd believes the Fashion Center space is a positive for any incoming business, particularly an entertainment or technology company. “It’s a model that has worked in Glendale,” he said, noting another of General Growth’s assets, the Glendale Galleria, has successfully combined office and retail. An office tower at the Galleria that opened in 1983 continues to be well-leased with low to no vacancy. Although John is quick to note that this analogy is not completely parallel, as Glendale is a tower dedicated to office suites while Northridge will be a conversion, it proves the combination can work. In Glendale, having office space adjacent to retail and restaurants, such as at the Galleria, has yielded excellent employee retrieval time– namely, lunch hour efficiency, according to Boyd. He believes this can also benefit a Fashion Center tenant. “That location is going to have appeal to that part of the Valley,” he said. May, the retail broker, is currently working on repositioning the shopping center at Van Nuys Boulevard and Moorpark Street in Sherman Oaks, where a conversion of that retail space is in the cards. “We are looking at alternative uses for the current Pacific Theater space and we have had interest from larger medical users to post-production companies, in addition to health clubs and value-oriented retailers,” May said. Ultimately, he continued, the Northridge mall is not going away but the limited number of large tenants with credit makes it difficult to backfill space, so shopping center landlords have to adapt. “Any legitimate use that provides quality rental income and does not degrade a project will be considered,” he said.

Michael Aushenker
Michael Aushenker
A graduate of Cornell University, Michael covers commercial real estate for the San Fernando Valley Business Journal. Prior to the Business Journal, Michael covered the community and entertainment beats as a staff writer for various newspapers, including the Jewish Journal of Greater Los Angeles, The Palisadian-Post, The Argonaut and Acorn Newspapers. He has also freelanced for the Santa Barbara Independent, VC Reporter, Malibu Times and Los Feliz Ledger.

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