In Rise and Fall of Malls, Weaker Ones Get ‘Demalled’

Regional malls, those retail shrines so beloved by Southern Californians since the automobile-crazy region boomed after World War II, are losing their monopoly on consumer desire.

As shoppers find other ways to buy merchandise, several traditional malls--including that famous playground for Valley girls, the former Sherman Oaks Galleria--are being converted to such new hybrids as entertainment centers, “big box” retail centers, office buildings, schools and even housing.

The conversions may be a sign that the regional mall, one of the most popular--and often profitable--of building types, is approaching obsolescence. And while malls will continue to dominate retailing and the most successful ones show no signs of flagging, the trend of converting struggling centers to broader uses has inspired a new buzzword: demalling.

Nearly four decades after regional malls became the dominant retail attraction in the U.S., many shoppers have come to view the spaces as “artificial and monotonous and predictable,” said Lee H. Wagman, president and chief executive of San Diego-based TrizecHahn Development Corp., which is converting the long-suffering Plaza Pasadena mall into a pedestrian-oriented shopping street.

Warnings about too many malls dotting the American landscape have been voiced by experts for nearly a decade, but the problems finally appear to be at hand. Malls in Long Beach, Huntington Beach, Orange and Ventura have failed or been forced to reconfigure under pressure from stronger retail centers.

The current push to demall existing shopping centers can be traced to several trends, starting with intense competition caused by market saturation. Centers with strong “anchor” stores can force rival malls to wither. The presence of Bloomingdale’s and Macy’s at Sherman Oaks Fashion Square was a factor in the decline of the Sherman Oaks Galleria, which was anchored at the end by two Robinsons-May department stores.

Demalling is also a sign that popular pedestrian-oriented shopping streets, such as Old Pasadena and Third Street Promenade in Santa Monica, are becoming the way to go in the retail industry.

“Given a choice to shop in a mall or on a street,” Wagman said, “people in many instances prefer the street.”

But the changing nature of retailing itself is perhaps the biggest reason for mall conversions, according to Jeff Axtell, a project director for Vestar Development Co., a Phoenix-based firm that is involved in several mall conversions.

Many present-day retailers, particularly the national chain stores, require larger spaces than those typically available in malls, with floor areas of 20,000 to 200,000 square feet, column-free space, prominent signs and window displays.

And retailers want to be in the company of other well-advertised stores, in the hope of benefiting from “everybody else’s advertising and drawing power,” according to Rick Kuhle, a senior vice president at Vestar.

If regional malls have become standardized, the new demalling often creates a one-of-a-kind space.

In Pasadena, TrizecHahn is taking an unconventional approach by tearing down most of the existing Plaza Pasadena and replacing it. Paseo Colorado, as it will be called, is expected to contain new stores, restaurants, a multiplex cinema and 35,000 square feet of office space.

But what will distinguish it is TrizecHahn’s decision to include 400 loft-style apartments, which will be stacked above the retail space. Another developer, Post Properties Inc. of Atlanta, is to erect the living space atop Paseo Colorado.

“This is the only project to my knowledge that has built housing on the site of a regional mall,” TrizecHahn’s Wagman said.

The Paseo Colorado tenant mix also will be unusual. Pasadena city officials asked the developer not to cannibalize existing merchants from the city’s best-known retail areas, Lake Avenue and Old Pasadena. As a result, the developer is promoting the project as an “urban village” with upscale, neighborhood-oriented merchants, including a gourmet market, a health club and a day spa.

When TrizecHahn is finished with the conversion, scheduled for the spring of 2001, almost nothing of the original mall will remain with the exception of a Macy’s store and the underground parking garage. Where the windowless, slab-sided structure now stands, TrizecHahn plans to build courtyards, walkways and three free-standing buildings that are designed to resemble a row of old-fashioned storefronts.

“I call it returning [the store] to the street,” Wagman said.

Unlike its predecessor, Paseo Colorado will avoid the “uniformity and artificiality of malls,” Wagman said. “It is very much connected to the urban fabric.”

The design of the new mall, in fact, conforms to a 1915 plan for the city, which calls for an unobstructed view between Pasadena City Hall and the Pasadena Civic Auditorium south of the mall, according to architect Steve Nakada of the Los Angeles office of Ehrenkrantz, Eckstut & Kuhn.

Retailers apparently approve of the unconventional plans for Paseo Colorado: Even before construction has begun, the new center is 70% leased.

“This is what consumers want, what the retailers want and what the financial markets want, because it is really a new product,” Wagman said.

Meantime, another demalling is taking place at the Sherman Oaks Galleria, which is being reconfigured to include 600,000 square feet of office space, 300,000 square feet of retail and a 16-screen cinema. The developer is Brentwood-based Douglas Emmett & Co.

The “repositioning” of the Galleria reflects the strong demand for office space on Ventura Boulevard, where little new construction has occurred in the last decade, said Allen Young, a senior vice president with CB Richard Ellis, leasing agent for the retail portion of the Sherman Oaks project.

When completed over the next two years, the mall where “Valley Girl” was filmed in 1983 will house four office buildings, including a 135,000-square-foot site formerly occupied by Robinsons-May that has been leased by Warner Bros. Animation.

So far, about a third of the retail space in the Sherman Oaks project has been leased. Retail tenants will include Pacific Theatres, which plans to rehab the third floor of the former mall as a multiplex movie house, as well as the Cheesecake Factory restaurant.

The most common form of demalling is the conversion of an enclosed mall into a power center, also known as a “big box” center. Unlike traditional malls, which are inward-facing shells that contain many stores, the power center is a row of large stores, each with its own entrance off the street.

One such conversion is occurring at the former Glendale Fashion Center, an enclosed mall built in 1960. The mall closed in 1994, after being red-tagged in the Northridge earthquake. In 1997, Vestar bought the property and demolished part of it.

The developer is building a 264,000-square-foot, $70-million power center in the “lifestyle” category, scheduled to open early next summer. The Glendale center is already fully leased, a rarity in an industry where being 70% occupied upon opening is considered standard. Major tenants include Nordstrom Rack, Barnes & Noble, Ralphs, Strouds, Ross Dress for Less, PetCo and Staples.

City Mall in Orange was bulldozed and replaced last year with the Block at Orange, an open-air, youth-oriented shopping and entertainment center that reported 12 million visitors during its first year in business. The Block’s big draws are its restaurants, a 30-screen theater and the popular Van’s Skate Park.

Despite intensifying competition among Orange County centers, the Block is now planning to expand by more than one-fourth--adding at least 250,000 square feet. The planned addition would include more shops, entertainment and eateries.

The struggling Huntington Beach Mall, meanwhile, was purchased last month by Irvine-based Erzalow Retail Properties, which plans to sink at least $50 million into transforming it into an open-air center with large specialty retailers.

And the 37-year-old Buena Park Mall is being dramatically redesigned at a total cost of $70 million. The exterior of the enclosed section of that mall has been rebuilt to resemble an “urban street-scape.” Next summer, a second phase of construction will begin, adding a 167,600-square-foot open-air entertainment center with a 20-screen theater, themed restaurants, music shops and bookstores, and perhaps an arcade or virtual-reality game room, general manager Ken Kraus said.

In San Diego, Vestar is converting the former College Grove Center into a 650,000-square-foot power center. Built in 1960, it was the city’s first regional mall. Home Base opened an outlet there in October, while Wal-Mart, Sam’s Club and Staples are scheduled to open in spring. Like the Glendale project, the San Diego center is fully leased.

With the favorable response to these mall make-overs from retailers and consumers, TrizecHahn’s Wagman predicts a continued decline in the number of regional malls. “The number of those highly successful ones is shrinking,” he said.

Vestar’s Kuhle agreed that traditional malls are in transition. “The strong malls will get stronger, and the weak will go by the wayside,” he said.