Westside Pavilion, a dying mall in Los Angeles, ticked all of the boxes for Hudson Pacific Properties.
The Los Angeles-based developer was looking for an urban site with big floor plates and exceptionally high ceilings to redevelop into what it called “state-of-the-art creative office space” for future tenants. The company also wanted a central location near mass transit and major highways, in one of the handful of West Coast cities where it usually builds.
Then, as Hudson Pacific started planning to outfit the mall, along came Google, a Hudson Pacific tenant elsewhere in the city. “The stars kind of aligned,” said Alexander Vouvalides, the developer’s chief investment officer.
The old mall would become new office space. The 584,000-square-foot Google complex, to be called One Westside, is projected to be finished in 2022 at a cost of up to $410 million.
The Westside Pavilion redevelopment is one of the latest examples of a nationwide trend in commercial real estate: the conversion of malls into office space. Offices are less risky than retailers, and in some cases they can generate foot traffic for the mall’s remaining stores and restaurants.
The biggest beneficiaries of the conversions are co-working enterprises, like WeWork, which provide shared work spaces primarily to entrepreneurs, freelancers and start-ups. The highest concentration of co-working spaces in retail nationally is in malls, according to an August study by the global property company Jones Lang LaSalle. The same study predicted that co-working space in retail in general would grow at an annual rate of 25 percent through 2023.
But this is not another chapter in the tale of how brick-and-mortar retail is being ground under the foot of online shopping. Malls have long been converted into other uses, including apartments, condominiums, and sports and entertainment venues. Instead, developers and landlords are seeking what Mr. Vouvalides described as “a higher, better use” for the properties, a sentiment echoed by elected officials and supported by real estate data.
Officials see the conversions as a way to repurpose buildings that are probably doomed to suffer gaping vacancies anyway. Westside Pavilion’s two big tenants, Macy’s and Nordstrom, had exited by mid-2018, for instance, and few retailers could replace them.