Makeover Makes a Mark On Famous California Mall
September 26, 2001

By Staff
Appeared in Real Estate Journal

The original Sherman Oaks Galleria, at the interchange of the San Diego Freeway (the 405) and the Ventura Freeway (the 401) in San Fernando Valley was no ordinary mall. And its conversion into an office, entertainment and retail complex is no ordinary conversion. In its heyday, in the early 1980s, the galleria was a playground for teenagers in "the Valley" who liked to shop and socialize in the hermetically sealed world of the mall. It became a cultural institution of sorts as birthplace of the Valley Girl and the inspiration for Frank Zappa and daughter Moon Unit's catchy song of that name. Parts of "Fast Times at Ridgemont High" were filmed there, as well as scenes from "Commando", starring Arnold Schwarzenegger playing against type.

But all good things must come to an end. The galleria fell on hard times in the early 1990s, facing tough competition from newer malls in the area and suffering disfigurement by the Northridge earthquake of 1994. (The mall was closed for a short time after the earthquake to make repairs to four two-foot-thick concrete sheer walls at the north end of the complex.) The mall had lost its luster by the time Douglas, Emmett & Co., a local commercial developer, bought it and two adjacent office buildings from a Japanese insurer in 1997 for just over $50 million, according to sources familiar with the deal.

A New Leaf
For Emmett, the fading galleria presented an opportunity "to turn a white elephant inside out," says Andrew Cohen, managing principal in the Santa Monica office of San Francisco-based architecture firm Gensler, which designed the ambitious mall overhaul. For all its fame and short-lived fortune, the Sherman Oaks Galleria was, in architectural terms, nothing more than "a standard vanilla, white-box mall with blank exterior walls," says Mr. Cohen. Designed in the late 1970s by local firm Albert C. Martin Architects and opened in 1980, the three-story galleria was an inward-looking relic.

Emmett chose a no-holds-barred adaptive reuse approach for the project, including doubling the office space at Sherman Oaks to just over 1 million square feet, nearly two-thirds of the 1.6 million-square-foot complex. Although the developer would not disclose how much it has invested in the rehab, sources familiar with the project say that it could cost as much as $160 million.

Doubling the office component was a strategic move. The huge competing malls nearby were a major factor in the previous owner's decision to sell. "Because of the small size and physical structure, it doesn't work as a regional mall," explains Douglas, Emmett CEO Dan Emmett. When Emmett began the overhaul, the Los Angeles office market was building a head of steam. Although growth in demand has since slowed, it remains fairly strong. Sherman Oaks's first major office anchor, Warner Bros. Animation, is leasing 150,000 square feet at the galleria and moved in this past February. Office rent in the complex is approximately $30 per square foot, according to Mr. Emmett.

Anchors for the new and improved Sherman Oaks Galleria, which celebrates its official reopening this summer, include a 100,000-square-foot, 18-screen cinema with 4,000 seats operated by Pacific Theaters and a 50,000-square-foot Tower Records. The mall will feature lifestyle-oriented retail along with a fitness center, a day spa and a variety of restaurants in an open-air promenade and courtyards, as well as parking for 3,500 cars. Together, the retail and office space is 70% preleased.

How Green Is My Valley
Emmett has been able to apply its considerable experience creating energy-efficient systems in existing office buildings to the Sherman Oaks conversion. "Most of our projects have gotten or are in the process of getting the EPA Energy Star designation," comments Emmett, referring to a federal designation that recognizes significant energy-saving measures in individual properties. The most dramatic change entailed tearing down the blank mall walls and replacing them with an energy-efficient glass curtain wall. The redesign also includes courtyards and a large, open-air promenade shaded by a suspended steel lattice with tinted glazing, like "a European village," says Mr. Cohen.

Early in the design process, Emmett arranged a charrette to investigate ways to transform the galleria from a monument to consumption to a model of conservation. Participants included Gensler, Syska & Hennessy Consulting Engineers, the Rocky Mountain Institute -- a nonprofit organization based in Snowmass, Colo., that helps businesses, communities, individuals and governments save money while saving natural resources -- and the Los Angeles Department of Water and Power.

To develop a life-cycle cost analysis for the galleria and zero in on particular areas for energy savings, the team used a Department of Energy-2 energy model, which provides a thermal representation of a building and an estimate of its annual energy consumption. It then focused on reducing reliance on artificial light and conditioned air in what, as Mr. Cohen points out, "was basically a refrigerated box." This resulted in the almost complete reskinning of the complex with a high-performance, double-paned, low-e glass curtain wall. On the west facade, horizontal louvers were installed to bring natural light deep into the interior while also creating solar shading. In addition, light wells and skylights were introduced throughout the structure.

Although the office and retail interiors are air-conditioned, light sensors help keep the electricity bills down, and the rest of the mall is open to the mild Southern California climate, which provides plenty of light and air for free. The capital outlay was offset in part by savings on the cost of chillers, which could be 30% smaller thanks to the energy-saving aspects of the redesign. The architecture and design team estimates that the energy-conserving aspects of the redesign will provide a 30% annual savings in energy costs.

Not Quite Ready for Prime Time
While the city of Los Angeles has not been affected by rolling blackouts because it did not deregulate its utilities, the recent power emergencies in California have certainly helped focus both developers' and architects' attention on designs that reduce energy use. The energy benefits and lowered cost of building maintenance in the redesign of the Sherman Oaks Galleria are nothing to sniff at. But Rob Bohlin, head of Syska & Hennessy's Sustainable Design Group, believes the workforce productivity gained by going green is even more valuable. "Most commercial office buildings spend approximately $2 to $4 per square foot on energy costs per year," he says. "The human cost of a building [salaries, benefits, etc.] is on the order of $200 to $400 per square foot per year. So if we can improve the environment whereby productivity is increased by only 1%, an entire year's energy savings has been realized." This, he believes, "will doubtless lead to pretty short payback periods."

Does that mean the time has come when a building's energy efficiency can be used as a marketing tool? "I'd like to believe it's a marketing tool, but that is probably yet to be proven," says Mr. Emmett, who is on the board of directors of Santa Monica BayKeeper, a local environmental group. "Landlords and tenants are less sensitive to power than they should be." However, in the case of the galleria, he points out, "energy-saving features add a lot to the design and drama of the structure."