While I agree with your assessment of what will happen to the upper mall, and with the impending lack of nighttime pull in particular, it was not that the cinemas were cancelled so much as it was that no cinema chain was willing to lease the space. After years of no-one coming on board to present films, it makes sense—unfortunately, for the reasons you outlined—that they retooled the space for a commercial office tenant.
Oh I get the thought process, I just think the way to handle the change in programming was poorly thought out. They gave over a substantial amount of retail space to pretty private and restrictive uses. I'm ready to be proven wrong, but I just think it's going to end up being a pseudo off limits area within what was supposed to be a publicly accessible retail concourse. I can already see security guards roaming the upper southwest corner keeping people from drifting too close to the Konrad entrance. No fun.