America is in the grip of a housing shortage, with a staggering 4.5 million homes needed to meet demand. Meanwhile, sprawling malls across the country are facing a bleak future, with nearly 34 million square feet of retail space vacant. For innovative developers and entrepreneurs, defunct malls represent an extraordinary opportunity: turning old shopping places into modern residential spaces. For realtors, renters and potential home buyers, it’s time to meet at the mall.
The Case for Mall-to-Rental Conversions: Housing and Rental Options
For developers, the appeal of malls lies in their size, location, and existing infrastructure. Most malls are surrounded by ample parking, so there’s less demolition and site preparation compared to greenfield development. Additionally, malls are typically well-located near major intersections, highways and public transportation, providing convenience to future residents. With these built-in advantages, developers can convert malls into rental units, condominiums, or mixed-use communities relatively quickly, according to reports from MSNBC.
Malls also offer a chance to create desirable community-oriented spaces. By blending residential units with retail, dining, and entertainment, developers can create thriving neighborhoods. Residents benefit from the proximity of shops, restaurants, and amenities, while businesses gain a built-in customer base. This symbiotic relationship breathes new life into struggling malls while meeting critical housing needs.
Shopping for Apartments at the Mall
Consider the example of the Arcade Mall in Providence, Rhode Island, the oldest indoor shopping mall in the U.S. Once abandoned, the Arcade was transformed into micro-apartments and now houses residents alongside thriving businesses. Residents say they have everything they need inside the mall: hair salons, coffee shops, bookstores and more are now revitalized by a thriving community of residents and rentals.
National Impact in Housing and Rentals
Across the country, at least 192 malls have announced plans to incorporate housing into their spaces. Between Denver and Boulder, Colorado, Flatiron Crossing has developed HiFi: a mixed-use, 345-unit luxury multifamily community on the site of the former mall. Combining housing with green spaces and access to movie theaters, retail and restaurants, residents can walk to 65,000 square feet of evolving opportunities.
These conversions address two critical issues: the housing shortage and the economic decline caused by empty malls. Vacant retail spaces don’t just waste valuable land; they erode local economies, decrease tax revenue, and create eyesores in communities. Transforming malls into residential hubs helps reverse this trend, generating economic activity and improving quality of life for residents. Mall revitalization is a leadership win for the community, the developer, and the home owner (or apartment renter). Civic leaders need to consider how to turn old retail into new revenue.
Challenges of Converting Malls into Housing
Despite its promise, mall-to-housing conversion is not without hurdles. One significant challenge is zoning. Malls are typically zoned for commercial use, and re-zoning to accommodate multifamily housing often requires lengthy approvals from local governments. These processes can be contentious, especially in areas resistant to higher-density development. For example, at the Arcade Mall in Providence, residents can’t have an open flame – so no stoves are allowed – due to an unshakeable city ordinance. Government leaders could help ease the bureaucracy burden, with policies designed to streamline the conversion process.
Another obstacle is design. Unlike traditional residential buildings, malls were not built with housing in mind. Many lack the natural light and ventilation essential for apartments, making only exterior-facing spaces viable for conversion. “Conversion projects are really tricky,” according to Kevin Fagan, Senior Director of Commercial Real Estate Analysis at Moody’s Analytics. He says a lot depends upon existing conditions, some of which are unknown. “You’d be looking at maybe $200 a square foot to convert, where on the upper end you might be looking more at like $800 or more per square foot to convert.”
Financing is another consideration. Developers must navigate rising interest rates, construction costs, and uncertainties in the capital markets. These challenges can make it difficult to achieve the profitability needed to attract investors.
A Vision for the Future: Apartment Housing Revitalizing Old Malls
Despite these challenges, mall conversions represent a promising trend in urban development, a profit opportunity for developers, and a tax revenue stream for communities. By transforming dead retail spaces into vibrant residential centers, developers can address the housing shortage while revitalizing neighborhoods. Moreover, these projects encourage sustainable land use, reducing the need for suburban sprawl and preserving green spaces.
According to data on abandoned malls, compiled by IPX1031 (a division of Fidelity Investments), closed-down malls are a familiar site for many. Today, 68% of Americans live within one hour of a “dead mall”, and 40% of the population lives near two or more. “Dead malls” have high vacancy and low traffic, or are abandoned altogether.
As Americans reimagine their relationship with malls, these spaces are poised to become more than just vacant nostalgia from days gone by. Developers, apartment renters and potential buyers are seeing opportunity for growth. Savvy local government officials need to support the potential for tax revenues and urban utilization, if possible. Because these developments represent a bold future—where the answer to the housing crisis is just a short trip to the mall.
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