America’s housing shortage has gotten so bad that politicians are looking left, right, underfoot and downtown to see what we could turn into residential buildings. Nearly a decade of underconstruction has led to a shortfall of between 3 million and 6 million housing units, leading young Americans to double up with roommates or family members or hold off on buying a home altogether.
There is, however, a widespread and underutilized class of real estate that has the potential to make a dent in this figure. Long-suffering retail – malls, strip malls, dead strip malls and their cousins – could be converted into hundreds of thousands of new apartments nationwide, with just a little work.
According to a November report from Enterprise Community Partners, turning just 10% of underperforming commercial sites into housing could create 700,000 new units nationwide. While this is just a drop in the bucket of America’s millions of housing shortages, it could make a real difference for some communities. In the Boston area, converting just 10% of shopping centers would be enough to absorb all population growth in the region for the next decade, according to a 2021 study by the Metropolitan Area Planning Council of Massachusetts. (A property need not be completely empty to be a good candidate for housing additions, and many housing conversions in this study propose retaining ground-floor retail in apartment buildings.)
“I think this has tremendous potential across the United States,” said June Williamson, an architecture professor at the City College of New York and co-author of several books on building reuse. Fortune.
“All the land already developed for commercial use and spread at very low density throughout the United States has the capacity to accommodate all different types of housing,” he added.
To be sure, the capacity for radical change does not mean it will happen, and converting retail to housing comes with its own set of physical and political challenges. However, there are key reasons why repurposing dead retail is a much more promising solution to the housing crisis than office-to-apartment projects, which have turned out to be much more expensive and rarer than initially thought. And there are fundamental reasons why right now it’s still only potential and not actually happening.
Retail is everywhere
Decades of expansion-oriented development have left the United States with a glut of commercial space. According to ICSC (formerly the International Council of Shopping Centers), there are 116,000 shopping centers nationwide. This includes not only large malls, but also downtown malls and smaller hubs like malls.
“Malls are ubiquitous, they’re everywhere, they often underperform,” said Mark Racicot, MAPC’s director of land use planning. Fortune. “In many cases, they already fit into the neighborhood.”
While not all retail is underperforming, much of it is, and the economic climate makes improvement unlikely. According to a 2023 UBS report, approximately 50,000 stores are expected to close in the United States over the next five years.
Already, dozens of shopping centers have made the transition to residential construction. In Irondequoit, New York, a suburb of Rochester, an abandoned Sears building was transformed into 157 senior and low-income housing units called Skyview Park Apartments; the development opened in 2022. In Santa Ana, California, a low-rise shopping center has been transformed into a community center featuring 55 apartments. And in Aurora, Illinois, a portion of the Fox Valley Mall has been converted into 304 units, and another mall in Vernon Hills, Illinois, now boasts 311 residential units. Both developments include shared amenities and commercial space, says David Dowell, owner of the national architecture and urban design firm El Dorado Fortune.
“While it’s too early to say they’ve succeeded, the mix of uses will certainly make these luxury offerings more attractive,” Dowell says.
As of 2022, nearly 200 malls across America were planning to add residential units, according to the report Orange County Register; 33 had made those plans since the pandemic began.
Office conversions are difficult, but retail is even less so
For a moment, at the start of the post-pandemic era, offices seemed like the magic wand to solve the housing shortage. Remote and hybrid work has created a huge glut of unused office space – about 1 billion square feet at the start of the decade – and some have begun to wonder whether to repurpose this empty space for housing.
But the flow of office conversions has been more of a trickle. According to a July 2023 Deloitte study, between 2016 and 2021, only about 30 office-to-residential projects came online each year. And at the time of the study there were only 217 such conversion projects in the pipeline.
“If you look at what has been converted since 2016 and what they expect to convert by 2025, it’s only 90 million square feet,” Julie Whelan, global head of occupier research at CBRE, previously said Fortune. “The conversions that have occurred and are underway are really just a drop in the bucket with the vacancies that are out there.”
So why aren’t developers and politicians doing more to promote these types of conversion projects? It’s because, often, they’re even more expensive and time-consuming than new construction. In fact, a February report from Goldman Sachs says office acquisition prices would need to drop nearly 50% for these projects to be “financially viable,” given the upfront work they require and the still-high price of office space. Physical retail has also suffered from the pandemic and the resulting surge in e-commerce. Unused shops, however, are often easier to convert into homes than empty office buildings.
Most mall redevelopments, rather than eliminating retail altogether, include retail, housing and other types of uses in a confined space. This aligns with developers’ current focus on creating what they call “18-hour neighborhoods,” or live-work-play hubs where residents can essentially get the most bang for their buck. In other words, they can live in the same place as – or very close to – where they shop and work without spending extra money on travel. It’s also a good deal for the remaining retail stores, which benefit from increased foot traffic in the area.
And empty malls may be better suited for these developments instead of office buildings because the infrastructure to support these mixed-use spaces already exists in malls, said Kurt Volkman, associate principal at the national architecture firm, HED engineering and planning. Fortunebecause mall locations often have existing infrastructure such as parking and access to public transportation.
“Now, these spaces represent a redevelopment opportunity, as their large floors and locations at the ends of the commercial development offer flexibility when converting to living, entertainment or commercial spaces,” says Volkman. “Developers who see the opportunity and transform malls built for another era into mixed-use spaces that meet today’s challenges will reshape retail for a more profitable future.”
Furthermore, outlets simply have more space. A shopping center project often appears filled with large amounts of empty concrete: one or more large, low buildings surrounded by extensive parking lots. For this reason, it can be relatively easy for a developer to simply add more buildings to a project by building on excess parking space, according to City College’s Williamson. Existing retail can be transformed into doctor’s offices, offices or homes.
And mall-to-residential conversions have the potential to happen much faster than new construction “since there is already an existing built structure on a piece of land that is already approved for at least one type of development,” Dowell says.
“The developer does not have to look for a site to build on or obtain permits for construction, cutting down trees and the like,” he says. “The biggest concern in terms of time will be getting the redevelopment plan approved by local government authorities.”
It’s not all smooth sailing
However, in addition to timing challenges, shopping center redevelopment projects present a number of drawbacks. While the open layout of these buildings can lend itself to a more flexible design, lighting and utility work can become an issue, depending on the property.
Since shopping centers have been built with fewer windows, this “should be addressed with architectural interventions,” as residential spaces must offer a certain level of window-to-floor ratio so that occupants receive natural light throughout their unit, he says Dowel.
“Residences also need plumbing, electrical, heating, cooling and ventilation systems, as well as other types of infrastructure such as WiFi or cable TV service,” Dowel says. “Even if a shopping center has them, they likely won’t be easily adaptable to residential use, which will involve significant upgrades and modifications.”