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The American mall, a once-dominant force in consumer culture, is dramatically transforming.
As the retail landscape shifts with department stores closing and e-commerce booming, developers are finding new life for aging properties by turning them into vibrant mixed-use communities.
A growing number of malls are incorporating residential units, with apartments and townhomes sprouting alongside the remaining retail stores. The trend, driven by a severe housing shortage nationwide, is breathing new life into struggling shopping centers and creating walkable amenity-rich neighborhoods.
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Amy Henion, a 33-year-old graphic designer, moved into The Arcade Mall in Providence, Rhode Island, two years ago. The oldest indoor shopping mall in the country, The Arcade has 48 microunits on the second and third floors. Henion provided a tour of her 250-square-foot apartment on TikTok.
“It’s cool to be part of such a historic building and knowing that every single one of these units used to be a shop of some kind,” Henion told CNBC. “You have access to amenities that you don’t get if you’re just living in a home in a suburb, like if I want to get my hair cut, I can walk downstairs and get my hair cut. If I want to pick up lunch, I don’t even have to leave the building, even if the weather outside is awful.”
The Macerich Co. (NYSE:MAC), a real estate investment trust that owns 45 million square feet of real estate, is redeveloping the FlatIron Crossing Mall in Broomfield, Colorado, to include housing.
“The mall is becoming cool again,” Macerich Vice President of Development Jacob Knudsen told CNBC. “So being able to live by it, work by it, play by it, go to restaurants by it, we’re definitely seeing this as a trend.”
According to real estate consulting firm Realogic, as of January 2022, at least 192 U.S. malls were planning to add housing units. Since the start of the pandemic, at least 33 malls have already completed apartment construction projects.
The surge in residential development is particularly evident in states like California, Florida, Arizona and Texas, where demand for housing is high and the need for innovative solutions is acute.
The shift addresses the housing crisis and revitalizes the retail experience in malls. By bringing residents closer to shops, restaurants and entertainment venues, developers are creating self-sustaining communities where people can live, work and play – all within a single development.
“There’s just too much retail in the U.S.,” Oscar Parra, principal of Pacific Retail Capital Partners’ Special Situations Group, told CNBC. “(It’s) like four times higher than any other nation. I don’t know of a market that needs a million-square-foot mall.”
For mall owners, the shift toward residential development is a strategic move. While top-tier high-end malls remain in demand, a significant portion of the U.S. mall market is struggling.
Nearly 34 million square feet of mall space is vacant and inactive. A large portion of the American population lives within a short distance of a mall experiencing high vacancy rates, low consumer traffic or complete abandonment.
According to experts, this trend is likely to continue considering the nationwide housing deficit of 4.5 million homes. For developers, incorporating apartments into mall redevelopment offers a multifaceted solution. Not only does it address the critical housing shortage, but it also creates a captive audience for the remaining retail and restaurant spaces in the mall.
“Malls are an opportunity,” Knudsen said. “This is an opportunity to find land and have a built-in customer base to get people into the mall.”
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