US Developers Building Housing in Abandoned Shopping Malls To Address Shortage in the Market

The United States is experiencing a shortage of available housing units on the market, leading to an increase in home prices as the industry struggles to meet the demands of buyers. To address this, some real estate developers are now building apartment units in dying department stores and malls.

As of June, Zillow estimated that the US is short at least 4.5 million homes, a figure that reflects a growing housing deficit from previous years. To resolve the problem, developers are now bulldozing empty department stores and shopping centers like Macy's and JCPenney to build luxury apartments or affordable housing units.

This was first reported by CNBC. The publication added that, in some cases, developers reimagine malls and build a mix of housing, retail spaces, restaurants, and outdoors.

Have Any Malls Opened Housing Units?

As of early 2024, at least 192 malls had plans to incorporate housing into their premises. At least 33 projects have been completed since the COVID-19 pandemic began. The Paradise Valley Mall in Phoenix, Arizona, for instance, recently opened 400 luxury apartment units. The Lafayette Square Mall in Indianapolis also plans to debut 1,200 apartments in 2025, including affordable options, per the New York Post.

In Irondequoit, New York, an abandoned Sears was converted to have 157 low-income and senior housing units, according to Fortune.

"There's just too much retail in the U.S.," Oscar Parra, the principal of Pacific Retail Capital Partners' Special Situations Group, told CNBC. "I don't know of a market that needs a million-square-foot mall."

To put it into perspective, one million square feet could hold 17 football fields.

Challenges of Converting Malls Into Housing Units

Despite there being a million of square feet available to convert into housing units, there are numerous challenges developers must face to be able to transform malls into homes. This includes high construction costs, outdated lease agreements, and zoning laws---all of which can delay projects.

Additionally, developers must decide whether to repurpose existing structures or demolish old buildings to make way for the housing units.

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