Conversion from shopping malls to housing creates mixed-use developments nationwide

Traditional shopping malls, once bustling commercial hubs, are now being converted into mixed-use communities that incorporate housing, adding much-needed housing supply to the market.

According to a recent report from Realtor.com, the move is far from solving the housing affordability crisis – a challenge that requires multiple systemic changes – but some industry experts say it is still helping address the housing shortage, especially in states where the problem is more severe, such as New Jersey and Florida.

“Converting underutilized or vacant mall space into housing can be advantageous for both property owners and home seekers,” Hannah Jones, senior economic research analyst at Realtor.com, told FOX Business.

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Jones said these properties leverage existing infrastructure to bring well-located homes to market faster and avoid many of the delays associated with new land development.

Still, there are significant hurdles to converting commercial property into residential use, especially when it comes to local zoning laws and construction costs.

Darryl Fairweather, chief economist at Redfin, said local governments control zoning laws that determine whether land is used for commercial or residential purposes. Fairweather says that converting commercial areas into mixed-use developments requires changes to these zoning laws, but such efforts often face resistance from residents. For example, she noted, some worry that more housing, especially affordable housing, will increase traffic or attract undesirable tenants.

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The problem is exacerbated by the fact that many shopping mall structures are also not designed for residential use and are expensive to renovate, Jones said. Additionally, high labor and material costs often make complete demolition and reconstruction more practical. These additional costs could ultimately lead to higher home prices, reducing potential affordability benefits, Jones said.

“While mall-to-housing represents a creative way to leverage existing infrastructure to add supply to a tight housing market, it is not a silver bullet for affordability because of cost and design challenges,” Jones said.

The move is far from solving the housing affordability crisis, but it will help address the housing shortage. (George Reiser/Boston Globe via Getty Images/Getty Images)

Still, Jones noted that while this trend is growing, it is concentrated in certain regions.

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As more projects move forward, the physical and social landscape of American shopping centers is beginning to change.

Charlie Opler, CEO of prominent real estate Sotheby’s International Realty, said shopping centers, which were popular destinations from the 1980s to the 2000s, are being replaced by residential areas, potential locations for restaurants and movie theaters, or mixed-use developments that feature high-end retail alongside residential space.

An empty shopping mall in Woodbridge. Virginia. (Robert Knopes/UCG/Universal Images Group, via Getty Images)/Getty Images)

Opler said Riverside Square in Hackensack, N.J., which sold part of its land for multifamily housing and now houses more than 15 restaurants and some of the most upscale retail in the country, exemplifies this trend.

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“The housing element in many places is to use parking lots and surplus land to create more housing stock, whether it’s rental housing or condominiums,” Opler said.

Over the next 20 to 30 years, Opler predicts that as vacancy rates rise, many older malls may be demolished and replaced with transportation hubs or housing in some locations.