Shopping center conversions to housing creating mixed-use developments across the country

Traditional malls, once bustling hubs of commerce, are now being converted into mixed-use communities incorporating residential housing, adding much-needed housing supply to the market.

The move falls far short of solving the housing affordability crisis — a challenge that requires multiple systemic changes — but some industry experts say it nonetheless helps solve the housing shortage, particularly in states where the problem is more severe, like New Jersey and Florida, according to a recent Realtor.com report.

Hannah Jones, senior economic research analyst at Realtor.com, told FOX Business that “turning underutilized or vacant commercial space into housing can be a win-win situation for homeowners and home seekers.”

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Jones said these properties leverage existing infrastructure to bring well-located homes to market more quickly, avoiding many of the delays associated with developing new land.

However, there are significant barriers to converting commercial properties to residential use, particularly regarding local zoning laws and construction costs.

Daryl Fairweather, Redfin’s chief economist, said local governments control zoning laws and determine whether land is used for commercial or residential purposes. Converting commercial areas into mixed-use developments requires changes to these zoning laws, but such efforts are often met with resistance from residents, according to Fairweather. For example, she noted that some people worry that more housing, especially affordable housing, could increase traffic or attract unwanted tenants.

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The problem is exacerbated by the fact that many shopping center structures were also not designed for residential use, making conversions costly, according to Jones. Additionally, high labor and material costs often make complete demolitions and reconstructions more practical. These additional expenses can ultimately lead to higher housing prices, reducing potential affordability benefits, Jones said.

“Shopping center-to-housing conversions represent a creative way to use existing infrastructure to increase supply in tight housing markets, but cost and design issues mean they are not a silver bullet for affordability,” Jones said.

This decision is far from resolving the housing affordability crisis, but it does contribute to remedying the housing shortage. (George Rizer/The Boston Globe via Getty Images / Getty Images)

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

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As new projects move forward, the physical and social landscape of America’s malls begins to change.

Charlie Oppler, CEO of Prominent Properties Sotheby’s International Realty, said the shopping centers that many visited in the 1980s through the 2000s are being replaced by potential housing sites, restaurant and movie theater destinations, or mixed-use developments offering high-end retail alongside residential spaces.

Vacant shopping center in Woodbridge. Virginia. (Robert Knopes/UCG/Universal Images Group via Getty Images) / Getty Images)

Riverside Square in Hackensack, New Jersey, which sold part of its land for an apartment complex and now has more than 15 restaurants as well as some of the most upscale stores in the country, exemplifies this trend, according to Oppler.

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“In many places, the housing component is using parking lots or excess land to create more housing, whether it’s rental or for-sale housing,” Oppler said.

Over the next 20 to 30 years, Oppler predicts that many older shopping centers could be demolished as vacancy rates rise and replaced with transit hubs and housing, depending on location.