A growing number of Americans could soon be living in shopping malls, as builders look to reinvent dying retail spaces to fix the nation’s housing shortage.
The math is simple: there are not enough homes for sale in the U.S. market compared to the number of Americans who need one—assuming they could afford it—while there are hundreds of “ghost” and “zombie” malls scattered across the nation, which have shut down or are facing closure due to falling sales and dwindling visits.
As of 2024, there were an estimated to be nearly 34 million square feet of empty retail space across the country. Meanwhile, the U.S. had an estimated housing supply deficit of 3.8 million homes, according to Realtor.com.
“The U.S. is in need of residential units. Vacant properties such as residential shopping centers and malls can provide a large structure to bring in much needed units,” Jessica Lautz told Newsweek. Lautz is the deputy chief economist and vice president of research at the National Association of Realtors.
The Case for Mall-to-Apartments Conversions
The idea to turn vacant or struggling shopping malls into housing is not new, but it has picked up speed since the pandemic, when the U.S. experienced a surge in online shopping which led to store closures across the country.
An average of 1,170 shopping malls closed across the country every year between 2017 and 2022, according to a report released by Capital One earlier this year. While many Americans still enjoy in-person shopping and foot traffic to malls has improved since the pandemic, many are still having a hard time keeping their doors open.
Last year, 9,260 mall stores closed while 6,880 new ones opened for a net loss of 2,380 outlets. There are currently around 1,200 malls across the country, according to Capital One. By 2028, there might be as few as 900. They were also more likely to be vacant than any other retail space, according to Capital One, reporting an 8.7 percent vacancy rate at the end of last year.
This phenomenon has gone hand-in-hand with declines in retail sales for department stores across the country since 2001, according to U.S. Census Bureau data cited by CNBC.
“The rise of ghost and zombie malls represents a perfect storm of overbuilding, shifting consumer behavior, and strategic missteps that reshaped the American retail landscape,” Ray Wimer, a professor of retail practice at Syracuse University, told Newsweek.
“First and foremost, we simply built too much. From the 1960s through the early 2000s, developers constructed malls at a breakneck pace, far exceeding sustainable demand. By 2005, the U.S. had roughly five times more retail space per capita than any other nation; about 24 square feet per person compared to 2–3 in most of Europe,” he said.
“Not only did we overbuild, but we expanded existing malls beyond what their markets could support. Then came e-commerce,” he added.
“Online retail didn’t just nibble at mall traffic; it redefined shopping itself. Why drive to a struggling mall when you can browse an infinite inventory from home? The pandemic only accelerated this behavioral shift, propelling online penetration forward by years in a matter of months.”
Department store closures compounded the damage, Wimer said.
“When anchors such as Sears, JCPenney, or Macy’s shuttered locations, they left gaping voids, both physical and contractual. Co-tenancy clauses often allowed smaller retailers to terminate leases or demand rent reductions, creating a domino effect. Once two anchors depart, the property can quickly tip into decline.”
Finally, he said, cultural and demographic forces sealed the trend. “Younger consumers value experiences over possessions, walkable urban spaces over car-centric suburbs, and convenience over tradition,” Wimer said. “The enclosed suburban mall, once the epitome of modern retail, no longer fits the rhythm of contemporary life.”
As anchor stores like Sears, JCPenney, and Macy’s shut down, aging malls unable to keep up with the rise of e-commerce and Americans’ new shopping habits, they are leaving behind sprawling buildings that run the risk of becoming relics of a bygone era—unless these structures are transformed into something else; something that can inject new life in the community around them.
Builders are increasingly looking at these spaces to be transformed into mixed-use buildings, merging commercial and residential. As of January 2024, at least 192 shopping malls across the country were planning on converting space into apartments, according to real estate consulting firm Realogic.
The Perks of Living in a Mall
Adding housing options to shopping malls would offer an immediate—if partial—fix to the shortage in the country, experts say.
“Utilizing existing infrastructure can bring homes to the market quickly, avoiding some of the delays associated with redevelopment or greenfield housing development,” Hannah Jones, senior economic research analyst at Realtor.com, said in a recent report. “The shift from retail to residential is a logical solution in a country facing a persistent housing shortage.”
But the transformation could also be a solution to the issue of dying shopping malls across the country.
Realogic called it a “best of both worlds scenario”: when only parts of a struggling shopping mall are transformed into housing and part is kept as retail space, new residents can breathe new life into surviving and new shops catering to their needs.
Not only can new homeowners or tenants bring back traffic to existing restaurants and stores, but they can also have the effect of attracting a different kind of retailer, like grocery stores, pharmacies, and health-care clinics, in what Realogic calls a “win-win” for mall owners.
“Being located so close to essential services increases the apartments’ appeal; being located so near hundreds of apartment dwellers who need their products and services increases the mall’s appeal to prospective retail tenants,” the company wrote in a recent report.
Malls offer the opportunity for developers to create the kind of community-oriented spaces that many American buyers—especially among the younger generations—seem to favor nowadays. Some 78 percent of newly built homes for sale in the nation are located in community associations, David Diestel, CEO of FirstService Residential, a company which works with thousands of homeowners across North America, told Newsweek.
“Historically, home has been four walls; today the shift is about the communities,” he said. “One in three people in the U.S. already live in what we call community associations, residential spaces with shared amenities—such as a swimming pool, a gym—which allows people to connect with their neighbors, sharing lifestyles,” he said. “What we see more than anything else is a shift towards community living, also as a way of managing affordability”
Not a Smooth Transition
But repurposing a shopping mall for housing is not always easy.
“As with all conversions, it requires creativity to revision the space and this can come with a significant cost,” Lautz said. “Building repurposing can be one of the solutions to add much-needed housing supply. However, each community is unique in the vacant buildings they have. Some communities have vacant malls, others may have hotels or motels, and other vacant schools,” she added.
The shape and layout of shopping mall buildings is often an obstacle for said transformation, lacking enough ventilation or natural light for apartments, making only part of the structure—often the external one—suitable for the conversion.
Other issues are that construction costs are high and rezoning can be a lengthy, complicated, and costly process to navigate for developers and owners. Often, demolishing a former shopping mall can be easier for builders who might then decide to build luxury housing that does not address the current affordability crisis.