Shopping Mall Redevelopment: Transforming Traditional Malls into Mixed-Use Destinations

Introduction: The New Life of Old Malls

Traditional enclosed shopping malls across the United States are being reimagined as bustling mixed-use communities. Driven by changing retail economics, the rise of e-commerce, shifting consumer habits, and urban revitalization needs, developers are converting “dead malls” into modern live-work-play destinations. In fact, industry estimates show over 1 billion square feet of U.S. retail space is now obsolete and primed for reuse. Rather than let these huge properties sit vacant and drain local tax bases, investors and municipal planners see an opportunity to unlock value through mall redevelopment. By introducing apartments, offices, hotels, entertainment venues, and public amenities to mall sites, redevelopment projects aim to boost foot traffic, diversify income streams, and strengthen communities. This article explores the financial insights behind the trend, real-world examples of mall-to-mixed-use conversions, design and zoning considerations, and how public-private partnerships can turn aging malls into thriving assets once again.

Why Malls Are Being Transformed into Mixed-Use Hubs

Several powerful forces are converging to make shopping mall redevelopment a compelling strategy:

• E-Commerce and Evolving Habits: Consumers increasingly shop online, leading to declining mall foot traffic and store closures. Department stores – once reliable anchor tenants – have struggled or gone bankrupt, leaving hulking empty spaces. With people seeking more experiential retail and convenient lifestyle amenities, the single-use mall format has lost favor. Millennials and Gen Z prefer environments where they can shop, dine, live, and socialize in one place, rather than spending an afternoon in a mono-purpose mall.

• Oversupply of Retail vs. Housing Shortages: The U.S. has far more retail space per capita than other countries, yet suffers a severe housing shortage. Many malls occupy prime locations in densely populated suburbs – exactly where new housing is in high demand. Developers are seizing on this mismatch. As one industry report notes, over 53% of mall redevelopment projects include a residential component, making housing the most common new use. By adding apartments or condos to underused retail acreage, owners tap into unmet demand while providing built-in shoppers for remaining stores.

• Weak Financial Performance of Aging Malls: By the mid-2020s, U.S. retail real estate fundamentals were surprisingly tight – with average retail vacancies hitting record lows around 4–5%. Enclosed malls, however, are the glaring exception. The average mall vacancy rate stands around 8.9% – the highest of any retail property type. Struggling Class B and C malls in particular have seen major anchors leave and smaller shops follow, eroding rental income. Many owners face declining NOI (Net Operating Income) and rising maintenance costs for half-empty buildings. Redevelopment into mixed-use offers a path to higher occupancy and fresh revenue streams. For example, housing can generate steady residential rents, and new commercial tenants (like grocers or medical offices) can backfill vacant big boxes, revitalizing the rent roll.

• Desire for Walkable “Town Center” Experiences: There is a broader lifestyle shift favoring walkable, community-oriented development. Mall-to-town-center retrofits aim to recreate the feel of a downtown Main Street. This appeals to young families and downsizers alike. By adding open-air streets, public plazas, and 24/7 activity, redeveloped malls can recapture the “heart and soul” energy that enclosed malls once had in the mid-20th century. Importantly, this mix of uses (retail, dining, entertainment, residential) makes the property an all-day attraction rather than a 9-to-5 retail venue, which benefits both the community and the developer’s bottom line.

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Financial Insights: Vacancies, Rents and Revenue in Redeveloped Malls

From an investor’s perspective, the financial calculus of mall redevelopment is complex but potentially rewarding. Key insights include:

• Vacancy Reduction and Stabilized Income: By introducing non-retail uses, owners can dramatically reduce vacancy and improve overall occupancy. While traditional malls average nearly 9% vacancy (and many distressed malls far higher), a redeveloped mixed-use property can achieve far lower effective vacancy once apartments are leased up and new commercial tenants occupy updated spaces. Housing pre-leasing is often strong on these sites due to pent-up local demand. Meanwhile, 85% of mall conversion projects still retain some retail, typically rightsizing it to fit current market needs. Retaining retail ensures continued rental income from successful stores, while eliminating only the excess, poorly performing space. The result is a more balanced income profile: rent from apartments, offices, or hotels now complements the retail sales-based rents, insulating the owner from retail market volatility.

• Rent Trends and Revenue Per Square Foot: For remaining retail space, landlords of revitalized centers often see higher sales productivity and rent per square foot than before. This is because underperforming retail units are replaced with uses that drive foot traffic (e.g. grocery, food hall, entertainment) or with fewer but stronger retailers. Nationally, retailers’ sales per square foot have surged post-2019 while retail space supply shrank, meaning tenants in good locations can afford sustainable rents. At the same time, adding residential or office components opens new income streams with their own market rent structures (e.g. monthly apartment rents or office leases). These uses often command premium rents in supply-constrained areas (for instance, new multifamily units at a mall site can be Class A and priced accordingly). The combination of diversified rents improves the property’s overall Net Operating Income (NOI) and can boost its appraised value.

• Cost Structure and ROI Considerations: Mall redevelopments are capital-intensive endeavors – demolition, new construction, and infrastructure upgrades can run into hundreds of millions of dollars. For example, the Monmouth Mall overhaul in New Jersey is a $500 million project to add residences and reconfigure the site. Developers must underwrite these costs against future income from multiple uses. In some cases, the projected returns on such large mixed-use projects are lower than a simpler, single-use development, especially given higher construction costs and longer timelines. One economic development study noted that a “thoughtful and contextual redevelopment” of a mall may not pencil out without public support, as the cost can exceed what private investors find acceptable on their own. This is why creative financing and public-private partnerships (discussed later) often come into play. Nonetheless, many investors are betting that the long-term profitability and resilience of a diversified mixed-use center – with stabilized occupancy and steady demand for housing – will yield solid returns and asset value appreciation over time, compared to a dying mall with a shrinking income stream.

To illustrate the differences in financial and operating metrics, the table below compares a typical declining mall with a redeveloped mixed-use property:

Metric	Traditional Mall (Single-Use)	Redeveloped Mixed-Use Mall
Occupancy/Vacancy Rate	High vacancies (often 10% or more in aging malls).	Low vacancy after redevelopment (retail space right-sized; new apartments 90%+ leased).
Primary Revenue Streams	100% retail rents (base rent + potential % of sales).	Diversified: retail rents + residential leases, office leases, etc., providing multiple income sources.
Anchor Tenants	Department stores or big-box retailers (many struggling or closed).	New anchors like grocery stores, entertainment venues, healthcare, or none (site broken into smaller blocks).
Foot Traffic & Dwell Time	Declining foot traffic; shoppers make short targeted visits.	Increased foot traffic with residents on-site and attractions; visitors stay longer (live, work, shop in one place).
Property Tax Base Impact	Stagnant or declining (lower sales and occupancy reduce tax revenue).	Growing tax base – more residents and businesses generate higher property and sales taxes (e.g. one project created 1,000+ jobs and new tax revenue for city services).
Investor Perception (Cap Rate)	Higher cap rates (perceived risk in pure retail center, lower value).	Lower cap rates (seen as stable mixed-use asset with housing component, thus higher value and more buyers).

Case Studies: Mall-to-Mixed-Use Redevelopment Examples

Across the U.S., numerous mall conversion projects are underway or recently completed, showcasing how this trend materializes in practice. Below are a few notable examples, each highlighting different approaches to creating mixed-use destinations out of older malls:

• Monmouth Mall (Eatontown, New Jersey): A 1960s-era mall being reinvented as “Monmouth Square.” Developers are demolishing old department stores and shrinking the retail footprint to make room for 1,000 high-end apartments and new public spaces. A 40,000 sq. ft. Whole Foods Market will anchor the remaining retail alongside existing stores, bringing a grocery component into the mix. The 100-acre site plan includes pedestrian pathways, a town square and a public green for events. This project – a $500M investment – leverages the property’s prime highway access (near Garden State Parkway) and is slated for completion in 2028. It illustrates the focus on experiential retail (like cafés and farmers markets) and daily needs retail (grocery) to complement new housing.

• Westminster Mall (Westminster, California): An aging Orange County mall is being transformed into a massive mixed-use complex with 3,000 residential units, a 425-room hotel, extensive green space, and modern retail and dining streets. This plan will effectively create an urban village on the 100-acre mall site. By integrating thousands of housing units, the project addresses regional housing shortages while keeping retail relevant. Notably, the scale of 3,000 homes makes it one of the largest mall redevelopments, turning a once-struggling retail venue into a significant new neighborhood.

• Laguna Hills Mall -> “Village at Laguna Hills” (Laguna Hills, California): This 68-acre mall site is being redeveloped into 1,500 housing units, plus offices, a hotel, and revamped retail space. The design emphasizes an open-air “village” atmosphere. The inclusion of offices and a hotel in addition to housing and shops shows a comprehensive mixed-use strategy. It capitalizes on the mall’s location in a busy commercial corridor while introducing residential density to support the businesses.

• Southplace City Center (Cutler Bay, Florida): Formerly Southland Mall, this Miami-area project will deliver 4,000–5,000 new residential units in a phased mixed-use development. Plans call for 500,000 sq. ft. of retail, 150,000 sq. ft. of restaurants, a 150-room hotel, 60,000 sq. ft. of medical offices, plus an amphitheater and civic spaces. The first apartments will be available by 2025, with full build-out by 2029. Such a large influx of housing essentially creates a small city center. Local officials view it as a way to provide South Miami-Dade residents with urban-level amenities locally, reducing the need to commute to distant neighborhoods. The project’s marketing as a “mini city” underscores the goal of a self-contained community on the mall site.

• Belmar (Lakewood, Colorado): One of the earliest mall redevelopments, Belmar opened in 2004 on the site of the demolished Villa Italia Mall. It introduced an outdoor street grid with shops, restaurants, apartments, offices, and even a hotel in a new downtown-style layout. Belmar’s success as a walkable town center (complete with civic amenities and public art) proved the concept’s viability and has been cited as a model for subsequent projects. It also showed that phased redevelopment is possible – Belmar was built out over time and continues to evolve, illustrating patience and long-term vision in mall conversions.

These examples – from New Jersey to California – demonstrate how adaptive reuse of mall properties can vary in scope and emphasis. Yet all share the common thread of mixing uses to create value: adding hundreds or thousands of housing units, retaining some retail (often reoriented around experience or daily needs), and leveraging the site’s size to incorporate offices, hotels, or community facilities. The end result is a more resilient real estate asset and an activated community space.

Design, Zoning, and Urban Planning Implications

Repurposing a shopping mall into a mixed-use district is not just a real estate exercise; it’s also a significant architectural and urban design undertaking. Planners and architects face unique challenges and opportunities in these projects:

• Site Design and Architecture: Conventional malls were inward-facing boxes ringed by seas of parking. Redevelopment flips this model. Many projects demolish parts of the mall structure to introduce a street grid or outdoor pedestrian pathways, essentially crafting a new neighborhood framework. For instance, the Monmouth Mall plan is “returning to its open-air roots” by removing enclosed sections and creating a town square and walkable streets. Designs often call for mid-rise apartment buildings on former parking lots, parking garages to replace open lots, and the incorporation of green spaces and plazas where shoppers can linger. Architectural style can be modern or “Main Street vernacular,” but the key is a human-scale environment that encourages walking and blends into the community. An example is Cupertino’s upcoming redevelopment of Vallco Mall (“The Rise”), which will include seven acres of parks, plazas, and trails woven into the new development – a stark contrast to the concrete parking lots it replaces.

• vVisualization of a vibrant mixed-use shopping mall redevelopment, featuring new mid-rise apartments, street-level retail, and inviting public space on a former mall site. An illustrative example of design transformation in a shopping mall redevelopment.

• Zoning and Entitlements: One of the biggest hurdles is navigating zoning laws. Many mall sites were originally zoned exclusively for commercial use (retail) under Euclidean zoning codes that prohibited residential or other uses on the property. Before any redevelopment can proceed, cities often must create new mixed-use zoning designations or grant special permits to allow housing, offices, or hotels on these parcels. This can be a lengthy process requiring public hearings and even voter approval in some cases. In addition, outdated parking requirements need overhaul – old codes demanding 4–10 parking spaces per 1,000 sq. ft. of retail are overkill once a site is mixed-use and walkable. Forward-thinking cities are relaxing parking minimums and allowing shared parking arrangements (for example, residents and shoppers using the same spaces at different times), which reduces the need for costly parking structures. Projects in California have benefited from state-level laws (like SB 35 in Cupertino) that streamline approvals for projects with significant housing, helping sidestep some local red tape.

• Infrastructure and Transit: Mall redevelopments often require upgrades to infrastructure – but they also have advantages built-in. On one hand, adding residents and uses may necessitate improving roads, intersections, sewer/water capacity, and transit access. Many projects include new transit stops or enhancements to serve the site (e.g. Sarasota’s mall redo plans a public transit hub). Complete Streets principles are introduced, with new crosswalks, bike lanes, and pedestrian trails connecting the development to surrounding neighborhoods. On the other hand, mall sites come pre-loaded with some infrastructure that greenfield developments lack. They are typically located near major highways or arterial roads for easy access, and they have large utility connections in place from their retail days. Perhaps most importantly, the vast parking lots provide “shovel-ready” land for new construction. Developers can infill sections of parking with apartments or other buildings without having to assemble new land – a significant cost and time savings. Where standalone pad site buildings (outparcels) exist (e.g. former auto centers or restaurants on the mall fringe), these can sometimes be repurposed or rebuilt early in the project to start generating income while the rest of the site is under construction.

• Community and Urban Integration: A successful mall redevelopment must knit into the urban fabric of the area. This means paying attention to connections with surrounding streets and uses. Planners aim to avoid creating a “compound” and instead create a porous district that feels like a natural extension of the city. Design elements often include multiple entry points, extension of existing street grids into the site, and architectural cues taken from local styles. Public engagement is crucial: nearby residents may fear added traffic or building heights. Indeed, community pushback has stalled some projects in the past. Open communication and incorporating community amenities (like parks, affordable housing, or civic facilities) can help build support. For example, the Gainesville, GA mall conversion received unanimous approval after the developer worked with the city on adding pedestrian trails and guaranteeing a public park space. Keeping some beloved features (perhaps a historic storefront or a local business) can also ease the transition. Urban design strategies, such as fostering a mix of uses that complement rather than compete with the town center, ensure the new development doesn’t turn into a sterile private enclave. When done right, the redeveloped site becomes an integrated node in the city’s overall land use pattern, often stimulating further revitalization in nearby areas.

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Mall Sites vs. Greenfield Sites: A Comparative Advantage

Why focus on mall sites for new development instead of building on open land elsewhere? It turns out that former mall properties have several infrastructural and locational advantages that can make them superior to starting from scratch on a greenfield:

• Prime Locations: Malls were originally built to be accessible. They’re frequently located at highway junctions, along major bus routes, or near suburban centers. This proximity to transportation networks and population centers gives redeveloped mall sites a leg up. In many cases, the surrounding area is already a mature market with households, jobs, and spending power – a strong customer base for whatever new uses are added. By contrast, a greenfield site on the suburban fringe might lack these demand drivers and require decades to grow into its surroundings.

• Existing Infrastructure: Mall sites come with utility lines, road ingress/egress, drainage, and parking capacity already in place. The land has been graded and developed before, which simplifies preparation. A greenfield development would need to extend utilities, build new roads, and possibly even new highway interchanges – expensive undertakings that can delay a project. As noted by the NAIOP Research Foundation, “Most malls also feature large surface parking lots that provide developers room to erect new buildings or expand existing ones”, making expansion more feasible. Additionally, many malls have traffic signals, turn lanes, and highway ramps sized for their former peak traffic – an immediate benefit for handling the increased activity when housing and other uses come in.

• Speed to Market: Because the sites are already zoned for commercial use (and often located in areas used to development), the political and environmental hurdles can be lower than building on virgin land. While rezoning is needed for mixed-use, communities may prefer redevelopment of a blighted mall over loss of open space elsewhere. Environmental reviews can be simpler on previously developed land (no endangered species or pristine wetlands on a former parking lot, typically). This can translate to faster project approvals compared to a controversial greenfield project.

• Community Impact: Reusing a failing mall can prevent urban blight and restore an economic engine in an existing community. Greenfield projects sometimes contribute to sprawl and can strain infrastructure on the outskirts. In contrast, mall redevelopments capitalize on “the fundamentals of these mall properties [that] remain strong” – they’re in established neighborhoods that can benefit from renewal. The local economy gets a boost without expanding the city’s footprint. Moreover, the large scale of mall sites means cities can accommodate growth (housing, jobs, tax base) within current urbanized areas, aligning with smart growth principles. For example, replacing a dead mall with 600 apartments and a medical campus keeps that growth in town, rather than paving over farmland at the edge of the city.

  
  

Of course, mall sites aren’t without challenges – old structures may contain asbestos, and retrofitting infrastructure for residential use (e.g. adding parks or schools) requires planning. But the consensus is that redeveloping grayfield sites(like defunct malls and shopping centers) is a sustainable approach to growth, making use of land that has already been disturbed and infrastructure that’s already been paid for.

Public-Private Partnerships: How Investors and Cities Can Collaborate

Transforming a mall into a vibrant mixed-use district often demands close cooperation between developers/investors and municipal governments. Neither sector can do it alone: developers need public support in various forms, and cities need private capital and expertise to realize the vision. Here are ways they can partner to unlock value:

• Flexible Planning and Zoning Support: Cities can set the stage by updating comprehensive plans and zoning ordinances to support mixed-use redevelopment. This might mean creating a special mixed-use zoning overlay for the mall site, adjusting height/density limits, or reducing parking requirements to reflect new usage patterns. By making the entitlement process smoother, municipalities reduce uncertainty for developers. Some cities even pre-emptively rezone large commercial sites for mixed-use, signaling openness to proposals. Fast-tracking approvals for projects that meet community goals (for instance, including affordable housing or public amenities) is another way to encourage investment. In return, developers should work with planners to ensure the project adheres to design guidelines and contributes positively to the urban fabric.

• Infrastructure Investment and Tax Incentives: Because mall retrofits can strain local infrastructure (roads, schools, utilities), public investment is often warranted. Municipalities can leverage tools like Tax Increment Financing (TIF) districts, bonds, or infrastructure grants to fund improvements that enable the project – such as upgraded intersections, transit stations, or utilities. For example, in Hampton, VA, the city formed a Community Development Authority (CDA) that financed $92 million in infrastructure improvements to facilitate the conversion of the old Coliseum Mall into Peninsula Town Center, a mixed-use development. This type of public financing, paid back over time by the project’s tax revenue, aligns the interests of the city and developer. Similarly, cities might offer property tax abatements or sales tax sharing to make a project’s economics more feasible. Such incentives recognize that a successful redevelopment will expand the tax base and pay dividends in the long run.

• Shared Vision and Community Benefits: A partnership mindset means jointly crafting a vision that addresses both investor ROI and public interest. Cities can negotiate development agreements where the developer provides certain public benefits – parks, affordable housing units, transit facilities, or space for civic uses like libraries or community centers – as part of the project. In exchange, the city might contribute land (some mall sites are partly city-owned, e.g. former public facilities), expedite permits, or assist with land assembly (perhaps acquiring an anchor store parcel to sell/lease to the developer). By working together, cities ensure the project meets community needs beyond just tax revenue. The public engagement process is also critical: developers should involve local stakeholders early, hold charrettes or informational sessions, and collaborate with city officials to adjust plans in response to feedback. This not only smooths approvals but often leads to a better end product that citizens take pride in. As one economic development journal put it, “Good relations with local officials and stakeholders can help a developer identify uses and amenities that will maximize a project’s value… They can also be an important asset if a developer needs to update entitlements or wants to participate in a public-private partnership”. In other words, cooperation can pave the way for creative solutions that make the project more successful socially and financially.

• Innovative Financing and Ownership Models: In some cases, cities and investors might form joint entities or special purpose vehicles to tackle mall redevelopment. For instance, a city or county might purchase a portion of the mall (such as a vacant anchor store) to ensure it gets redeveloped in line with community goals, then partner with a private firm to develop it. Public redevelopment agencies or land banks can hold and prepare land, then solicit developers once conditions are right. On the private side, investors are increasingly partnering with firms that have specific expertise (e.g., a retail operator teaming up with an apartment developer). A notable example: a major mall REIT partnered with a residential developer to add apartments on their mall properties, marrying each party’s strengths. Such consortium approaches spread risk and bring in specialized knowledge, which can improve the project’s outcome. Cities can encourage these by hosting forums to connect mall owners with potential development partners, and by being clear about the incentives or support available.

In summary, mall redevelopment works best when treated as a public-private partnership in spirit, even if not formally structured as one. Each side has skin in the game: developers seek profit and viable projects, while cities seek revitalization, economic growth, and quality of life improvements. When aligned, they can transform a dying mall into a thriving mixed-use centerpiece that neither could achieve alone. The cost and complexity of these projects mean that “doing nothing is not an option” for communities – collaboration is essential to give struggling malls a promising second act.

Conclusion: Unlocking Value and Embracing Change

The wave of shopping mall redevelopment in the U.S. represents a paradigm shift in real estate and urban planning. It demonstrates an ability to adapt to economic disruption – turning the challenges of e-commerce and oversupply of retail space into opportunities to create something new. For investors and developers, these projects offer a chance to diversify portfolios and invest in mixed-use assets that align with modern preferences. For cities and towns, they are a lifeline for defunct properties that once were community focal points, allowing those sites to once again contribute to the local economy and identity.

Crucially, the success of mall-to-mixed-use transformations hinges on financial savvy, community-centric planning, and cooperative execution. Stakeholders must carefully analyze market demand (How many housing units make sense? What kind of retail or amenities will prosper?), ensure the numbers pencil out (Where can we draw support or phase the project to manage costs?), and bring the public along every step of the way. When done right, the drab halls of a dead mall can be reborn as “next-gen” mixed-use properties full of residents, shoppers, workers, and visitors – a true 21st-century town center.

The trend of shopping mall redevelopment is still unfolding, but momentum is growing. Dozens of projects from coast to coast are proving that with creativity and collaboration, yesterday’s shopping centers can become tomorrow’s vibrant neighborhoods. Real estate investors, developers, and municipal leaders in the U.S. are encouraged to approach these sites not as liabilities, but as opportunities – to unlock hidden value, meet community needs, and write a new chapter in the life cycle of American retail properties. The mall isn’t dead; it’s just evolving into something completely different and exciting.

Feb. 02, 2026 by Viola Sauer site planner