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  • Writer's pictureRealFacts Editorial Team

Tired: Office conversions to residential. Wired: Turning dead malls and suburban shopping strips into apartments

Construction site

With an affordable housing crisis looming over America, all options are being considered. One option championed early in the pandemic was the idea of converting office space into residential units as work-from-home and hybrid work schedules swept across the nation. That strategy has proved to be easier said than done. Retail to residential is now being looked at as a potential strategy in the fight against the housing crisis, but it’s no walk in the park either.

According to a November 2023 report from Enterprise Community Partners, a conversion of just 10% of underperforming retail assets into residential could create 700,000 new units nationwide. Although that may seem like a drop in the bucket of a multimillion-unit housing shortage, it would undoubtedly make a difference in various communities around the country.

For example, converting just 10% of strip malls to housing units in the Boston area would be enough to accommodate population growth for the next decade, according to a 2021 study from Massachusetts’ Metropolitan Area Planning Council. “I think this has huge potential across the U.S.,” according to June Williamson, a professor of architecture at City College of New York. She added, “All the land that’s already developed for retail use and scattered at very low density all around the United States has the capacity to accommodate all different kinds of housing types.”

Although the retail sector isn’t necessarily failing, there are certainly underperformers. A 2023 UBS report predicts that over the next 5 years, 50,000 stores are expected to close across the U.S. which would cause even more retail centers to underperform or go under.

So why is retail a better candidate for conversions over office space? For starters, most office conversions are still too expensive to pencil. A recent February report from Goldman Sachs reported that office prices would need to drop another 50% from where they are today in order to be “financially feasible.” Retail, like office, also took a hit by the pandemic. The difference is that the retail that was struggling only got worse and the strong malls and shopping centers survived. With lower acquisition costs, mall conversions are also better at catering to consumer preferences. Many developers are leaning into “18-hour neighborhoods” which are places where a person lives, works, and does recreational activities all in the same general area. By converting upper levels of malls to residential units while maintaining lower levels as shopping and dining, a convenient and fun atmosphere is created that people want to be in. Malls have this infrastructure built in while the same can’t be said for most office space.

Despite many of these mall conversions being easier and more profitable than office conversions, there are still hurdles. Shopping malls are typically built with fewer windows which would “have to be addressed with architectural interventions,” according to David Dowell, a principal at architecture and urban design firm El Dorado. “Residences also need plumbing, electrical, heating, cooling, and ventilation, plus other types of infrastructure like WiFi or cable TV service,” Dowel added. “While a mall will have these, they will not likely be easily adapted to residential use, meaning significant upgrades and alterations.” There is no quick fix to America's housing dilemma, but retail conversions could play a role in the long-term recovery.

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