The United States revitalizes defunct department store shopping mall space and transforms it into affordable small rental housing

Major department store chains like Macy's and JC Penny are closing more and more of their locations across the US and going out of business. A few months ago, Macy's announced that it will close 150 "inefficient" stores within three years, hoping to regain its footing after a dismal 2024. This year, it is preparing to close 66 department stores and outlets, including those in high-traffic areas like New York City and Los Angeles.

There are many factors contributing to the declining popularity of large Shopping Malls in the US, including changes in shopping habits after the pandemic with more people shopping online, the prevalence of robbery incidents causing security concerns, shoplifting impacting profitability, difficulty in hiring staff, and high rents.

Real estate developers see opportunities in these "already developed" cases, transforming them into new projects such as building new residential units next to shopping centers and revitalizing old department store spaces, in order to catalyze real estate investment confidence. This article introduces an CNBC interview video on how Americans are transforming abandoned department store spaces into housing.

Revitalizing abandoned department store malls into mixed-use residential and commercial spaces

According to data from Investment Property Exchange Services, as high as 68% of department stores near Americans have been abandoned. Many large shopping malls have become vacant and derelict, and now real estate developers have found a new solution to address the empty property problem - converting the vacant department store spaces into small rental units. This not only solves the empty property issue by fully utilizing the existing space, but also addresses the high rent problem, providing more affordable housing options for low- to middle-income single individuals.

Real estate developers are revitalizing large department store shopping centers and parking lot spaces, planning to develop residential projects that allow the public to live within the department stores. As of January 2022, at least 192 abandoned shopping malls are planning to develop residential projects within the department store premises and surrounding land, across states like California, Colorado, Florida, Arizona and Texas. This not only helps alleviate the housing shortage in the US, but also allows people to conveniently shop, dine and leisure all in one place.

What is it like to live in a department store?

Department stores are dividing up their unsold retail spaces into small rental units to attract tenants. People who already enjoy frequenting department stores would likely appreciate living within the shopping center, being able to stroll and browse the new merchandise every day. CNBC reporters visited the Flatiron Crossing shopping center development in Colorado and the Arcade shopping center project in Providence, Rhode Island, to understand what it's like living in a shopping mall. Tenants expressed that the experience of living in a department store is quite good - they can go to the in-mall hair salon, attend author talks at the bookstore, and have access to coffee shops and eateries to solve their meals, although cooking stoves are not allowed in the units. Tenants living upstairs can also maintain privacy by closing the blinds. Another benefit is the lively atmosphere from being close to the crowds, so single individuals don't feel lonely.

Many real estate investors are now seeing the opportunities in department store properties, renting them out for self-use or Airbnb. Taiwan has many "mosquito houses" and abandoned buildings that can reference this American approach to provide more affordable rental housing options for the general public, in a more environmentally-friendly way by utilizing already developed land and spaces without long waiting times.