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06/03/2021

Dormant Retail Spaces May Become Housing

Shopping malls that have fallen by the wayside over the last several years have caught the attention of California lawmakers, who are desperately seeking a solution to the state’s housing crisis.
closed Sears building

As shoppers have increasingly moved to e-commerce for their shopping needs, empty and desolate shopping centers and big box stores have remained behind. However, many of these locations, which are typically already near or in cities and have parking, aren’t zoned for housing, the AP reported. 

Typically, developers and lawmakers wouldn’t bother with the “hassle” of changing zoning laws, opting to find other retailers to fill the spaces instead. Now, the need for housing is so large that California is finally making moves on old retail spaces. The state Senate approved a bill to allow developers to build housing on commercial sites without changing the zoning. If the bill gets signed into law, it would make California the first state to adopt such a change.

“There has always been an incentive to chase retail and a disincentive to build housing,” Sen. Anthony Portantino, a Los Angeles-area Democrat who authored the bill to pay local governments, told the AP. “There is more dormant and vacant retail than ever.”

The bill comes at a time when shoppers are just starting to re-emerge into brick-and-mortar stores after the COVID-19 pandemic. Retailers and malls are already seeing an uptick in foot traffic compared to last year. However, e-commerce, which boomed last year under lockdown conditions, is still expected to continue growing. At the same time, retailers like Amazon and Wayfair are competing for warehouse space in order to continue fulfilling a growing number of online orders. 

While the COVID-19 pandemic accelerated digital shopping channels, many retailers were struggling with brick-and-mortar locations prior to lockdown. Major retailers, including J.C. Penney, Neiman Marcus and J. Crew, have all filed for bankruptcy. Sears and KMart, which typically operated large stores and were acquired in 2019, closed nearly 100 locations.

Opinions are split on leveraging old retail space for multi-family housing, but with sky-high demand for new and affordable housing coupled with the continuous growth of e-commerce, California could be the first to make the jump.