How Retail REITs Are Converting Shuttered Department Stores Into Walkable Neighborhoods

At the Town Center at Boca Raton, an 18.6-acre expanse of asphalt and a shuttered Sears department store are being erased to make way for a 374-unit apartment building and a 197-room hotel. Simon Property Group, which acquired the vacant Sears site for $23 million in 2025, filed the 31.6-acre redevelopment proposal to replace the 2018 casualty of the retail apocalypse with a landscaped main street. The plan includes an eight-story parking garage and eight new retail buildings spanning 157,170 square feet.[1][2]

This single Florida parcel illustrates a fundamental shift in how publicly traded retail landlords extract yield from their real estate. Rather than searching for another big-box retailer to fill a cavernous void, Real Estate Investment Trusts (REITs) are pivoting to residential development. Simon Property Group currently directs half of its $1.07 billion in active construction outlays toward mixed-use projects, part of a broader $4 billion development pipeline focused heavily on legacy retail anchors.[4]

The mechanism relies on land the REITs already control. Traditional malls and open-air shopping centers were built with massive surface parking lots to accommodate peak holiday traffic that no longer materializes. By carving out those underutilized acres, landlords can erect mid-rise apartment buildings without competing in the open market for residential land. The existing retail serves as a built-in amenity for the new tenants, while the new residents provide a captive, walkable customer base for the shops.[1][2]

Kimco Realty, a REIT specializing in grocery-anchored centers, has aggressively pursued this model through joint ventures with residential developers. In January 2026, Kimco and Bozzuto Development opened Coulter Place, a five-story, 131-unit boutique apartment complex built directly into Suburban Square in Ardmore, Pennsylvania. The $106 million project integrated 20,000 square feet of ground-floor retail into one of the country's oldest open-air shopping centers.[5]

"Coulter Place represents the next chapter in Suburban Square's evolution and a clear example of how we're unlocking long-term value through thoughtful mixed-use development," Kimco Realty CEO Conor Flynn noted during the property's debut. Flynn emphasized that introducing residential living directly into the walkable destination strengthens the center's economic vitality for retailers and visitors alike.[5]

The strategy is scaling to higher-density markets on the West Coast. In Daly City, California, Kimco and Bozzuto are currently constructing The Chester at Westlake, a 214-unit mixed-use development slated for completion in the winter of 2027. Located on a nearly two-acre carve-out of the Westlake Shopping Center, the seven-story building will deliver the city's first major market-rate apartment community in more than 15 years, placing residents less than a mile from regional transit.[3]

For the REITs, the financial returns of these conversions are materializing in their quarterly filings. In the second quarter of 2026, Kimco reported a record-high small-shop occupancy rate of 92.9%, driven by demand for spaces adjacent to these new residential hubs. Simon Property Group similarly raised its 2026 earnings guidance after signing over 1,200 leases spanning 4.8 million square feet, citing the outperformance of core retail assets that function as high-traffic social environments.[4]

The transition from commercial landlord to mixed-use developer is not frictionless. Adding hundreds of residential units to a suburban retail site routinely triggers intense local pushback over traffic congestion and school crowding. In South Florida, where developers are utilizing the state's Live Local Act to bypass certain municipal zoning restrictions for workforce housing, several mall redevelopments are currently facing organized resident opposition and pending litigation.[1]

Overcoming that friction requires landlords to prove that the added density improves the immediate neighborhood. "This proposed transformation of a long-vacant space into a vibrant mixed-use destination will introduce an exceptional collection of luxury and premium retail," Mark Silvestri, president of development at Simon Property Group, stated regarding the Boca Raton project. If the zoning approvals hold, the blueprint establishes a clear path for aging retail corridors: replacing empty anchor stores with the households needed to sustain the shops that remain.[2]