Struggling Malls Become Some Of South Florida's Hottest Development Targets

Increased demand for housing and a scarcity of land have brought decades-old malls with acres of surface parking to the top of developers' shopping lists.

In the last year, three South Florida malls have announced or launched major redevelopments that will add thousands of new residential units and hundreds of hotel rooms around upgraded retail space to lure back shoppers.

“I think that is breathing a lot of life or second wind into these properties where a lot of these properties are really well located,” Native Realty CEO Jaime Sturgis said. “They have a tremendous amount of surface parking, oftentimes, which really isn't necessarily the highest and best use, especially in an urban environment.”

Galleria Mall at Fort Lauderdale, Southland Mall in Cutler Bay and Sunset Place in South Miami, three properties that have seen their stars fade in recent years,  have been taken over by developers looking to add a roughly $4B in combined redevelopment, including more than 8,000 residential units.

While South Florida is home to stalwart indoor shopping centers — like Aventura Mall, which was named the best mall in the country by USA Today this year — the region's retail market is starting to feel some pressure.

Stabilized rents in Miami-Dade fell 6.1% year-over-year to $42.56 per SF and vacancy ticked up less than a percentage point to 3.2%, according to a third-quarter Colliers report. Negative absorption for the third quarter totaled 23K SF, bringing the year’s total to negative 118K SF, according to the report.

The three malls targeted for new development sit on more than 100 acres combined and have had declining occupancy and values since before the pandemic.

Coupled with a shortage of about 10,600 housing units annually in Miami-Dade County alone and the rarity of large infill land sites, malls that aren’t performing have become increasingly attractive to ambitious builders.

“The main driver behind it all is densification and lack of availability of land for development, especially in South Florida,” Colliers Executive Vice President of Retail Services Dave Preston said. “The more people we get, the denser we get and the more expensive land gets.”

The Galleria at Fort Lauderdale hasn’t broken 70% occupancy since 2023, when it was first listed for sale. Built in the 1980s, the 800K SF mall at 2414 E. Sunrise Blvd. was purchased last month for $73M by a group of investors, including  Russell Galbut’s GFO Investments and Atlas Hill, owned by Sandeep Mathrani, former CEO of WeWork and General Growth Properties.

The previous owners had wanted to demolish half the asset to convert it into residential but failed after multiple attempts due to neighborhood pushback. 

But instead of tearing the structure down, the new ownership wants to spend $100M renovating it, Mathrani and Galbut told Bisnow in a joint phone interview. They expect the effort to bring occupancy back up above 90%.

“This piece of real estate needed an operator who could invest in the asset,” Mathrani said.

On the Galleria's existing parking lots, the developers are looking to build eight residential towers with more than 3,000 units and a 170-key hotel. 

“You have 32 acres of the most underutilized real estate in all of Fort Lauderdale, two blocks from the ocean,” Galbut said.

The developers are planning to leverage the Live Local Act — a law designed to allow developers to bypass local zoning restrictions if they dedicate at least 40% of a project's units to workforce or affordable housing, priced between 80% and 120% of the area median income.

Live Local has made mall redevelopments like these more approachable, as it allows developers to build housing by right at densities that might have been blocked by local zoning rules.

“Other developers that had gone and made these proposals had to go through a traditional zoning process and get feedback and appease local residents and all that,” Sturgis said. 

“To a developer, that is predictability, and if you have a clear and faster path in order to be able to achieve your goal, then it's mitigating some of your risk, which is the name of the game,” he added.

Southland Mall in Cutler Bay, built in 1978, fits a similar mold. 

After struggling with major vacancies since 2017, losing big-box stores Kmart and Sears, it fell into foreclosure in 2021. American Landmark and BH Group paid $100M in 2022 for the 80 acres at 20505 S. Dixie Highway and are now pursuing a $1.5B redevelopment without demolishing the 990K SF mall. 

Malls like Southland have struggled with an overreliance on big-box anchors, competition against e-commerce and a weak sense of place, American Landmark Chief Development Officer Ron Gaither said.

“I think what you're seeing is an evolution in thinking to try to reverse that and offer something much more compelling for the consumer,” Gaither said.

The developers plan to build 4,295 apartments, 60K SF of medical office space, 150K SF of retail, 150 hotel rooms and a community amphitheater, renaming it Southplace City. The first phase, the 350-unit The Current apartment building, broke ground in March.

“It's very rare to find [nearly] 100 acres of essentially infill land that can be developed for the uses that we have here,” Gaither said. “Five thousand residential units is a tremendous opportunity for any developer.”

Because Southland's previous owner had entitled the property for redevelopment before losing it to its lender, the mall was an appealing takeover candidate for new developers with ambition.

“That was one of the key things that really excited us, the size and location of the play and the entitlement opportunity, which mitigated a lot of the development risk,” he added.

The 26-year-old The Shops at Sunset Place at 5701 Sunset Drive has withstood high vacancy for years, often referred to as a “ghost town.”

An affiliate of Midtown Development purchased the mall in 2021 for $65.5M from Federal Realty Investment Trust, a large discount from the $111M it traded for in 2015.

Midtown received approval last year for development plans for 1,513 residential units, a 287-key hotel and 350K SF of commercial space spanning nine towers on the 10-acre plot. Its demolition is planned for early next year.

Amid big-box retail bankruptcies and many retailers downsizing or closing, the new wave of development is an opportunity to bring thousands of shoppers in walking distance to retail, drawing in a better class of retail tenant.

“It comes down to highest and best use,” Preston said. “At some point, even if it's a successful mall, if it's only two stories, is there a better use of that property where an owner’s or developer’s bottom line is better served by going up multiple stories? These mall sites are the large sites with large acreage, which is hard to come by.”