So, welcome to the teeny-tiny shoebox apartment inside The Arcade. There are lots of others in the building just like this, so mine is about 250 square feet. There's a walkway right in front of the facade because

this used to be a shop front, and so people had to access all of the shops in the building. While malls across the U.S. are facing store closures and empty parking lots, some are finding new life from an unlikely source.

We are here at the Arcade Mall in Providence, Rhode Island, the oldest indoor shopping mall in the country. The Arcade had long been a center point in Providence's bustling downtown, but like other malls, it fell on hard

times and was completely vacant. But rather than letting this historic building fall into ruin, developers came in and decided to build 48 micro-lofts here on the second floor and up here on the third floor. While top-tier malls continue to be in high demand,

nearly 34,000,000 square feet of U.S. mall space is vacant and off the market. Almost 70% of Americans live within an hour of a mall that has a high vacancy rate, low consumer traffic, or is

abandoned altogether. At the same time, the country is facing a massive housing deficit of 4.5 million homes. There's a housing problem in a lot of markets across the U.S., right? This is an opportunity to find land and

have a built-in customer base to get people into the mall. Monday through Friday, this is really busy down here; it's definitely, you know, people in the offices working, getting lunch, or whatever. My barber is downstairs.

As of January 2022, at least 192 U.S. malls planned to add a housing component. The U.S. has about 1,100 regional and super-regional malls, about 8.5% fewer than in 2015.

So, can new housing developments help revive the classic American mall? And what's it like to live inside one? CNBC went to Providence, Rhode Island to find out. Amy Henion has been living on the top floor of a three-story

mall in Providence, Rhode Island, for the past two and a half years. What's it like to live at the mall? "It's really great. It's cool to be part of such a historic building, and knowing that every single one of these units used to be a

shop of some kind. But living in a converted store does present some challenges. Here is my very tiny kitchen. It is very small, but it is workable. And one of the interesting things about the units in the

building is that, because of codes, you can't have any cooking devices with an open flame, so none of the units have stoves or ranges. Do you ever have any concerns about privacy? "Not really. It's something you get used to living in the

It's a busy building, with people constantly coming and going. Every apartment has blinds that residents can raise or lower as they please. Despite these challenges, residents say that having access to shops and restaurants makes living at The Arcade a unique experience.

I get my hair cut in the salon downstairs, and there are little lunch spots, so you don't even have to leave the building. There's a bookstore downstairs, and they hold author talks in the private lounge area.

Avoiding New England's sometimes stormy weather is, of course, another perk. If it's pouring rain outside, or if it's snowing, you simply can't be bothered to go out. You can still go downstairs and take advantage of those

amenities. And it's not just long-term renters who are attracted to the mall. Scott Sheehan is a real estate investor who rents out his apartment on Airbnb.  Some of these business owners on the first

floor, how important is it to them to have a built-in customer base with the residents on the second and third floors? I know a lot of people are very loyal to many of the bars, restaurants, and clothing stores downstairs.

So, the business owners downstairs are definitely interested in maintaining that relationship with the residents. You definitely feel more like you're part of a community than if you were in a standard apartment building. It's been interesting with people trying

to unlock my door, thinking that this is an Airbnb apartment. So, sometimes you have to deal with the public more than you would in a regular home. But for me, that's a small compromise. When a mall dies, communities lose more than just a shopping

destination. Malls often serve as economic hubs, generating billions in tax revenue and creating thousands of jobs. In 2020, U.S. malls and shopping centers contributed $400 billion in tax revenue. When malls close, it triggers an economic

domino effect. Local businesses suffer, jobs are lost, and vacant spaces become eyesores. To combat this, developers are transforming dead malls into mixed-use spaces: offices, medical facilities, and housing. Of these conversions, nearly 54% are being used for

residences and office space. Once upon a time, retailers like Macy's and JCPenney were the anchors of America's malls. But department stores are shrinking. Macy's plans to close 150 of its namesake stores by 2027.

JCPenney, which has already closed hundreds of stores since declaring bankruptcy, is closing four more between this year and next, despite a billion-dollar turnaround investment plan. When you have dead retail space, it can be easier to

clear that; most of what a retail site is, is parking lot, so you don't have to demolish much to demolish a parking lot. And the buildings themselves are generally easier to demolish and then adapt into a retail space.

The Arcade is a little different than some other mall-based residential projects. Most, like the one at FlatIron Crossing in Broomfield, Colorado, are adjacent to the mall and connected by green spaces or walkways.

This was a vacant, underutilized parking lot here at the mall, and we decided to create a mixed-use project.  All the benefits the shopping center brings are included. You have a highly amenitized residential project that's

much more desirable than something in an isolated location. It not only meets housing needs but also revitalizes the property by bringing in a new customer base that can boost on-site restaurants, gyms, and entertainment venues.

While housing and malls sounds promising, it's not without challenges. Zoning laws can be a major hurdle. Malls are typically zoned for commercial or mixed use, not multifamily residential. Developers often need approval from local

jurisdictions to move forward. Like any developer, you have to navigate interest rates, construction costs, the capital markets, and so on. Another obstacle is design. Most malls have limited windows, which are essential

for residential spaces because they need natural light, making it difficult to convert certain mall areas. Usually, only the exterior-facing retail spaces are suitable for housing. Converting commercial office space into apartments is another trend, but it's often very expensive.

A study found that in five U.S. metro areas hit hardest by remote work, the estimated office acquisition price would need to drop by 50% for the conversion to be financially feasible. Conversion projects are really tricky because, you know, a lot

depends on existing conditions which you might not always know about. But to give you a range, on the very low end, you'd be looking at maybe $200 a square foot to convert. Where on the upper end, you might be looking at

more like $800 or more per square foot to convert. Despite those headwinds, malls across America just might have a second chance if they can truly become the housing hubs of the future. The mall is becoming cool again, and so being able to

live by it, work by it, play by it, go to restaurants by it. We're definitely seeing this as a trend. Some people are confused and they'll say, "Why would you want to live in a space that's small?"

But for me, it's about having a reasonable apartment at a reasonable price that will force me out into the community, interacting with the people outside. The point is not to stay in the 250 square foot studio. It's to interact with the downtown that you're living

How Shopping Malls Are Being Transformed Into Apartments In The U.S.

Welcome to the official YouTube channel for CNBC. From 'Wall Street' to 'Main Street' to award winning original documentaries and Reality TV series, CNBC has you covered. Experience special sneak peeks of your favorite shows, exclusive video and more.

For real-time news updates from around the world, visit: http://www.cnbc.com

For CNBC's primetime TV lineup, visit http://tv.cnbc.com

For CNBC's International YouTube channel, visit: http://www.youtube.com/cnbcinternational

How Shopping Malls Are Being Transformed Into Apartments In The U.S.

How Shopping Malls Are Being Transformed Into Apartments In The U.S.

Scripts