The wrecking crew has come for one of Orange County’s most visible retail relics.
Demolition work began this past week on a boarded-up, 80,000-square-foot former JCPenney building at the Village at Orange mall at 1500 E Village Way in Orange, California, to make way for housing. San Clemente, California-based development firm Integral Communities plans to replace the long-vacant property with a 167-unit condominium project featuring resort-style amenities such as poolside lounges and a bocce ball court. Other retailers on the property remain open.
The move comes as residential property takes over an increasing number of traditionally retail parcels across Orange County and the United States. A housing shortage in markets across the country is particularly acute in Southern California, making these types of projects a more familiar sight.
At the Village at Orange property, the apartments will bring activity to a site abandoned by retail users, according to John Stanek, principal at development firm Integral Communities.
"By activating this site, the project will add vibrancy, energy, and ‘eyes on the street,’ supporting both community safety and vitality," Stanek told CoStar News. "It will also help generate foot traffic and shoppers for any new and existing retail in the mall, offering a chance to truly reinvigorate this part of Orange."
Department stores such as JCPenney have been shuttering locations at malls across the country for years as consumers have turned to online shopping or headed to more convenient centers with unique shopping options.
Mall repurposing underway
While other former department stores at the Orange County mall have since been replaced by the likes of Sprouts Farmers Market and Walmart, the Penney store has been closed and unrenovated since 2017. An existing former Sears store that closed in 2021 will become the nation's first outpost for South African-based discount retailer Panda Mart.
As traditional department stores vanish and mall traffic wanes, developers are repurposing unused retail space into housing across the country, with hundreds of malls adding residential units to their sites in recent years.
Integral purchased the JCPenney site in a 2020 deal totaling $17.4 million.
The deal came about four years after privately held retail development firm TRC Retail acquired a roughly 500,000-square-foot portion of the mall — excluding the JCPenney and Sears — in 2016 from Fortress Investment Group for $85 million, a discount from the $100 million that Irvine-based Passco Investments paid for the property in 2004 despite two multimillion-dollar facelifts during the period.
The mall's JCPenney anchor store had already shuttered in 2017 as part of a wider plan to close 138 stores nationwide. And the 278,000-square-foot former Sears store, owned by Transformco, closed in 2021.
The enclosed portion of the mall shuttered in January 2024 and was demolished soon after, with developers still evaluating best uses. The mall's outparcels, including Walmart, Sprouts, Home Goods, Trader Joe’s and a Red Robin restaurant remain open.
Other Orange County malls are adding some residential space to their retail mix, too. A multimillion-dollar overhaul is underway at Indianapolis-based Simon Property Group's nearby Brea Mall, where the landlord is converting a former Sears and adjacent parking lots into a walkable outdoor complex that will resemble less of a mall and more of a new urban core for the city when finished, complete with new restaurants, stores and homes.
Filling a need
Mall redevelopments are pervasive in Orange County. At least 10 are undergoing major overhauls, with housing additions playing a key role, said Jesse Gundersheim, CoStar's senior director of market analytics for Los Angeles and Orange County.
"So far, the new product has been successful, attracting renters with the convenience of on-site restaurants and retail," Gundersheim said. The Paloma apartments developed next to Santa Ana’s MainPlace Mall in 2023, for example, leased up in about a year.
Coastal California can certainly use more housing. Apartment vacancy in Orange County ranks second-lowest across the largest 50 U.S. markets at 4.1%, and the city of Orange is even tighter, with a 3.4% vacancy rate.
Other malls are replacing retail and parking lots with housing across the country. In New York, Pacific Retail Partners will redevelop The Galleria into a mixed-use center, with seven residential towers of varied heights and up to 3,200 apartments. In New Jersey, global mall giant Westfield will add 1,400 residential units to Westfield Garden State Plaza.
The Orange County housing plans come at a time when local officials are under pressure from the state to facilitate the addition of 10,000 new homes by 2030, to help alleviate a housing availability and affordability crisis.
Turning malls into neighborhoods isn’t without obstacles. The Village at Orange project still faces entitlements and environmental review, and some community members have expressed concern over added traffic and density. The City of Orange plans to launch a Specific Plan process and environmental impact report this summer, with public input expected in the fall.