Brookfield Properties is getting closer to breaking ground on what could be the largest apartment project underway in San Francisco and part of the latest mall redevelopment for California, a state working to add housing.

The city of San Francisco and New York-based Brookfield agreed to terms for the partial revamping of Stonestown Galleria, a roughly 800,000-square-foot mall near Lake Merced Park that's added well-performing tenants in recent years — in contrast to some other malls that have had rising vacancies. Still, even well-performing malls are getting mixed-use additions as cities get more creative in ways to add homes to meet state mandates.

Brookfield's proposal aims to convert a 29-acre parcel at the mall that's largely used for parking into 3,500 homes, 20% of which would be reserved for renters earning less than 80% of the area's median income. It's San Francisco's largest housing proposal since 2011, when Maximus Real Estate Partners filed plans for the 5,600-unit Parkmerced near San Francisco State University, though the project has yet to break ground.

While Brookfield is redeveloping malls with housing elements elsewhere in the country, it's particularly important in San Francisco, a city required to build more than 80,000 housing units by 2031, the highest mandate for the Bay Area and among the more ambitious requirements for the state of California.

“Transforming Stonestown is a huge opportunity to add homes and parks, while still maintaining an important retail center that serves our residents and boosts our economy,” Mayor London Breed told CoStar News in a statement. “When we look at the future of San Francisco, this is exactly the kind of project we need to be a more affordable city for all.”

Though San Francisco's housing plan is now in compliance with state mandates, recent data from the US Department of Housing and Urban Development reveals the city issued 1,136 residential permits in 2023, a 13-year low.

Statewide, California is short some 3 million houses to accommodate the state's population, according to the Public Policy Institute of California.

San Francisco has completed just shy of 15,000 units in the past eight years, according to CoStar data. Among the larger housing projects underway in the city is Strada Investment Group’s 501-unit proposal at 555 Bryant St, slated to open next year.

Brookfield's plans for Stonestown have been in the works since 2021, roughly three years after it bought the mall through its $15 billion acquisition of GGP. The proposal now heads to the Board of Supervisors for approval.

The project also includes the addition of a 6-acre park and community space as well as additional retail stores.

San Francisco has relied on redevelopment projects to build housing for the past 25 years, according to CoStar, and shopping malls are becoming increasingly popular in and out of the Bay Area for residential projects.

San Francisco's retail market has struggled with low foot traffic resulting from the pandemic, forcing some operators to close and sending availability rates in some parts of the city to more than 20% in the first quarter of this year, well above the nationwide average of 4.8%, according to a CoStar analysis.

Other mall redevelopments are taking shape in largely vacant or underutilized shopping centers in the United States. Stonestown, meanwhile, has seen its roster of tenants grow since 2021, including the addition of a Regal theater, a Whole Foods grocery store and a Target.

In contrast, closings of notable tenants like Nordstrom at the former Westfield San Francisco Centre in downtown San Francisco forced the transfer of the property to its lenders.

In one example of Brookfield's mall redevelopments outside of San Francisco, the company is adding apartments and other commercial additions to revitalize Cumberland Mall in Atlanta, reports indicate.

Brookfield is one of several developers with such redevelopments underway across the state and country. Simon Property Group, the nation’s largest mall landlord, plans to spend $800 million this year on a half-dozen redevelopment projects from coast to coast. In Virginia, Santa Monica-based Macerich proposed redeveloping a former Lord & Taylor store at the Tyson’s Corner Center into a tower featuring offices and homes.

In California, Dallas-based Centennial aims to redevelop the 1 million-square-foot Valencia Town Center in Santa Clarita after buying the property for $199 million last September; and Sand Hill Property Co. won approval for a long-planned revamping of a vacant shopping mall in Cupertino near Apple’s home base that will add nearly 3,000 homes and 2 million square feet of offices.

Reports indicate renters are looking for a mixed-use experience when choosing an apartment. Renters are “focusing on the lifestyle of an apartment,” and are prioritizing the experience of a home rather than the square footage, according to a report by Matthews Real Estate Investment Services.

“The ability for renters to eliminate their commute to work, and the city’s best restaurants, shops, and activities creates a mix of leisure and business that is highly desirable to the modern consumer,” the report said.