WORCESTER, Mass.—A hotel and an apartment complex are rising on a street here that was buried by a shopping mall for four decades. A new office building also opened nearby, replacing a structure that failed to resuscitate this New England city’s core.

Standing on a reopened street, Worcester City Manager Edward M. Augustus Jr. said the two-story mall ultimately hurt the city. “We don’t want these big, dead walls,” he said.

At...