What is a micro-unit apartment? Micro-unit apartments were examined in a report by the Urban Land Institute. The exact definition of these very small apartment units depends on a variety of different factors, chiefly, where they are located. Local zoning laws play a factor in terms of what size units are in the market. Unit sizes range from 220 square feet to 400 square feet, and generally speaking, micro-units are 350 square feet, which is about the size of a single-car garage. Now that’s tiny!
Who rents these, and are they just a fad? These types of units primarily attract young, single professionals: specifically, millennials, who are between 18 and 34 years old. Some of the drivers leading young people toward these units are high levels of student debt, which limits spending on housing, and low starting wages out of college. While these two trends don’t seem to be changing anytime soon, it should be noted, that ULI is not 100 percent convinced yet if micro-units are here to stay or only a fad.
What do tenants look for? One of the main appeals of this type of living arrangement is location. As a matter of fact, according to “6 fascinating findings about micro-apartments,” an article by Matt Hickman on Mother Nature Network:
“When polled, an overwhelming majority (97 percent) of current micro-unit dwellers listed location as the top priority when they signed a lease.”
Typically, these units are in demand in major coastal cities such as Seattle, San Francisco, Los Angeles and New York City, where you have tech centers and a lack of affordable housing options.
A win/win for everyone that’s good for profits, people and the planet. “The Rise of Micro-Apartment Units,” a story in National Real Estate Investor, indicates how these units add to the profit side:
“For investors and developers, the appeal is clear. ULI has found that smaller units enjoy higher overall occupancy rates than mid-sized or larger units, and calculates that rental prices of these units — averaging $2.647 per sq. ft. — are up to 81 percent higher than larger units.
Opportunities also appear strong because small units are under-represented in the housing inventory, according to ULI. Micro-units make up less than 3 percent of total apartment development supply, although they’re more popular in dense urban environments where millennials are flocking.”
In regard to people, these types of units give many people access to a live/walk/work lifestyle they couldn’t afford and access previously. And in regard to the planet, these units are based in urban centers where walking and public transportation are the main ways of getting around, reducing the reliance on carbon-emitting automobiles, and, from an energy standpoint, the unit size also leaves a small carbon footprint, helping the planet.
The views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.
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John Hunt is conference program manager with Institutional Real Estate, Inc.
