Bigger is not always better, at least not according to some budget-strapped millennials looking for affordable housing solutions. As a result, the demand for smaller, micro-unit apartments, lofts, and studio rentals is attracting new developers and investors.
Although new housing construction has not recovered since the recession, in 2013 and 2014 developers built about 1,000 micro units with roughly 2,200 more either under construction or proposed. The tiny apartments are especially popular in large technology or media-focused markets with high housing costs, such as Seattle, New York, San Francisco and Washington, D.C., although several sources and analysts say the trend is spreading to smaller metro areas as well. Experts say it’s too early to surmise if the mini-studio concept will be a flash-in-the-pan development fad or if it will catch on in other markets.
Craig Barrett, co-founder of NBI Properties, said that although the mini apartment craze is not prevalent on the Emerald Coast, commercial real estate investors are always considering new projects involving housing for local military families and retail businesses scaling back on showrooms or floor space.
“The popularity of micro units concept will grow as we discover new ways of making small spaces more attractive and efficient,” Barrett said. “Some furniture manufacturers are addressing the trend by offering retractable Murphy beds, convertible sofas, and other furnishings that will make interior spaces and storage more efficient. These features and the ability to retain tenants are making the projects more attractive to commercial developers.”
Developers are typically attracted to rent premiums they can charge on a per square foot basis. A comparison between micro dwellings and standard studio apartments shows that building a denser concentration of tiny studio units on dwindling patches of available land makes better economic sense in many cases. Overall, the apartment market overall is shifting toward a greater mix of smaller studio and one-bedroom units being included in traditional apartment communities, as well as more construction of micro-unit communities, according to a report earlier this year from the Urban Land Institute (ULI).