Micro Apartments: The Next Big Thing?
March 27, 2015
Tiny studio apartments may be the next trend for the multifamily sector. Developers see the small apartments -- averaging about 380 square feet -- as a big draw to urban-dwelling millennials as they break out to form new households.
Developers built about 1,000 micro units in 2013 and 2014 and about 2,200 more are under construction or proposed, according to the CoStar Portfolio Strategy. Many of these micro apartments are mostly centered in high-cost housing markets, like Seattle, San Francisco, New York, and Washington, D.C. Seattle alone boasts about 70 percent of the micro units constructed over the last two years.
Just like the overall rental market, rents for micro units are rising rapidly. Asking rents for micro unit projects of 400 square feet or less have spiked over the last four years – from about $600 in 2011 to averaging about $1,143 this year, according to the CoStar Group. Prices have risen as the vacancy rate of micro apartments has dropped from 16 percent to 6.6 percent.
Developers are finding they can still charge a premium for micro apartments, even though they're smaller than studios. For example, in downtown Washington, D.C., asking rents per square foot for mini apartments are about 57 percent higher than rents for studio units, according to the CoStar Group’s data.
Demand for smaller units appears to be high. A report earlier this year from the Urban Land Institute found that studio and one-bedroom units accounted for nearly 51 percent of the 2012-2013 completions – that's up from 41 percent in 2002 and 2003.
Source: "Micro Apartment Units Getting Macro Attention From Urban Developers," CoStar Group (March 25, 2015)
Updated: November 25, 2020