Micro-Apartments: How These Small Multifamily Spaces Are Impacting CRE

The cost of living, particularly in major cities across the United States, has been on the rise over the last few years, however, so has the desire for urban living. Nearly 1 in 4 renters of traditional units have expressed interest in renting a micro-apartment at the expense of sacrificing space for a 20-30% decrease in rent. The development of micro-apartments is a convenient solution for tenants who desire to live in high-density urban areas with affordable, quality living.

While some CRE professionals argue that micro-apartments are simply a fad, others believe that they are a lasting solution, for both tenants and investors, to the over-saturation of urban areas.


Read ahead to learn more about micro-apartments and how these small multifamily spaces are shaping the future of commercial real estate.


What are micro-apartments? 

Micro-apartments are small living spaces with a footprint between 200 and 400 square feet that offer space-saving efficient designs, including a kitchen and bathroom (and sometimes high-ceilings and large windows to give the illusion of space).

Not to be confused with studio apartments (which are typically 500 to 600 square feet), micro apartments are smaller but designed to appear more spacious than they actually are. Studio apartments typically have no walls or partial dividers between any area except the bathroom. On the other hand, micro-apartments may have a separate sleeping area or nook specifically designed for the bed to be tucked away. Micro-apartments typically have built-in furniture, such as desks and murphy beds, another feature that differentiates them from studios.

These apartments have become a convenient alternative for residents who do not mind trading in space for affordable city living.


How do micro-apartments impact urban development?

Location, Convenience, and Affordability

Micro-apartments are typically located in thriving urban areas with convenient access to attractions including restaurants, bars, and entertainment. Offsetting the limited amount of space by their proximity to popular locations, convenience is one of the driving forces behind the success of these tiny units.

In an effort to capitalize on Millennials’ growing desire to live in smaller spaces with a close proximity to work and recreation, apartment developers have begun constructing micro-apartment complexes in the heart of major cities such as Seattle, Los Angeles, San Francisco, and Austin. In Seattle, nearly 5,500 micro-units were built between 2012-2015, remaining one of the only affordable unsubsidized housing options in the city. From 2012 to 2018, traditional rent prices in Seattle grew from $1,750 to $2,620 while those for micro-units were still able to be found for anywhere between $800-$1,300.


City Regulations

Micro-apartments’ attractiveness to a wide range of tenants has aroused the interest of developers in growing urban areas. Because of the growth potential of smaller living spaces, progressive cities nationwide have begun working towards regulating and maximizing it by adding more micro units to the rental landscape. There are even some cities that have made changes to their zoning laws to permit the development of miniature apartments.

Cities have varying regulations regarding the business codes that govern micro-units and what is considered livable. Zoning regulations govern the development of a property, including density, lot coverage, parking, and floor area ratio. Zoning requirements for cities like Los Angeles limit both the size and height of buildings in an effort to prevent density. Some cities have attempted to combat the development of micro-apartments by implementing stricter rules and regulations. Others, like New York, have modified their zoning codes to allow for the development of micro-apartments due to the need for more innovative housing models.


How do micro-apartments affect the future of CRE? 

Cities across the country are in varying stages of developing micro-apartments. Some cities are adopting this trend with the notion that it is just a fad while others view the micro-apartment movement as a way to bring more life and development into the city. Regardless of each city’s stance, the development of micro-apartments is sure to have an impact on the future of CRE, specifically the multifamily sector.

Recently, multifamily owners have begun to embrace the short-term rental model created by the emergence of Airbnb. In fact, the National Multifamily Housing Council estimated that 65% of recent Airbnb bookings were made for multifamily buildings, with 43% of those occurring without the property manager’s approval. As short-term rentals continue to gain traction, micro-apartment owners could become the future of short-term rental spaces because of their urban core locations and minimal amount of space, which could be ideal for travelers who are seeking a convenient place to stay during a quick trip.

CRE trends towards energy-efficiency have also been on the rise in recent years. Millennials, the largest generation in history and most prominent group in today’s workforce, are shaping what it means to be “efficient”, and the market is listening. Developers have begun reacting to tenants’ demands by creating more eco-friendly and sustainable commercial properties, such as micro-apartments. These apartments are proof that comfortable, yet sustainable living is possible, placing pressure on traditional multifamily apartments to evolve their energy-efficiency and sustainability practices to keep up with the current demand.



To learn more about how micro-apartments and other tiny spaces are impacting the future of Commercial Real Estate, read Developers are Turning Small Spaces into Big Revenue.