Microunits Just a Niche, Bisnow Poll Says
The tiny unit craze is just a tempest in a teapot, according to our recent multifamily reader poll. More than 800 readers responded, and 70% said micro units are not the future of multifamily. (So if you were thinking of renting out your walk-in closet, think again.)
The caveat is simply a part of speech. Microunits are a future of multifamily, not the future, readers say. Why: It’s a niche meant for young, student loan-saddled Millennials whose belongings are mostly virtual (or empty nesters tired of the ‘burbs). One respondent calls trendy microunits “the Pet Rock of residential housing,” (points for comedy) and another cites “significantly higher turnover and operating costs” since its tenants are in such transitory stages of life. While some note microunits’ prevalence in Asian cities, others wonder how confined spaces affect quality of life and question the feasibility in secondary markets with weaker public transit systems.
Westchester County, NY-based William Raveis salesperson Conrad Farinola compares microunits to a week-long cruise with the family. Close quarters are fun for a week, that’s it. And while it might make sense for students and the single set, you’ll probably stay single with such little space to host a significant other. (A great solution to overpopulation, he jokes.) Though people argue microunits help developers squeeze more yield out of a project, you can’t build them on the cheap in New York because of all the bells and whistles necessary to make units livable, Conrad says. (And even though whistle prices have stayed constant, bell costs are rising at an alarming rate.) A tennis player with the travel bug, Conrad just got back from Norway last week.
Bethesda, Md.-based Institutional Property Advisors associate Joe Esparza (left, snapped with his partner Michael Aho and their new koala friend Barnacle on a recent trip to Australia) says there won’t be a microunit tidal wave, but it’s a natural part of the cycle. Think back to the early ‘80s, he says, when we went down to 350 SF/unit after the oil crisis. The recession was a similarly traumatic period, causing people to think “Do I really need all the things that I have?” and embrace a more downsized, practical lifestyle. (And use Mom and Dad’s house for storage.) The difference this time is Millennials are choosing rentals for their more transient, pick-up-and-go lifestyle. Until they have kids, that is.
Chicago-based Melvin M. Kaplan Realty prez Melvin Kaplan (above left, with his brother George) hopes microunits will take off in Chicago, because the city’s frothy $3/SF-plus rents (and 4% cap rates) are not sustainable. “All a person really needs is a bed, a toilet, and a place with amenities like a convenience store downstairs,” he says. It’s a strong concept that has crossover for both apartments and hotels. Think a commodity broker who just needs a place to nap or crash in the evenings, or exchange students looking for lodging on the cheap. NY-based Sydell Group has the right idea with its planned Freehand hostel at the former Tokyo Hotel in River North, he says. A young 77, Melvin’s been in the business for 40-plus years and says he works harder than he did at 50. (It's ok, your 50s are a time to see the world and let loose before you settle down.)
For more insight on turning theory into practice, we talked to micro developers. Seattle-based Eagle Rock Ventures managing director Scott Shapiro says microunits are driven by communities’ growth dynamics (and lack of workforce housing), and in Seattle the population is growing faster than housing can be produced. Eagle Rock has a couple hundred units (average size is 200 SF) open or under construction around the city, and tenants range from age 17 to 62 (average age of 29), he tells us. Most are working, and many are new to the area due to a new job or relationship. (Or a new job that becomes a new relationship that you have to hide from HR.) Once school’s out, Scott looks forward to hitting the mountains and beaches of Oregon with his wife and two kids.