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Bisnow Special Report: Where Micro Units Stand

Micro apartments are taking off in cities like New York and San Francisco and just this week a micro unit plan was approved in Honolulu. Developers have used names like nano units, launch pads, urban flats and fun units. Are they a fad or lasting trend? 

First off, micro units aren't single room occupancies. Unlike SROs, which have communal kitchens and bathrooms, micro units have a privatefully functioning kitchen and bathroom. They can range anywhere from 500 SF to as low as 220 SF. In NYC, where conventional new dwellings have to be at least 400 SF, micro apartments are defined as studios ranging from 275-300 SF. In San Francisco, minis can go as small as 220 SF as long as 70 SF is set aside for the bathroom and kitchen. DC takes it a step further, allowing 220 SF units with no minimum requirement for bathroom and kitchen space.

Your typical nano unit renter is a young professional male under 30, or more specifically, under 27, according to a report by the Urban Land Institute Multifamily Housing Councils. Young professional females fall behind by a slim margin. Young couples, roommates, older singles who are downsizing, and pied-à-terre users round out the target demographic. Micro renters are drawn by the prices—roughly 20%-30% cheaper than comparable "normal" units, although they typically work out to a higher price per SF. Another draw is the ability to live alone.

Amenities are a big deal for urban flat renters. These are renters who are looking for a great location close to shops, restaurants, bars and entertainment. They want everything at their fingertips: washer and dryer in-unit, storage and a grocery store nearby. Only 30% of those surveyed by the ULI Multifamily Housing Councils wanted a fully furnished unit, but 55% wanted multifunctional furniture.

It’s tough to peg the demand for micros because the market is still small. The ones available are getting snatched up quickly, with a 91.1% occupancy among units under 500 SF in the 2012-2013 development cycle. (But keep in mind micros accounted for just 2.7% of the sample ULI's Multifamily Housing Councils studied during that cycle.) Also, roughly a quarter of tenants renting traditional units reported in the study that they'd be interested in a micro unit as long as it's less expensive, in a great location and allows them to live alone.

Young American renters aren’t so interested in the ultra-compact appliances that have taken off in Europe and Asia. Some design elements that work include linear kitchens with removable islands, built-in storage, vertical shelving, tall ceilings and large windows. Renters also prefer common gathering spaces. The cost of developing and operating a micro apartment community is more than conventional communities, but the rent per square foot offsets the price. But just in case the mini revolution is a passing fad, some developers are experimenting with flexible floor plans that will allow renters to combine units. A developer named Patrick Kennedy is tweaking the concept in San Francisco with shared suites as big as 625 SF