The newest asset class to sweep into America’s largest cities are Micro Apartments. Micros typically consist of 5-10 story buildings containing 50-150 studio apartments of roughly 300 sq ft each. That’s not a whole lot of room, but they contain a bathroom, kitchenette, foldable furniture, and 9-foot ceilings to make things appear as roomy as possible. What attracts people to live in a shoebox? Micros occupy prime locations in the urban core, are very proximal to transit, are an affordable option for living alone, and contain plenty of common area amenities on the premises; like the cosmopolitan experience of ‘Friends’ blended with the humble convenience of college dorms. Micros have taken hold in NYC, Boston, Seattle, San Francisco, LA and now San Diego. With the housing shortage, local governments are welcoming the density of Micros with open arms.
As an investment vehicle, the numbers really jump off the page. Take the example of a standard 600 sq ft one bedroom apartment that rents for $2,400/month. If instead we slice this unit in two at $1,700 per side, the gross revenue of $3,400 brings an extra $1,000/month in perpetuity with only minor upfront costs of the additional kitchenette and bath. Another huge advantage is governments waiving all parking requirements. This saves big on development costs and creates a larger array of developable parcels not suited for standard apartments. Micros are still in the early innings, and we’re excited to contribute housing supply to a drastically underserved market.
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