Big on amenities, small on space
Young professionals are paying top rents to live in new upscale apartment towers sprouting in downtowns across the U.S. They’re sacrificing living space for prime urban location and extras such as poolside Wi-fi. Prashant Gopal of Bloomberg reports on the
SIZE SMALL
Apartments are dramatically smaller in major cities across the U. S. than they were 10 years ago, Axiometrics figures show.
Seattle’s average size, for example, among the smallest in the country, fell to 756 square feet from 1,012 square feet in 2004.
Micro units, which are as small as 200 square feet, have appeared in cities where space is at a premium, such as New York.
Higher-density towers are “revitalizing downtowns,” said Jeff Meyers, president of Meyers Research LLC, a California real estate advisory firm.
“Building smaller hits the biggest bandwidth of household income of the millennials,” said Meyers. “In this generation, they’re willing to accept the smaller unit because they only have so much income to go around.”
AMENITIES TRUMP COSTS
Rents in June rose faster than wages in all of the 25 largest U.S. rental markets, according to to Trulia Inc.
A two-bedroom apartment in those areas costs more than 40 per cent of the average local wage, the San Francisco-based company said.
Many young professionals and empty nesters settle in areas with access to jobs, shops and entertainment.
Because offices are concentrated in downtowns, job growth draws tenants in, according to Sanjay K.C., senior real estate economist at Axiometrics. Changing renter tastes and higher gas prices also play a part.
“Flight to suburbs was common during the housing boom,” he said. After the bust, “there was a return to the urban core once again.”
Developers seeking to accommodate tenant demand sent multi-family housing starts in April to the highest level since January 2006, according to the Commerce Department.
NEXT TIER
The population of people in their 20s and 30s grew the most last year in lower-density cities and big-city sub- urbs, according to an analysis of Census Bureau data by Trulia.
In the centre of Austin, Tex., the 4,515 apartments under construction will increase the supply of units by 40 per cent in the next 12 months, said Robin Davis, manager of data firm Apartmenttrends.com.
Austin apartment buildings compete for tenants with yoga and spin classes, music studios, poker rooms, community herb gardens, telescopes for nighttime gazing, dog parks and electric-vehicle charging stations, Davis said.
Living space has been compressed, with formal dining rooms scrapped in favour of kitchen islands doubling as eating areas or desks.
BUILDER BEWARE
In downtown Minneapolis, Turnstone Group cancelled a proposed 140-unit tower in late 2012, said Chip Johnson, the company’s founder.
“Anytime you see that many cranes on the skyline with projects under construction going for the same price point and demographic, it should make you pause.” Builders may be adding too many units for tenants who eventually will grow out of them, said Ryan Severino, senior economist for research firm Reis Inc.
LUXURY VS. LEGACY
In Boston, 4,710 apartments are under construction. The majority are luxury units for young professionals, and they’re beginning to drive up rents in some lower-income neighbourhoods, said Sheila Dillon, city housing chief. “We do need to build more family housing in our core,” Dillon said.
Building small helps make housing more affordable because tenants care about the rent and pay little attention to square footage, said Tony Giarratana, owner of Giarratana Nashville LLC.
Giarratana has started construction on a 146-unit project with some as small as 396 square feet. And he’s pitched a six-storey property with two options: 191 units with an average of 492 square feet, or 142 units and 656 square feet. More apartments would reduce the average monthly rent to $1,282 from $1,491.