Wave of the fu­ture? Mi­cro units touted for mil­len­nial renters

Orlando Sentinel - - EXTRA HOMES - By Jim Buchta

Ready to live like a min­i­mal­ist?

City Club Apart­ments CBD, a new rental build­ing in down­town Min­neapo­lis, is bet­ting there are a lot of home seek­ers like you. Many of the 307 units in the build­ing are com­pact, one­room apart­ments with built-in Mur­phy beds, and the 17-story build­ing has only 20 ded­i­cated park­ing spa­ces, mak­ing it an out­lier in an in­creas­ingly com­pet­i­tive rental mar­ket.

The Michi­gan-based de­vel­oper, Jonathan Holtz­man, said the project has been a hit and will serve as a model for fu­ture de­vel­op­ments.

He said that within months of open­ing, more than half the units had been leased, em­bold­en­ing him to pur­sue a se­cond high-rise de­vel­op­ment in down­town Min­neapo­lis, though he wasn’t ready to dis­close the lo­ca­tion.

“This com­mu­nity rep­re­sents the next evo­lu­tion of that process and think­ing and will in­form our vi­sion and mix for the com­mu­ni­ties we cur­rently have un­der de­vel­op­ment in Detroit, Kansas City, Chicago and Cleve­land,” he said.

With a record num­ber of rentals ex­pected to hit the mar­ket in the Twin Cities metro this year and com­pe­ti­tion for renters on the rise, de­vel­op­ers are watch­ing the mar­ket closely to de­ter­mine the best mix of units in their build­ings. Many be­lieve mi­cro-units are the wave of the fu­ture.

Holtz­man said the ma­jor­ity of the new apart­ments that have come on­line in the last five years have been one-bed­room, one-bath and two-bed­room, two-bath units, but “our non­tra­di­tional, smaller floor plans are leas­ing the fastest.”

Holtz­man calls the small­est units in the build­ing “nanos.”

One-room apart­ments, known by many as studios, ef­fi­cien­cies and mi­cro units, are noth­ing new. Dur­ing the 1980s, sev­eral high-rise build­ings were built with one-room apart­ments and small­ish al­cove units that have a small an­te­room with room for just a bed and a night­stand.

And over the past decade, a grow­ing num­ber of de­vel­op­ers are cater­ing to renters who are will­ing to sac­ri­fice space for af­ford­abil­ity.

Yel­low Tree, a Min­neapo­lis-based de­vel­oper and prop­erty-man­age­ment com­pany, re­cently fin­ished a new 65-unit build­ing in north­east Min­neapo­lis that fea­tures mi­cro apart­ments that are much smaller than usual, in­clud­ing one-room stu­dio apart­ments of 358 square feet.

For many mil­len­ni­als, space to en­ter­tain at home is less im­por­tant than com­mon space where they can con­gre­gate with friends and other res­i­dents. At City Club CBD, the build­ing is stocked with sev­eral gath­er­ing spa­ces, in­clud­ing a 17th-floor rooftop Sky Club with a swim­ming pool and out­door kitchen.

For de­vel­op­ers, the small­est units typ­i­cally fetch the high­est per­square-foot price, though the monthly rent is lower than one would pay for a one-bed­room or larger unit.

“They’ve made units smaller and smaller in or­der to help peo­ple with their rent pay­ment,” said Gina Ding­man, pres­i­dent of Ever­est Real Es­tate Ad­vi­sors in Ed­ina, Min­nesota. “Most peo­ple aren’t pay­ing at­ten­tion to their per­square-foot price; they’re just look­ing at their monthly pay­ment.”

At City Club CBD, nanoa­part­ments range from about 450 to 600 square feet. Rents vary de­pend­ing on the lo­ca­tion within the build­ing. A 450-square-foot unit on the third floor, for ex­am­ple, rents for $1,250 per month. A one-bed­room plus den unit with 875 square feet rents for $1,450.

With an over­all va­cancy rate through­out the sev­en­county metro at just 2.3%, the av­er­age monthly rent is now at an un­prece­dented $1,254 - a nearly 8% in­crease over last year, ac­cord­ing to a midyear re­port from Mar­quette Ad­vi­sors.

In down­town Min­neapo­lis, renters have more op­tions but will pay more. The av­er­age va­cancy rate dur­ing the se­cond quar­ter in­creased slightly to nearly 5%, not in­clud­ing in­com­er­e­stricted units. The av­er­age rent was $1,749.

Mary Bu­jold, pres­i­dent of Max­field Re­search in Min­neapo­lis, said the lack of park­ing at City Club CBD is un­likely to be an is­sue given the build­ing’s lo­ca­tion near pub­lic transporta­tion and within walk­ing dis­tance to shops, restau­rants and ser­vices.

“If you are right in the down­town, tech­ni­cally you do not need to even own a car, which gives you added in­come to your bot­tom line,” she said. “Mi­cro units will con­tinue to at­tract young peo­ple, but do not re­ally fit too well for older peo­ple who usu­ally want a lit­tle more space,” she said.

Holtz­man said he has been test­ing non­tra­di­tional sized apart­ments with un­usual floor plans over the last three years, and used that knowl­edge to de­ter­mine the unit mix at City Club CBD.

“Our com­peti­tors are watch­ing very closely and would love to know the mix of our 307 units,” he said. “I don’t want to ed­u­cate them — this knowl­edge and fo­cus on con­tin­ued dis­rup­tion is one of our many com­pet­i­tive ad­van­tages.”

RICHARD TSONG-TAATARII/MIN­NEAPO­LIS STAR TRIBUNE

Janet Lewis ex­plores a 540-square-foot mi­cro unit that rents for $1,250 a month.

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