Mortgage Matters: Apartment Sizes Shrinking While Rent Prices Are Growing
Micro-units are becoming more popular, following on the tiny-house trend, as millennials tend to be more environmentally conscious than previous generations…
by, Brian Barker
The average size of newly built apartments in 2018 is 941 square feet, which is 5 percent smaller than it was a decade ago. For studio apartments, the change is more pronounced — they’re 10 percent smaller. Rents, on the other hand, have jumped 28 percent during the same time period, according to RENTCafe, a nationwide apartment search website.
“Changes in renters’ living habits are literally redrawing floor plans,” wrote Nadia Balint, senior marketing writer for RENTCafe. “The largest share of apartment dwellers, millennials, prefer living in locations close to restaurants and entertainment, rather than having a large kitchen or living room to cook or entertain at home.”
Higher rental costs today, however, have millennials looking for savings by renting smaller units, and developers are clearly responding. Micro-units are becoming more popular, following on the tiny-house trend, as millennials tend to be more environmentally conscious than previous generations. Apartment developers are supplementing the smaller units by adding more common spaces to their buildings, in which residents can both work and entertain.
“Across our 72,000-unit portfolio we have seen an increasing demand for relatively smaller units,” said Toby Bozzuto, CEO of apartment developer the Bozzuto Group. “We attribute this to a lifestyle shift that is based on our residents’ desire to be less encumbered by things. Our residents value flexibility and convenience and appreciate a thoughtful approach to unit design.”
Despite an apartment construction boom in the last several years, occupancies remain high, and rents are still gaining. Yet rents are rising fastest for those who can afford it least. Rents for low-end properties, defined as those with rents less than 75 percent of the regional median, are gaining faster than luxury rentals, according to CoreLogic.
“We’ve seen a slight uptick in rent prices over the past few months as strong employment growth continues,” said Molly Boesel, principal economist at CoreLogic. “The strength stems from the low-to-middle price tier, which has seen monthly average growth of 3.2 percent since January 2018.”
All real estate is local, and so are size trends, apparently. Overall, including old and new apartments, the Southeast has the largest units in the nation, while California has the smallest. The average apartment size in California is 837 square feet, compared with 975 square feet in the Southeast.
[divide icon_position=”left” width=”short” color=”#”]Source: CNBC
