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Developers Bet that Micro Apartments Will Work in Smaller Cities

The relatively low cost of micro apartments in high rent cities such as N.Y. and San Francisco makes them a feasible alternative for singles, but will they attract millennials in smaller, lower-rent cities like Providence, Cleveland and Worcester?
December 26, 2013, 7am PST | Irvin Dawid
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Kris Hudson writes of micro apartment developments either proposed or built in those three cities. They hope that "the tiny apartments—generally the size of a hotel room for about half the rent of a full-size apartment—will attract young professionals and recent college graduates, helping to revitalize city centers."

"Developers believe that single people in their 20s and 30s will accept less space in exchange for lower rent, even in cities where rent levels aren't especially lofty," Hudson adds.

  • In Cleveland's University Circle district, an employment and cultural hub five miles east of downtown, developer Coral Co. plans to start construction next year on 50 micro apartments as part of a large, mixed-use project
  • In downtown Providence, the 185-year-old Arcade retail building was converted this year to 48 micro apartments.
  • In Worcester, Mass., a newly built complex of 55 micro apartments has leased more than two-thirds of its units, including to students at the Massachusetts College of Pharmacy and Health Sciences.

The perceived demand is not just based on high rents but changing demographics. "Census figures show that single-person households made up almost 27.8% of all U.S. households in 2012, up from 25.8% in 2000." PBS NewsHour indicates that in "the '40s and '50s it was less than 10%". Hudson notes that "(w)hile the elderly account for some of the growth, economists and demographers also attribute it to Generation Y, the roughly 80 million Americans 18 to 34 years old."

This is not a short-term phenomenon," said John Infranca, an assistant law professor at Suffolk University in Boston who specializes in land-use law and has studied micro-apartment projects in several cities. "There is going to be demand for this housing going forward. The [trend] of an increasing number of singles in cities is staying steady across the country." [Infranca is featured as an authority on the topic on PBS NewsHour's Dec. 17 report.]

According to a national tally of micro apartments by real estate data provider CoStar Group Inc., there are "26 micro-apartment projects totaling 2,000 units built or under development since 2011 in six of the nation's most expensive markets: San Francisco, Washington, Los Angeles, Boston, New York and Seattle."

To be sure, there are those that doubt whether micro apartments will appeal to renters outside the high-rent cities.

"In smaller markets, the rent differential is such that, if you have a good job, you can typically afford the rent of a…full-size apartment," said Jeffrey I. Friedman, chief executive of Associated Estates Realty Corp., which owns 14,000 apartments averaging 975 square feet in 10 Midwestern and East Coast states."

Hudson indicates that micro apartments can vary from 200 sq.ft to as high as 500 sq.ft. depending on descriptions provided by developers and cities.

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Published on Friday, December 20, 2013 in The Wall Street Journal - U.S.
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