In the ever changing landscape of major cities across the country multifamily family developers are finding less is more. What I mean by that; smaller units – like studio apartments are being grabbed up faster than larger ones. As rents are on the rise and urbanization has intensified, many developers have responded with smaller apartments and it is paying off.
Earlier in this decade the larger units were more popular, however now the focus has flipped. The vacancy rates for the smallest 25% of one-bedroom units have dipped below those for medium and larger units, according to CoStar. The average unit completed last year measured 941 SF, according to RENTCafé. That is 5% less than the average of 10 years prior. “Smaller units have been gathering an outsized share of demand, especially in urban submarkets in major metros, which is simply due to the fact that rents are far above where they were at pre-recession highs, and these major metros have become really expensive,” CoStar consultant Robin Trantham said. “Renters choosing to live in the city have had to sacrifice square footage in order to do so.”
Building smaller units is a clear extension of the myriad of reasons that renters want to live in them. Urbanization has pushed rents up, and developers and residents alike have found smaller units satisfy each of their respective needs. The cost of land in most cities has gone up tremendously and the Las Vegas area is no exception.
Over the last several years Las Vegas became a multi industry city – tech people have moved in as well as call center for large multinational companies as well as warehouses for companies like Amazon and Sephora. Most of these people do not make huge amounts of money however need a place to call home.
Panoramic Interests is based in the expensive San Francisco Bay Area and specializes in small studios, one-bedrooms and two-bedrooms. Its average two-bedroom is about 440 SF, or “smaller than a lot of studios”. Every rental market that has high rental costs can always benefit from the construction of smaller units because of the lower rents. For that reason, the performance of smaller floor plans in what CoStar defines as core markets — Boston, New York, Chicago, LA, S.F., Washington, D.C., and Seattle — is where the trend is most pronounced.
And I believe we can add Las Vegas to the list. The cost of land has gone up so much in the last few years that newly built homes have become very costly. If Las Vegas wants to accommodate all the people moving here that work for the new industries coming here – which includes lots of millennials, real estate investors in Las Vegas should be jumping on this trend. Also this is not just a millennial thing – baby boomers, empty nesters and divorcees are looking for value in the marketplace. Many of them are looking to down-size.
This is another way that the residential market is reinventing itself – to cater to the needs of these groups of people and there is a great need in Las Vegas on the supply side as well. Increasing construction costs have put larger multifamily units on hold. The more appealing unit economics of micro-units, co-living or just smaller floor plans are becoming clearer to investors and developers around the country and Las Vegas investors and developers would be wise to get into this market.
So, all you property investors and developers contact me if you are interested in getting into this money making trend. Don’t want to own apartments because you don’t want to be a landlord? I get calls from investors looking to buy apartment buildings… build one and then sell it for a nice profit!
Do you have a need for commercial / industrial / retail space? Are you ready to buy or sell a home? We can help you with that… just call us at 702 SELL NOW or click on this link to my website http://www.702SellNow.com
Choose to have an amazing day…..Jeff