What are the market prospects for microunits in the U.S.?

Microunits are not new to Asia and we have developed a number of Microunit projects in China. Would it be worth our time to explore development possibilities in the U.S.? If so, what markets would offer the best value?

Answers

On April 10, 2018 Skip Whitney answered:

Very strong in major cities like San Francisco and New York City. A big growth opportunity since not many developers have built them yet. Smaller units in traditional condo towers are the first to sell out.

On April 09, 2018 Mark Drumm answered:

They are potentially an emerging product type.

On April 09, 2018 Korosh Farazad answered:

We have not encountered any micro unit opportunities in United States yet; however, we are seeing a bit of interest coming into the market and mostly in tier 1 visits like New York, LA and Chicago.

On April 10, 2018 Mark Suchy answered:

Micro-units are a relatively new product type in the U.S. The only markets that I am aware are the downtown San Francisco, New York and Boston markets. According to Panoramic, returns are generally better than traditional rental units. There is demand from both the individual and from schools that master lease a number of units for their students.

On April 09, 2018 Gary Sumihiro answered:

Presumably you are referring to micro units as dwelling spaces. I also assume that to answer the question properly, you would keep leasing rates approximately 20% to 30% under standard rentals (which would still yield a high rent/sq ft). While there is no definition of a micro unit, I am further presuming you are thinking in the range of 300-500 sq ft. (Cities have different minimum standards, like the District of Columbia, which I believe is 220 sq ft). As to exploring development in the US, absolutely. High density and high growth areas are ripe for micro units. Denver is an example. With Denver fast becoming a tech center for the US west states, properties have risen so quickly that housing has become unaffordable for the thousands of programmers and start up types that are flooding the city. Seattle, Washington DC, New York, San Francisco are all cities that should be explored.

On April 14, 2018 Sheri Chromow answered:

There has been some development of microunits. There have been some in New York City, and there is a great deal of interest in them. To date, the concept has not had major success. However, it is certainly likely to, given a larger demand as the major cities continue to grow.

On April 14, 2018 Robert J. Ivanhoe answered:

There is certainly a fascination about microunits and an increasing demand for the product. However, in most places, such as New York, microunits do not comply with local building codes, which require larger square-foot areas for apartments than contained-in microunits. Some municipalities are changing these requirements or enacting pilot programs to try them, but it may be a while until the change is made on a wide scale. What I see as a larger trend are various co-living schemes which accomplish a similar result, with smaller living areas but communal common areas. The demand for this seems greater. There is a cost savings for residents and this seems to be very appealing to the millennial culture, but in some cities, similar land-use regulatory changes will be required to accommodate this trend. But, this is the one that seems to be taking hold more than microunits as most people think of them.

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