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Developing Micro-Units

Advantages and Opportunities


Background Information

What is a Micro-Unit? A micro-unit is a small studio that uses efficient design to appear larger than it is, ranging from 280 to 450 square feet. With the current challenges to house affordable units in large cities, micro-units have become popular among renters and developers.


Since 2008, average unit sizes remained constant, except for Studios, shrinking from an average of 800 to 525 square feet per unit, and 3 bedroom units, growing from 1,300 to 1,500 square feet per unit. Studios in these markets achieve an 18% premium on rent per square foot basis compared to 1 bedroom units, and a 30% premium compared to 2 and 3 bedroom units.

Source: Potikyan, Marine. Advantages and opportunities of developing and investing in micro-units. Diss. Massachusetts Institute of Technology, 2017.



Why Would People Choose to Live in Micro-Units?
















Source: Life at Home in the 21st Century, Wallstreet Journal


A study of 32 middle-class Los Angeles families revealed that out of 1,000 square feet of space, only 400 was mostly used: the dining room, the den and the kitchen.


People are ready to sacrifice space mainly for 1) location, and 2) affordability.


Micro-units are typically located in city centers and delivered furnished with utility electricity and internet expenses covered. This allows micro-units to command a premium on a per square foot basis compared to all other unit types.



Ori, an MIT Media Lab Robotic Furniture Start-Up

Robotic furniture is the next generation for efficient space. It’s not the size of the space that’s important, it’s how you use it. Ori has developed a robotic furniture system that transforms space into a multifunctional living area. The innovative design increased the usable area of micro-units by 17%!

The start-up has partnered up with several Boston developers to test the product.


Conclusion

Micro-Units present opportunities for developers to increase the rentable rate per square foot by 18-30%, while providing value to renters in terms of flexibility, affordability and proximity. In an environment where housing affordability is becoming problematic, micro-units serves as a solution to provide housing to young professionals.

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