A micro apartment is a smaller-than-average rental unit that typically measures less than 350 square feet.
Learn what classifies an apartment as micro, and, as a landlord, what you stand to gain or lose by buying one.
What Is a Micro Apartment?
A micro apartment is akin to a studio apartment but on a smaller scale. These units combine necessity and functionality by offering the typical amenities of a standard apartment within a footprint of under 350 square feet.
- Alternate name: micro unit
How a Micro Apartment Works
Rising land value and construction costs in cities, coupled with a desire to maintain affordable rent prices relative to tenant incomes, have led developers to shift focus from larger, lower-density apartments to smaller, higher-density ones that generate more revenue per square foot. The result has been a boom in the construction of smaller-than-average rental units known as micro apartments in cities from coast to coast, such as Boston, New York, and San Francisco.
Micro apartments usually measure less than 350 square feet, though they can range in size from 150 to 500 square feet depending on the location. In addition, cities from Seattle to Boston have laws in place that limit the minimum size of a studio apartment.
The essential amenities of any apartment—a bathroom, kitchen area, living space, and sleeping space—are packed into the minimal area using multifunctional or flexible furniture and storage, such as movable kitchen islands and sofas that convert into Murphy beds. Some micro apartments also feature communal space,s such as lounges, gyms, pools, rooftop decks, and other outdoor spaces that give tenants additional space to use beyond their unit as well as the ability to socialize without leaving home.
Micro apartments can be rented for oneself or purchased as investment properties and rented out to others. They tend to attract young single professionals as tenants—people who are just starting out in their careers and may have just moved to a new city. These individuals may not have accumulated much furniture or other possessions at this point, making a micro apartment an ideal place to begin their future as the minimal space they offer might be sufficient.
Builders also maximize the space in these units by using certain features to create the illusion of more space. For example, units tend to have high ceilings, usually nine feet or taller, as well as large or even floor-to-ceiling windows.
How Much Does a Micro Apartment Cost?
The purchase price of a micro apartment for an investor will vary widely based on the specific builder and the area of the country where the apartment is located. Construction costs are generally 5% to 10% higher for micro apartments than standard ones, which may in some cases be reflected in a higher purchase price. Even so, the value ratio (rent per square foot per month) is typically 25% higher, which may make up for these costs.
In general, the rent on a micro apartment is between 70% and 80% of what a tenant might expect to pay for a conventionally sized apartment in the same area. Below are some sample rents of micro apartments across the country:
- Carmel Place, New York: Rent begins at $2,775 a month.
- 77 Bluxome Apartments, San Francisco: Rent starts at $1,695 a month.
- Turntable Studios, Denver: Rent starts at $1,095 a month.
The target demographic for micro units skews toward the young (under 30 years of age). In addition, men are slightly more likely than women to rent them.
Pros and Cons of Micro Apartments
Maximizes the number of units in a building
Higher rental-rate premiums
Higher occupancy rates
Attractive to renters for their affordability
Ownership opportunity in a vibrant locale
Higher operating costs
Targets a niche tenant market
Revolving door of tenants
Furnishing them can be costly
Micro apartments are attractive investments for several reasons:
- Maximize the number of units in a building: You can fit more units into your property, which increases your profit potential.
- Higher rental-rate premiums: Micro apartments tend to garner more rent per square foot than conventionally sized apartments.
- Higher occupancy rates: Micro apartments also have higher ratios of used space relative to total space, which can attract new renters and avoid prolonged vacancies.
- Attractive to renters for their affordability: It's cheaper to rent a micro unit than a traditional studio apartment. As a result, tenants can sustain the living arrangement for a longer period of time and may not even need a roommate to pay for part of the rent.
- Ownership opportunity in a vibrant locale: Half the appeal of micro units is in their location in vibrant, major metropolitan areas that offer numerous attractions and amenities for both landlords and tenants.
The drawbacks of micro apartments include:
- Higher operating costs: The ongoing operating costs are typically higher for micro apartments than standard ones because the property fits more units and may generate higher bills for utilities, waste disposal, and other services.
- Target a niche tenant market: Young single professionals, couples who want to downsize, or older individuals who seek a dwelling for occasional use may be willing to sacrifice square footage to live in a vibrant urban area. But the allure of a micro apartment may not extend beyond these markets.
- Revolving door of tenants: Despite their high occupancy rates, micro units are still subject to turnover. Because the units are fairly utilitarian, young professionals may treat them as starter homes. When they save up enough money, they may move on to a bigger, more amenity-rich apartment, and you'll need to yet again find and adjust to a new tenant.
- Furnishing them can be costly: The Urban Land Institute found that 55% of renters are interested in micro apartments with multifunctional furniture. Of course, to meet that demand, you as the landlord will need to furnish the apartment at least partially, which can be costly.
- Micro apartments are similar to studio apartments but on a smaller scale, usually no more than 350 square feet.
- They're typically based in cities and are geared toward young professionals.
- They offer at minimum a kitchen and bathroom, though most units pack in a living area and sleeping space and some offer common spaces and luxury amenities.
- Construction and operating costs are higher relative to standard apartments, which may impact the purchase price, but rental prices for tenants tend to be cheaper.