Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.
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50 • September 2015 • Western Real Estate Business www.REBusinessOnline.com M illennials are fueling yet an- other commercial real es- tate trend: the microsuite. Also referred to as micro-units or a"pod"ments, these tiny dwellings were designed with the trendy young professional set in mind, who seem to want it all. Only problem is, this post- college, pre-six-fgure-salary group can't always aford it all. "These tenants need a place to sleep, eat and use the bath- room," says Mike Smith, a principal at Lee & Associates- LA North/Ventura. "They don't feel like paying more of their hard-earned paycheck for liv- ing space they don't need. They are usually just starting out, so they don't have the space re- quirements that those who are run- ning a household would have. They will, however, pay a premium for their small space to have high-end fn- ishes and resort-style amenities or,at the very least, a fancy historic sign on top of their building." Downtowns throughout the West- ern U.S. have been brimming with fancy historic sign-showing buildings for decades. Now that they've attract- ed an entire generation of people – are at least their locations have – develop- ers are taking notice as well. While there is a solid subset of renters who can aford to lease a 700-square- foot studio or a 900-square-foot one bedroom in the coolest downtowns, the demand for living space in popu- lar urban cores has caused developers to think outside the bigger box. These smaller boxes, typically composed of less than 400 square feet, have many advantages for both parties. First, it gives Millennials (and other population subsets who live alone and are unencumbered by families) what they desire: an afordable, 24-hour lifestyle in a pulsating part of the city. "Millennials are the prime renter demographic, and they are increas- ingly attracted to urban living and the emerging live/walk/work/play lifestyle," says Dean Zander, senior managing director of institutional in- vestment sales for Berkadia in Los An- geles. "They have expressed a strong desire to live solo, and to stay mobile and independent, as well as liquid and fexible." Microsuites also provide a way for developers and landlords to increase the amount they're netting each month in rent since they're able to get more buck for less bang. "For developers and landlords, microsuites are ex- tremely attractive because they can command a higher price per square foot," says Janet D. Neman, senior managing director at Charles Dunn Company in Los Angeles. "A typical studio apartment is about 500 square feet, while a micro- suite is typically sized between 200 and 300 square feet. With rents for mi- crosuites just slightly less than rents for studios, more tenants are able to aford rent while the landlords col- lect more money per square foot than they could otherwise – and usually at a much higher density than with an alternative unit mix." Tech-Savvy Cities Lead the Way As with most Millennial-inspired designs, the tech-centric cities were the frst to adopt this trend. "Micro-units today are confned mostly to technol- ogy- or media- focused coastal markets with high housing costs, such as Los Angeles, San Francisco, Se- attle, New York and Washington, D.C.," Zander says. "Among cities in Southern Califor- nia, delivery of these units has been confned primarily to the beach cit- ies, Hollywood and Downtown LA, as well as new urban cores, including North Hollywood and Playa Vista." These cities are leading the way, Zander believes, because their pre- mium land costs and rising construc- tion rates are forcing developers to maximize a project's density while still delivering an attractive product. Neman has also noticed this trend taking shape throughout Los Angeles' Silicon Beach and Downtown areas, where living close to one's place of employment can result in substantial savings on time, gas and sanity. "The trend is spurring development all the way west into Santa Monica and north into the entertainment hub of the Valley," she notes. "The young- er workforce especially encourages this trend. They want to live near their workplace to cut down on gas prices and transit time. They also want to live in areas that have active, pedestri- an-friendly neighborhoods. Microsu- ites allow professionals of all ranks to be part of an urban lifestyle, whether that lifestyle is in Downtown Los An- geles, Koreatown, Santa Monica or Studio City." The Avalon in Koreatown is one ex- ample of a microsuite property that sells itself based on location. Of the 47 units, 20 are considered microsuites, ranging in size from 350 square feet to 360 square feet. The Avalon's den- sity means more residents are able to live near a bustling area of Los Ange- les. The property is situated on Cata- lina Street, just a few streets north of Wilshire Boulevard, where residents have a variety of transportation, en- tertainment, dining and other services available to them. Adding Amenities The 92-unit Alder Flats in the First Hill neighborhood of Downtown Se- attle is another successful example of microsuites at work. The units range from about 205 square feet to 455 square feet if there is an added loft, with rents ranging between $850 and $1,405 per month, and Wif and utili- ties included. This may seem steep for an apartment that's less than half the size of a standard studio, but the building ofers a variety of in-unit and community amenities designed to make residents feel like they're get- ting more. The loft is one creative way to add space to otherwise cramped quarters, while foor-to-ceiling windows are an- other. "Micro units need to be carefully designed," says David Senden, a prin- cipal at KTGY Architecture + Plan- ning in Irvine, Calif. "It is a little like a yacht, or RV design: no wasted space, a reason for everything, and ways to make the space do double and triple duty." With this in mind, high ceilings — MULTIFAMILY GOES MICRO Microsuites are popping up in urban cores throughout the West, proving that bigger is not always better. By Nellie Day Above is a conceptual micro-unit design from KTGY Architecture + Planning. As Senden notes, most spaces in micro-units are maximized, oftentimes performing double or triple duty. The Avalon in Los Angeles' Koreatown includes 20 units that are considered microsuites, as they range in size from 350 square feet to 360 square feet. Neman Zander Smith