Supersize Apartments Are Back in Demand
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Supersize Apartments Are Back in Demand

Developers across U.S. try to meet millennials’ needs and accommodate the shift to remote work.

By Sami Sparber
Wed, Jun 30, 2021 11:25amGrey Clock 3 min

Apartment sizes are getting bigger across the U.S., just as more people are looking for additional space while spending more time working from home.

In 36% of U.S. cities, apartments under construction are larger on average than those built over the previous five years, according to a report from RENTCafé, a nationwide apartment-search website. Units in 33 of the 92 cities studied rose nearly 50 square feet on average, the report said.

The demand for larger units follows several years when apartments were shrinking in size, in part because smaller units are more profitable for property owners. In dense urban areas and around universities, many developers continue to build smaller apartments to offer more of them and meet high rental demand, according to Yardi Matrix, a real-estate market-intelligence firm that provided data for the RENTCafé report.

But the percentage of bigger new apartments is the highest it has been in five years, reflecting recent tenant preferences, said Doug Ressler, Yardi Matrix’s manager of business intelligence. Older millennials have reached the typical homebuying age, but many are unable to find a home they can afford. Instead, they are looking to rent larger apartments for themselves and their families, Mr. Ressler said.

While the urge to upsize apartments predated the Covid-19 pandemic, some real-estate executives suggest it will continue as the health crisis puts a new premium on space. Developers say they are building units that offer more space to work and relax in, as a way to accommodate residents who are moving out of high-density cities and into suburban areas across the country.

“We’re doing little things like adding built-in offices and areas where people can work from home in nooks and crannies,” said Michael Van Der Poel, founding partner of Asia Capital Real Estate, a private-equity firm that specializes in multifamily-housing development and investment.

J. David Heller, chief executive of the NRP Group, a developer of multifamily buildings, said his firm is offering a den that can be used as a home office in both its one- and two-bedroom apartment plans.

NRP, which develops communities in St. Petersburg, Fla., and San Antonio, among other cities, has expanded a number of its floor plans by 30 to 50 square feet, Mr. Heller said.

Some multifamily developers in northern New Jersey are taking a similar approach, replacing one-bedroom apartments with one-bedrooms plus a den, said Brian Gretkowski, president of Sparrow Asset Management.

The extra space that U.S. developers are offering is incremental, but “in a 600-square-foot apartment, 50 square feet adds up,” said Justin Brown, president and CEO of Skender, a Chicago-based construction firm.

RENTCafé’s report, which it released in early June, analyzed apartment data in the 92 U.S. cities where floor-plan-size information was available as of last month for projects under construction.

One-, two- and three-bedroom apartments are increasing in size in almost half of the cities RENTCafé analyzed. Those units are adding to their average size 28 square feet, 39 square feet and 105 square feet, respectively, according to the report.

Everett, Wash., is leading the trend. Developers there are building apartments to be 267 square feet larger than those built in the past five years, the report said. Other leaders include Kirkland, Wash., with 211 additional square feet, followed by Scottsdale, Ariz., with 208 more square feet, on average.

The report didn’t address whether the shift to add space will affect rent prices. Not all developers are convinced the trend will stick, citing affordability challenges.

“We’re unsure if long term, average unit sizes will increase because that would ultimately mean higher rents,” said Omar Rihani, head of multifamily development at Project Management Advisors.

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: June 29, 2021

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Mortgage holders should brace themselves for more pain as the Reserve Bank of Australia board prepares to meet tomorrow for the first time this year.

Most economists and the major banks are predicting a rise of 25 basis points will be announced, although the Commonwealth Bank suggests that the RBA may take the unusual step of a 40 basis point rise to bring the interest rate up to a more conventional 3.5 percent. This would allow the RBA to step back from further rate rises for the next few months as it assesses the impact of tightening monetary policy on the economy.

The decision by the RBA board to make consecutive rate rises since April last year is an attempt to wrestle inflation down to a more manageable 3 or 4 percent. The Australian Bureau of Statistics reports that the inflation rate rose to 7.8 percent over the December quarter, the highest it has been since 1990, reflected in higher prices for food, fuel and construction.

Higher interest rates have coincided with falling home values, which Ray White chief economist Nerida Conisbee says are down 6.1 percent in capital cities since peaking in March 2022. The pain has been greatest in Sydney, where prices have dropped 10.8 percent since February last year. Melbourne and Canberra recorded similar, albeit smaller falls, while capitals like Adelaide, which saw property prices fall 1.8 percent, are less affected.

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“Many of the drivers of high prices are starting to be resolved. Shipping costs are now down almost 90 per cent from their October 2021 peak (as measured by the Baltic Dry Index), while crude oil prices have almost halved from March 2022. China is back open and international migration has started up again. 

“Even construction costs look like they are close to plateau. Importantly, US inflation has pulled back from its peak of 9.1 per cent in June to 6.5 per cent in December, with many of the drivers of inflation in this country similar to Australia.”

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