Micro-housing is hot, as it fits with national trends toward more renters who rent for longer periods of time, and a lower supply of affordable housing across the country. Not surprisingly, major cities lacking in housing—for instance, New York, San Francisco, Los Angeles and Seattle—are rushing to build amenities-rich micro-units to attract the Millennial workforce.
But is upscale micro-housing a safe enough bet for investors—or just a fleeting trend? So far, it appears to be a stable niche within the multifamily sector. A 2014 study by Urban Land Institute’s Multifamily Housing Councils division, evaluating market performance and market acceptance of micro-housing, showed that newly-built micro-housing had higher occupancy rates and achieved higher effective rents for new leases.
While micro-housing has its challenges, says Dean Zander, a senior managing director in Berkadia's West Los Angeles office, it also offers plenty of sound investment opportunities.