The coronavirus pandemic sent millions of American office workers home to do their jobs in a setting more suited for sleeping, eating, and spending time with family or friends.
For many who do their living in apartments, that presented a particular space crunch. And as expectations rise for the work-from-home (WFH) trend to become a permanent thing for many, some builders of new apartments are responding in kind, adding more space that they fully expect to be able to rent at a correspondingly higher price.
That trend is now showing up in the data. For instance, RentCafé analysts have determined that more than a third of U.S. cities are now seeing larger apartments being built, by an average increase of just under 50 square feet.
That sounds like enough to accommodate a small home office and maybe keep that second bedroom, too, or add a bathroom, depending on the design, doesn’t it?
Larger apartments found in 33 of 92 markets, especially in urban areas
RentCafé, an apartment rental listing service that’s part of Yardi, said in a recent blog that it found larger apartments now under construction in 33 of the 92 markets in which it analyzed floor plans, with an average of 942 square feet compared with 894 square feet built in the past years in those cities.
Interesting, too, is that a lot of this construction appears aimed at keeping the city folks in the cities. Only seven of those 33 cities with expanding floor plans are in suburban areas. The rest are in the urbs, not the ‘burbs.
A good example is Chicago. RentCafé said that apartments under construction now in the Windy City proper have grown by 38 square feet on average to 838 square feet. Meanwhile, a suburb does lead the way in terms of space being added.
That would be Everett, Washington, a community about 25 miles north of Seattle where the average apartment under construction is 1,195 square feet, 267 more than five years ago. Both numbers are the highest among the 92 markets studied. The other two with apartments averaging more than 200 more square feet are another Seattle suburb, Kirkland, and the Phoenix suburb of Scottsdale, Arizona, at 211 and 208 more square feet, respectively.
The Millionacres bottom line
Adding more space appeals to a lot of people for a lot of reasons, including those who are choosing not to buy a house for reasons of mobility, not finances.
"The number of people that earn over $100,000 a year is significantly higher than it was 2 or 3 years ago. Those are renters, but obviously renters by choice because they can go out and buy a house," Daryl Spradley, senior vice president of Charles Wayne Consulting, says in the RentCafé blog.
Those are folks who can afford the higher rent needed to justify and sustain the investment in more space. They represent a market that real estate investors need to be aware of -- if they’re not part of it themselves -- as decisions are made on what to buy, what to build, and where.
That’s because even if you’re not investing in new construction, this trend will impact the appeal of existing rental property, too, of course, in varying degrees depending on the market. These are things to consider whether we’re talking about a direct investment or in the portfolio of a residential real estate investment trust (REIT).