The Rise of the Micro-Units

It’s a cliche of big city living – people cramming themselves into teeny-tiny apartments barely bigger than a walk-in closet. In reality, that phenomenon seems confined to New York City. One doesn’t find very many “micro-units” in Philadelphia. That is, not until recently.

The micro units are a rarity in Center City.

Alterra Property Group is running something of an experiment to see whether the Philadelphia rental market will support some very small micro-units. So far, it seems like response to these compact living spaces has been positive. Alterra’s newest Philadelphia property, Avenir at 1515 Chestnut, is a 180-unit multifamily building. Of these units, 60 are the petite micro-units. The small units range from 320 square feet up to 420 square feet. The smallest units command rents of $1,050 a month, while a larger unit goes for about $1,350 monthly. So far leases have been signed on 45 of the 60 micro-units.

The tiny units are renting briskly, says Leo Addimando, managing partner at Alterra. The company only just finished working on the units in the past several weeks. About half of Avenir’s 180 units are leased, with between five and ten more being leased every week.

Avenir is a rarity in Center City, where some buildings have studios included as part of their apartment mix but none in a building with full amenities. Addimando says that he believes other developers will start borrowing the idea in future buildings. According to Urban Land Institute, which did a study of this niche area, there is definitely demand for micro-units but “the stock of very small units is still quite limited, and it is difficult to know whether the performance of these smaller units is driven by their relative scarcity or whether significant pent-up demand for micro-units actually exists.”