Since 2010 average apartment shrank 9.7%
Centrally located, small and more affordable living spaces dominated the past decade, according to new data released by RCLCO Real Estate Advisors
The average apartment unit size shrank by about 9.7 percent during the 2010s — by about 7.6 percent from 2010 to 2014 and 2.2 percent between 2015 to 2019, according to new data from RCLCO Real Estate Advisors, which found that centrally located, small and more affordable living spaces dominated the past decade.
However, RCLCO’s report notes that the trend is by no means uniform across all types, price points, and geographical locations.
“The second portion of the decade gives us a lot to unpack,” the report, authored by Managing Director Erin Talkington, Senior Associate Dana Schoewe and Intern Alden Kramer, states. “Despite the overall decrease, this trend is no longer consistent across metros, market cost levels or unit types.”
Although decline in unit size has been seen on a national level, RCLCO pointed out that the coasts have seen greater declines in recent years compared to other parts of the country. Average unit size in the East and West saw continued 4 and 5 percent decreases for units built in the past five years compared to 2010 to 2014. However, the Midwest and South saw minimal change in unit size during that period.
Not surprisingly, high-cost markets also saw increased downsizing within the past five years while other markets mellowed out. Units built in the last five years in higher and moderate-cost markets were an average of 13 percent and 8 percent smaller than those constructed in the 2000s, respectively. While units built in moderate-cost markets remained consistent in size, high-cost markets, average unit sizes decreased by 5 percent from 2015 to 2019 compared to 2010 to 2014.
RCLCO noted that continued downsizing in high-cost markets likely correlates to the availability in these kinds of markets to downsize units built in the previous decade, especially compared to a more limited supply of units in very high-cost markets with the ability to downsize.
Although low-cost markets saw no reduction in new unit sizes during the first half of the 2010s, average unit size did decline to mimic size seen in moderate-cost markets between 2015 to 2019.
Across the board, the company has seen demand increase for studio apartments, while two-bedrooms have become less in-demand.
“While very-high cost markets have seen the least change in unit mix, there has been a strong push to deliver studios across all market cost levels,” the report states.“Studios as a share of total units have increased across the board, most notably in high-cost markets where studios as a share of units leaped from 6 percent in 2000-2009 to 15 percent in 2015-2019. Contrarily, during this same time frame, two-bedroom units as a share of total units dipped from 45 percent to 34 percent.”
The company noted that three-bedroom units have actually increased in size in recent years across nearly all markets, largely to “cater to move-down renters coming from single-family homes, and perhaps remain competitive with the emerging single-family rental market,” the report notes. Although sizes have increased, the share of these types of units in the market has declined.
Interestingly — bucking the norm in other priced markets — the average floorplan size for studios in very high-cost markets actually increased over the course of the 2010s, indicating that there is a minimum unit size that may appeal broadly to renters.
“This is further supported by the fact that the share of very small units delivered (under 500 square feet) has decreased since the previous decade across all market cost levels,” RCLCO’s report reads.“Despite favorable pricing economics, there is a limited renter pool that will consider very small floorplans, tipping the scales toward a ‘sweet spot’ of small, yet livable floorplan sizes.”
Studio and one-bedroom floorplans between 700 to 800 square feet have increased significantly at the expense of 800- to 900-square-foot floorplans. RCLCO noticed the trend particularly in high-cost markets where 66 percent of studio and one-bedroom apartments built from 2015 to 2019 were 700 to 800 square feet, compared to just 28 percent that were built from 2000 to 2009. On the other hand, only 6 percent of these floorplans constructed from 2015 to 2019 were 800 to 900 square feet in size, compared to 53 percent from 2000 to 2009.
As a result of the pandemic, RCLCO does anticipate some unit sizes may increase in the short-term to accommodate new work-from-home realities and an exodus of renters from densely populated cities. However, the company doesn’t expect the trend to last.
“In the long-term, rising building costs and the pressure to deliver attainably-priced units in major metros will continue to drive down sizes in high- and moderate-cost markets over the next decade,” the report states.