Would you plunk down $300,000 for a studio that measures 350 square feet — about the size of two surface parking lot spaces — to live in the heart of Miami Beach? If the idea seems preposterous, micro-units are not for you.
But a growing number of real estate developers are banking on the micro-unit concept — tiny, furnished apartments in amenity-laden buildings, located in hot neighborhoods — to attract buyers and renters who want to live in Miami-Dade's most popular neighborhoods but can't afford to pay market rates.
They are also exploiting the malleability of the tiny-living concept — which has been used in cities such as Seattle and New York to alleviate the affordable housing crunch — and customizing it to suit their individual projects. They include:
▪ The 70-unit 6080 Boutique Hotel at 6080 Collins Ave., due for completion in July, is a residential/hotel mixed-use project with turnkey residences ranging in size from 350-square-foot studios to 900-square-foot two-bedrooms (about a fifth of a professional basketball court). Prices range from $300,000 to $750,000.
▪ Developer Property Markets Group has launched a co-living operation, dubbed PMGx, that applies the micro-unit living concept to traditional apartments. The company is adopting a rent-by-bedroom (RBB) tactic at the 464 units in the X Miami tower (formerly known as Vice) at 300 Biscayne Blvd., just down the street from the Miami-Dade College Wolfson Campus. The RBB strategy is simple: You rent a single bedroom (with its own private bathroom) inside a fully-furnished unit and share living space with roommates that have been screened and vetted during the application process. Rents will range from $1,300 to $1,500. The building is due this summer.
▪ X Las Olas, a two-tower project at 300 SW First Ave. in Fort Lauderdale, will add another 1,100 RBB units to the PMGx stockpile. The company plans to break ground on a third South Florida project — the 700-unit tower X Biscayne, at 400 Biscayne Blvd. — in late 2018.
▪ Wynwood 25, a partnership between The Related Group and East End Capital located at 227 NW 24th St., will deliver 289 rental apartments to the trendy neighborhood, where housing remains scarce. They will range in size from 400 to 1,200 square feet and go for $1,400 to $3,200 per month. The building was topped off last week and construction will be completed in early 2019.
▪ Related has two other micro projects in the area: Wynwood 26, a joint venture with Block Capital Group at 51 NW 26th St., will add 172 apartments between 400 and 900 square feet. Rents will range from $1,400 to $2,800. Singer Lenny Kravitz will serve as creative director of the building's public areas and amenity spaces. The project broke ground on Monday.
▪ VHouse Wynwood will duplicate the model of Related's boutique-residential tower in Sao Paulo. The building, to be located at NW First Ave and 28th St., will partner Related with Metro 1 and deliver 192 condos between 416 and 900 square feet, with prices starting at $200,000. The project is in the development phase.
▪ YOTELPAD Miami, a $150 million joint venture between Aria Development Group and the Kuwait-based AQARAT real estate company, is another micro-unit residential/hotel project, this one in downtown Miami at 227 NE Second St. The building will be a 31-story toweroffering 250 Yotel-branded hotel rooms (or “cabins,” as the company calls them) and 215 condos ranging in size from 425 to 700 square feet. Prices will start in the $300,000 range and construction is scheduled to begin in late 2018.
▪ Moishe Mana, the developer who owns large chunks of land in Wynwood and along Flagler Street in downtown Miami, is proceeding with his plan to build a 49-story tower at 200 North Miami Ave. that would include 328 micro-units between 400-500 square feet in size.
"It is our initiative to endorse the development of micro-units in the city of Miami," said Mana, who has previously expressed a desire to turn Miami into the Silicon Valley of South America. "It is crucial to provide housing for millennials to ensure the growth of Miami as a global hub for industries and technology. Until today, the need to keep the millennials here was overlooked. Our project is not based on constructing one single condo building, because Miami has enough of those. Our concept is about building connectivity within a neighborhood."
Millennial appeal
All of these developments take advantage of building and zoning codes that allow for higher density and lower parking requirements, which maximize land use. Although some fixed construction costs stay the same — you still need a bathroom and a kitchen, for example — the overall building costs are roughly 20 percent lower.
"Developers and lenders see Miami is growing up," said Luis Flores, a partner at Saul Ewing Arnstein & Lehr LLP, who works with developers around the U.S. "The micro-unit model permits rentals and complies with zoning. For a New York lender, that's a no-brainer. The wrinkle Miami adds is that the units will also have beautiful design and finishes. If I'm a 25-year-old first-year lawyer or banker who works in downtown or Brickell, I'm not thinking about square footage. I want a great location and a shiny new apartment with great amenities."
All of the micro-unit buildings coming online in Miami-Dade are rich in amenities — common work and play spaces, gyms, pools and outdoor areas. Some of them, such as the 6080 Boutique Hotel and the X Miami tower, come fully furnished with beds, sofas, flat-screen TVs — even flatware and bed linens.
In other words, they are move-in ready — you just need to bring your clothes — which is what their residents want. According to a study by the Urban Land Institute Multifamily Housing Councils, the majority of micro-unit dwellers are young (under 30) professionals and first-time renters who haven't accumulated many possessions and don't need as much living space — or, presumably, closets.
According to the study, micro-unit users consider the small apartments as "launch pads" for new careers and lives — most move on to a larger place within two years — and they are social animals who prefer to meet their friends at a restaurant or bar instead of hanging out at home.
Most important is location. Nearly all the respondents in the study (97 percent) cited location as the most important priority in deciding to rent a micro-unit. The study also foundthat a minority of micro-unit users are older and use the small spaces as a part-time residence near relatives, in-town pied-à-terre or party pad.
Philip Freedman, managing director of Compass Development Division, said the small sizes have not impeded sales at 6080 Collins Boutique Hotel, where 70 percent of the units have been pre-sold to a mix of South Florida residents and out-of-towners from the U.S. and nine foreign countries.
The $45 million project is a joint venture between Buenos Aires-based Domus Group, Urbis Real Estate and the management company Eskape Collection, which will run the building's hotel operations when it opens in July. Eskape currently operates another residential hotel property on Miami Beach, the Abae Hotel at 1215 West Ave.
"The local buyers have been people who live in Coral Gables or Pinecrest or Hialeah who want to have a new, easy weekend place on Miami Beach," Freedman said. "The other buyers are people who want to come here for the weekend or on vacation without dealing with a condo association or big maintenance fees. When people come to look at this type of unit, they've already managed their own expectations. They know they're not going to be large. It's a totally different mindset."
Using the traditional real estate benchmark of price per square foot, the micro-units at the 6080 project are nearly twice as expensive as a regular Miami Beach condo, costing $857 per square foot for a studio. The current median price per square foot in Miami Beach is $505, according to Realtor.com.
But the overall price of the units is competitive with the median Miami Beach condo sales price of $430,000 and a steal at the luxury condo median sales price of $2.8 million, according to the 2018 first quarter Elliman Report released Thursday. The 6080 Collins building sits on a prime location, across the street from the ocean, and features all the perks of the luxe life other than space — 24-hour valet parking, concierge, gym, rooftop pool, even maid service. The monthly maintenance fee is $1.27 per square foot, or $445 per month for the smallest units.
Location matters
Analysts say that micro-units don't make financial sense in suburban neighborhoods such as Kendall or Doral, where renters and buyers can still find good living spaces at an attainable price. Nor are they a good fit for older neighborhoods such as Little Havana or South Beach, where a lot of the older existing housing is already pint-sized.
But for the booming urban cores of Miami, where much of the development over the last five years was geared at the luxury ($1 million and over) market, micro-units and downsized living are a good fit — and another indication of the city's ongoing maturation from vacation mecca to a true urban center.
According to the most recent Demographia International study, which compared median household incomes to median home prices in the third quarter of 2017, Miami is the sixth least-affordable major market in the U.S. for "new starter housing of an acceptable quality" located near industrial and commercial developments, requiring buyers to pay 6.5 times their annual income. That's almost double the national median of 3.8x and higher than notoriously expensive markets such as Seattle (5.9x), New York (5.7x) and Boston (5.5x).
That's where tiny living and micro-units — which are generally priced 20 percent lower than market rates — come in.
"Miami residents love their big spaces, but there are all sorts of new things that are at play with micro-units," said Jonathan Miller, president/CEO of the New York-based real estate consulting firm Miller Samuel Inc. "The old rules don’t apply, because we're in an exploratory period. Miami's trend toward new urbanism, where it’s all about walkability and niche neighborhoods, focuses on things that prior generations didn't focus on. Micro-units are aimed at people who are not being served by what’s been built."
At the same time, Miller said, the real estate industry is awash with capital at lower interest rates, and when there's money available, developers don't stop building.
"When there’s a new market to explore, you see this sort of boom," Miller said. "A parcel of land where a developer can get a much higher price per square foot becomes a draw. In valuation-speak, it's 'highest and best use.'"
Some developers also see micro-units as an investment in the future. Carlos Rosso, president of condo development at The Related Group, points out the company is building office towers adjacent to two of its residential developments in Wynwood: A 40,000-square-foot office building next to Wynwood 25 and another 40,000-square-foot office space near VHouse. The developer is also adding nearly 70,000 square feet of retail spaces to the neighborhood that will be curated as if they were amenities — coffeehouses, gyms, restaurants and barber shops.
"We have a vision for Wynwood," Rosso said. "Ten years from now, we want to be remembered as the developers who redefined living in Wynwood. We are doing it one building at a time, like you film a movie one frame at a time, and won't stop until our vision is achieved."
The right timing
The arrival of micro-units comes at the right time for Miami-Dade County, when many of the younger professionals living in Brickell and downtown are already used to smaller, shared living spaces.
"We are like any of the highly desirable international cities like San Francisco, New York and Hong Kong in the sense that we have increasing demand and very constricted supply," said Gerard Yetming, executive vice president of Colliers International South Florida . "We are literally an island between the ocean and the Everglades, and there are pockets in there that have desirable neighborhoods with a 24-hour lifestyle. People are already creating their own micro-units there by living with roommates."
Ryan Shear, a principal at the development firm PMG, said the company intends to double the number of units in its RBB co-living PMGx operation to a total of 10,000 within five years.
X Miami will be the third building in the division: The first two, X University Villageand X Logan Square, have already proven the concept. Like most micro-units, the apartments come fully furnished. You sign a lease for a bedroom — between $1,300-$1,500 a month, depending on the floor — and if you end up not getting along with your roommates, you can transfer to another bedroom in the building.
"We have taken an old process — finding a roommate — and modernized it," Shear said. "The lease application for X Miami went online five days ago and we already have a waiting list. And it's drawing all kinds of people. The majority of our market is 25-year-olds, but we're also seeing a lot of waitresses, service-sector people and folks who work downtown. They say they're dying to live in a nice place downtown, but their budget is $1,400."
Although Miami-Dade's micro-unit boom is limited on hot neighborhoods with higher land values for now, the concept may spread to other areas. In December, the City of Miami approved an amendment to the Miami 21 building code that reduced the mandatory minimum size of micro-units in Transit Oriented Development (TOD) areas from 400 to 275 square feet. The amendment, which only applies to projects close to mass transit such as Metrorail, Metromover and the upcoming Brightline train service, also reduces or eliminates the requirement for parking spaces — a construction cost that forces developers to raise their prices.
On March 6, the Miami-Dade County Commission launched a 120-day study of micro-housing to "encourage the efficient use of land by accommodating greater population density in a smaller area," another indication of local government exploring possible solutions to the area's affordable housing crisis.
But some developers argue micro-units are not a viable long-term solution, because people can't live in such tiny quarters for long. Jay S. Jacobson, president and CEO of EDEN Multifamily, which specializes in boutique apartment buildings located in underserved neighborhoods, said he helped develop a micro-unit tower in Seattle in 2010, directly across the street from Amazon headquarters.
But the project was a bust, with a turnover rate of 137 percent. The average turnover rate for a regular apartment building is between 55 and 57 percent per year.
"The average size of the units was 330 square feet, but once people realized they had no place to put their clothes or shoes or handbags, they were moving in and moving out on the same day," Jacobson said. "Conceptually, micro-units are a great idea. But you have to put the human element into it. Dropping unit sizes to 400 or 500 square feet is workable. But when you’re building 250 square foot units, all you’re building is hotel rooms. You can't solve affordability by squeezing people into those. It's not a lifestyle conducive to any human being in this country."
For now, though, the real estate industry is bullish on the micro-units currently being developed in Miami, because they are filling a gap created by the post-recession emphasis on luxury development in Miami-Dade's booming urban cores.
"The housing market is changing because of cost and supply," said Steven Wernick, a land-use partner at Akerman LLP. "There’s going to be new types of housing product, and there are a number of trends and public policy objectives that are part of the conversation with micro-units. Some people immediately think all apartments are going to become micro-units, but that’s not the case. We are seeing a few projects come out of the ground that are incorporating them. We’re going to keep exploring the concept project by project."
Source: This article was written by Rene Rodriguez, and published in the Miami Herald.
***
To access the best condo opportunities in South Florida, contact me directly:
NADJALISSE RODRIGUEZ, Realtor Assocate, EWM Realty International
NRodriguez@LiveinSFL.com, LiveinSFL.com, Follow: @LiveinSFL
***
コメント