Center City building offers micro-units for rent

Alterra Property Group is testing whether the Philadelphia multifamily market would lease small apartments called micro-units and, so far, it looks as if there is demand for these compact abodes.

Alterra’s newest Philadelphia property, Avenir at 1515 Chestnut, has 180 apartments – and 60 are micro-units.

The micro-units range in size from 320 and 350 square feet up to 420 square feet. Rents on the smallest units are $1,050 a month while a larger unit commands $1,350 in rent a month. Leases are signed on 45 of the micro-units.

“Few if any of the smaller units are still available,” said Leo Addimando, managing partner at Alterra, a Philadelphia real estate company that partnered with the Scully Co. to convert the former office building into residential.

Work on the property just finished in recent weeks. So far, half of the overall 180 apartments are leased up and are they are renting out about five to 10 more a week, Addimando said.

While some, but not many apartment developers have included studios as part of their offerings, the small scale that Alterra is offering in a building that is considered “fully amenitized” hasn’t been done with any frequency in Center City.

AMC Delancey and Allan Domb have dipped into this arena but it hasn’t taken off as it has in other cities such as New York and Washington D.C. but Addimando predicts that will change.

“The competition will start doing more of it now,” he said.

The concept allows apartment developers to get more bang for their buck by increasing the number of units a building has available to rent.

Micro-units are typically 350 square feet or less and have fully-equipped kitchens and bathrooms. Instead of having a lot of extra living space that a conventional apartment might have, micro-units rely on amenities in a building, such as lounge areas, game rooms and other meeting areas, as well as its urban environment or surroundings to provide places to escape, entertain or socialize.

It will be interesting to see if others do follow and what the market’s response will be.

Urban Land Institute did a study of this niche area and found that there is 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,” the ULI report said.

Source: Philadelphia Business Journal