Spaced out

Cool, tech savvy and fluent in the language of social media, the millennial generation has much to envy. But when it comes to buying a home of one’s own, especially in global cities, that appears to be where their luck runs out, with affordability becoming a problem for even the most skilled young professionals. 

In this context, the emerging “micro-apartment” segment offers a real alternative. Small units are being built in cities across the globe that are distinctly different from the cramped flats found in badly converted houses around London, or Hong Kong’s notorious metal-cage homes. Specialist developers are creating centrally located, compact, well-designed homes that appeal to young people and, crucially, are affordable. 

“If we don’t develop smaller units where space is critical, the population will be driven out into the suburbs or to other cheaper cities,” cautions Ben Derbyshire, Chairman of HTA Design. “The economy of industrialised or post-industrialised countries now rests on the success of knowledge-based industries in our cities and this requires people to live and work in close proximity so they can share their knowledge and skills.”

As people flock to developed cities and the population continues to grow, land will inevitably become even more in short supply. To alleviate this crisis, the housing produced will therefore have to be efficiently designed and affordable, and this is where the emerging micro-home comes into play.

George Clarke HonRICS, architect, builder and broadcaster whose popular UK series Amazing Spaces was inspired by small-scale buildings, sees a huge amount of pressure on cities for space.

“I’ve seen many small spaces that have been designed by incredibly talented and inventive people,” says Clarke, who has travelled the world visiting micro-units, such as an imaginatively designed, multi-level flat in Paris that employed raised beds and dining areas. He was also impressed by a rooftop concrete box in Barcelona, the size of a hotel room, that could be reconfigured for different uses. These examples have taught him that building smaller spaces in a creative way is an approach that should be adopted. 

In larger, high-cost US cities, such as New York, Boston, San Francisco, Seattle and Washington DC, there is a growing interest in micro-units. The American Urban Land Institute (ULI) published a report, The Macro View on Micro Units, in 2014 that suggested micro-units appeal to city dwellers in high-cost markets who are willing to trade space for improved affordability and closer proximity to the city centre. 

Although there is no standard definition of a micro-unit, the report defines it as a small studio apartment, typically less than 350ft2 (32m2), with a kitchen and bathroom. However, the size can range from less than 250 ft2 to 500ft2 (23-46m2), depending on the city building code requirements. More than 400 rental apartment communities, comprising more than 90,000 units, built in 2012-13 in 35 US metropolitan areas were analysed as part of the research. 

Stockton Williams, Executive Director of the Terwilliger Center for Housing at ULI, says the report highlighted a range of factors in the US underpinning the demand for smaller units. “At a macro level, American families and household sizes are getting smaller and particularly in our larger cities, more households consist of one person,” says Williams. “More Americans are living alone and the emerging micro-units are a reflection, in part, of those demographic trends”.

The other contributing factor, Williams acknowledges, is that many American cities have severe affordability problems, creating pressure to add to the supply of lower-cost housing. “This doesn’t mean, however, that micro-units are restricted to those on lower incomes,” he adds. “Micro-units also represent a new product at the high end to the millennials [those born after 1980] that have a significant disposable income and are attracted to urban living.”

If architects’ vision for its Carmel Place project is realised, tenants on different income levels and of all ages will be living there. The scheme, which was completed in June 2016, is New York’s first micro-apartment complex and comprises 55 prefabricated modules. Each ranges in size from 258-355ft2 (24-33m2) and rents are $2,000-$3,000 a month. 

Carmel Place will also provide community spaces, including a gym, studies and small gardens for tenants to share. This is a very similar concept to one embraced by the Collective, a UK-based developer of a new form of private-rented, shared living accommodation aimed at young professionals. The Collective’s Old Oak development, in west London, provides gyms, bars, a games room, cinema and outdoor space for its 500-plus tenants, who live in studios of 160-215ft2 (15-20m2).

The UK capital, where prices are forecast to rise 11% in the next five years and the average cost per square metre of a home is as high as £11,300, is also seeing a vogue for micro-housing. 

“There’s more micro design happening in London now than there’s ever been,” says Clarke. “I think people have become fairly bored of very, very expensive standard apartments and are rethinking how they want to live.”

Clarke argues that the trend for smaller spaces in cities has started to influence how the British approach the appraisal of a flat. As is the case with continental Europeans, they are increasingly describing how many square metres a flat has, rather than the number of bedrooms. “If building costs are based on the amount of square metres, then that has to have an impact on the sales cost,” he adds, “so the smaller we make them, hopefully the more affordable they will be.” 

Figures  from the UK Department for Communities and Local Government show less than 20,000 homes were built in London in the 2013-14 financial year, while the population grew by 52,000 households. The average price paid by a first-time buyer in London was 9.4 times the average wage in 2015 – the highest level since records began in 1983 – suggests building society Nationwide.

Pint-sized pied-a-terres

Given these startling statistics, it is no surprise that Pocket, a developer of compact central London apartments, has a mailing list of  more than 18,000 interested buyers. Pocket builds smaller-than-average units in central locations with good transport links. The flats are sold at 20% below the prevailing market value to key workers who meet the affordability criteria, and the discount is passed on to subsequent purchasers. 

Russ Edwards, Pocket’s Design Director, emphasises that they are not building micro-homes. “Micro tends to refer to units that are below the appropriate space standards and often rely on gimmickry to work as a functioning home,” he argues.

“Our homes are compact and comply with London’s space standards but, importantly, they rely on good design strategies to provide a fantastic home.”

The main Pocket product is a 409ft2 (38m2), single-bedroom unit featuring full-length windows, generous floor-to-ceiling heights and sensibly shaped rooms. Their efficient design means that no space is wasted. In summer 2015, Pocket had completed seven schemes around London and sold about 200 homes. In 2016, it launched seven schemes across five boroughs.

“In London, only 1.7% of the entire housing stock is of intermediate tenure, where we feel the greatest demand is,” says Edwards. “There’s a huge squeeze in the middle, who are poorly catered for and struggling to achieve home ownership. Our business is catering for that intermediate niche, and is targeted at first-time buyers, typically in their late 20s to late 30s.”

Alix Green MRICS, Residential Director in JLL’s affordable housing team, is working with Pocket and providing independent valuation advice to its funding partners, the Greater London Authority and Lloyds Bank. She can see why the Pocket model appeals to prospective, first-time buyers because the product is simple and affordable: “Pocket puts location at the top of the list. It’s very much a city product and, clearly, market values are driven by location and proximity to central London, to services and transport hubs. It’s fair to say that unit size comes second to location with the Pocket product.”

Green is keen to point out that the Pocket units don’t feel cramped or too small. “There are some design features that have been very carefully thought through, which gives the feeling and illusion of space and this can make for a very efficient unit,” she says.

Do Pocket flats live up to the hype? Debra Stein thinks so. The project manager, who is in her late 30s, moved into Pocket’s W9 development in west London in 2012. She works for a financial services firm, and paid £200,000 for her one-bedroom unit. Stein considers herself exceptionally lucky to have noticed the email offering full ownership of a Pocket property.   

“There are only 32 flats in our development and they went extremely early. If I hadn’t read that email, I don’t know what I would be doing today, probably still renting,” she says. “I was able to buy something, which meant I didn’t have to sacrifice price for distance. I would have greatly missed living in central London. Without solutions like this, no one’s going to get anything. It’s quite frightening.” 

Building micro-units may be a relatively new phenomenon in London, but in Hong Kong, often considered the birthplace of micro-living, it is a way of life. In a 426 square-mile territory where around 7.2 million people jostle for space, Simon Smith MRICS, Head of Research and Consultancy at Savills Hong Kong, has explored the trend for building “shoebox apartments” in Asia. 

“The demand for these apartments has risen over the past few years in Hong Kong as an increasing number of the younger generation and single-person households have shown an interest in the sector,” says Smith. “Traditionally, shoebox apartments are single-block apartments located in core locations such as Central, Wan Chai, Causeway Bay and Island East, and attract mainly executives, lawyers, bankers and accountants. In non-core areas, the demand is mainly from first-time home buyers, young couples and single-end users.”

Smith says that the housing situation in Hong Kong is more buoyant than Tokyo and Singapore. Developers in Hong Kong have completed some high-quality apartments of between 250-350ft2 (23-32m2) in established residential clusters. For example, the area around Kowloon station features developments such as the Arch, the Cullinan, Harbourside, Sorrento and the Waterfront.

“More than half of the apartments in Hong Kong do not have a mortgage, and 52% of households own their home, of which 60% do not have a mortgage or a loan,” says Smith. “Mortgage-tightening measures, which favour small lump sums for properties, have meant that mortgage borrowers and lenders have changed their preference for shoebox units.”

Savills has noted that demand in micro-units has developed in two ways. They are now included in large-scale developments, not just in single-block schemes, and they are now being built in many emerging new towns, such as Tseung Kwan O and Kai Tak, and not just in key business districts.

But is the rise of the micro-unit merely a symptom of urbanisation or actually a long-term cure? Will the novelty of living in a more compact space with fewer personal belongings lose its allure? 

“As long as major US cities remain appealing to single households and, as long as these places remain relatively high cost, there will be interest in innovative ways to expand supply,” says Williams. “Whether [micro-units] become a mainstream product mostly depends on the health of US urban real estate markets and whether any significant regulatory progress can happen at a local level. There are some fundamental barriers that have to be worked through before the micro-unit becomes a common housing type. For example, locally imposed minimum sizes and limitations on building density, which are common in US cities, can create obstacles to multi-family development in general and micro-units in particular.”

In the UK, experts argue the market needs a lot more choice in terms of unit sizes, and the space standards are key to that process. Edwards says: “We’ve lost in the UK the ability to move through the property market, from bedsits, to one-beds, trade up to two-beds and then to a house in the suburbs. We are providing extra rungs in the ladder to fix that process and our view is that that’s true with a lot of Western cities.”