“Workforce” Apartments Gaining Investors’ Interest

High-end apartments have attracted most investment dollars during the almost 10-year bull run that began at the end of the Great Recession, but now more affordable units are getting attention from investors. From the Wall Street Journal:

A venture led by Prudential Financial Inc. is spending nearly $600 million for 4,000 housing units aimed at lower-income workers, the latest sign that investors see bigger gains in lower-rent apartments than in the upscale ones that have led the recovery.

These so-called workforce housing units usually are in older buildings that cater to price-conscious renters, paying about $1,000 a month for a one-bedroom unit. Around 6.3 million units, or about 41% of all the rental apartments in the U.S., fall into the workforce category, according to CoStar Group Inc., which tracks buildings that are five units and greater…

Workforce housing rents are increasing at a faster rate than upscale units because of high demand and the dearth of new supply. Meanwhile, most of the 100,000 units that become obsolete annually fall into the workforce and affordable category, according to a report set to be released by commercial real-estate-services firm CBRE Group Inc. later this week.

Mr. Munk, of PGIM, pointed out that investing in relatively small improvements to workforce housing units —like a new carpet or a washer and dryer—can produce a big payoff in a higher rent. “If we can spend $10,000 to improve a particular unit, that could potentially bring in $200 a month more in rent,” he said.

Brentwood Crossing in High Point Sold for $5.5 Million

The Triad Business Journal is reporting that the Brentwood Crossing apartment community in High Point has been sold to a New York-based company for $5.5 million:

A New York-based real estate development company has purchased a High Point apartment complex for $5.5 million.

Brentwood Residences LP, an entity controlled by Omni New York LLC, bought the 138-unit complex at 306 Brentwood St. from Brentwood Crossing LLC last week.

The property, which has 130,256 square feet of living space in 18 buildings, sits on 10.781 acres and is valued at $2.4 million, according to tax records.

Sometimes 300 SF is All You Need

From a Wall Street Journal article about the rise in popularity of micro apartments, even in markets that aren’t that expensive:

Micro apartments are about 300 square feet or smaller, though some developers and cities define them as large as 500 square feet. They sometimes lack a separate kitchen or bedroom.

Developers believe that single people in their 20s and 30s will accept less space in exchange for lower rent, even in cities where rent levels aren’t especially lofty. Nationwide, rents have soared as the supply of apartments hasn’t kept pace with demand.

“This is not a short-term phenomenon,” said John Infranca, an assistant law professor at Suffolk University in Boston who specializes in land-use law and has studied micro-apartment projects in several cities. “There is going to be demand for this housing going forward. The [trend] of an increasing number of singles in cities is staying steady across the country.”

But in small cities like those found in the Piedmont Triad this concept may not work:

Some real-estate executives aren’t sure that micro apartments would work in smaller or less expensive cities because rents aren’t sufficiently high to induce enough renters to give up space. “In smaller markets, the rent differential is such that, if you have a good job, you can typically afford the rent of a…full-size apartment,” said Jeffrey I. Friedman, chief executive of Associated Estates Realty Corp. AEC +0.32% , which owns 14,000 apartments averaging 975 square feet in 10 Midwestern and East Coast states.

Another potential problem for smaller cities is that they don’t always have the mass transit, night life and cultural facilities to lure younger workers to live downtown. “You can’t just drop these [micro apartments] in communities that don’t have the amenities to serve that kind of lifestyle,” said Kelly Saito, president of Gerding Edlen, the developer of the first of Boston’s new wave of micro apartments.