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Builders Bet Tiny Apartments Will Lure Renters

Since Hannah Toth set out a few months ago to move out of her parents’ home in suburban Pittsburgh, she has seen plenty of airy apartments of up to 900 square feet.

What caught her eye is a 360-square-foot studio roughly the size of her childhood bedroom for just over $1,500 a month.

When Ms. Toth, 26 years old, tells family and friends about her decision, they ask, “You’re looking to live somewhere that’s how big exactly?”

Ms. Toth said she liked that the studio comes fully furnished, and that its smaller energy footprint is more environmentally sustainable.

A Pittsburgh developer is betting that more 20-somethings will pay more than $1,500 a month for the tiny studios in its new building, called Ollie at Baumhaus, even though space is so tight the beds double as couches.

It is a big risk in a city where the average apartment rents for a modest $979 a month, compared with nearly $3,400 in the New York metropolitan area and more than $2,800 in San Francisco, according to data provider Reis Inc.

A trend that started in pricey coastal cities as a response to rising rents is spreading to smaller cities that often have an abundance of relatively inexpensive housing options. In Milwaukee, Cleveland, Detroit, and Kansas City, Mo., developers are betting on demand from young people to live in tiny quarters even when cost isn’t the primary consideration.

Micro apartments generally come fully furnished with amenities such as wireless internet and in some cases maid service, at a price similar to those of larger traditional apartments. The cramped units encourage people to use the common spaces more, creating a greater sense of community, developers say.

The developers are gambling that such amenities will help set the units apart in a crowded marketplace, where a rush of new building is coming online despite ample supply of affordable older housing stock.

“I think it will be an adjustment, for sure,” said Dan Mullen, president at Bedrock, the development arm of mortgage magnate Dan Gilbert’s family of companies. But the tall ceilings and windows help make it feel larger, he added. “When you get in one of these units, it feels very spacious.”

Bedrock’s new micro-unit building is set to open this summer, with 218 furnished units averaging 260 square feet each.

Mr. Mullen points to perks such as free high-speed internet, a flat-screen TV and a rooftop terrace where tenants can watch movies. The units will rent for less than $1,000 a month—roughly in line with larger studios in other new buildings, which typically don’t include utilities and internet.

The Pittsburgh building, which has 127 units in total and was developed by local firm Vitmore, will feature not just tiny apartments but also three-bedroom units designed to be shared by roommates—some of whom might never have met before.

Christopher Bledsoe, co-founder and chief executive of Ollie, a real estate startup that is managing the project, said the building, which is set to open in June, will feature a community garden where renters can grow their own fruits and vegetables, an on-site manager who is a fitness instructor and bartender, and cooking classes from local chefs.

“What would cause a 20-something graduate to leave Pittsburgh and come to New York City?” he said. “It’s the desire to not come home to an empty apartment.”

The buzz around the mini units could help distinguish the building. Nearly 2,300 new apartment units were completed in Pittsburgh in 2016 and an additional roughly 1,800 are expected this year, according to MPF Research, a division of RealPage . That compares with the historical average dating back to 2000 of 1,000 units a year.

In Kansas City, a developer is installing queen-sized beds in case would-be residents want to get even cozier and share their 300-square-foot flats with a roommate. The units will rent for $700 to $800 a month—about in line with the average rent for apartments of all sizes, according to Reis.

“Young people today seem to be able to group together,” said John Hoffman, a partner at UC-B Properties, which is developing the 50-unit building that is set to break ground in the coming months.

Mr. Hoffman said he modeled the design of the units on a cruise ship cabin. The sink doubles for both the kitchen and the bathroom, the microwave doubles as an oven and the fridge can handle “a 6-pack of long neck beer and a 12-inch pizza,” he said, which is all he figures young people these days need.

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