The headwinds facing residential development today are intense. Labor shortages driven by immigration slowdown, supply chain instability, soaring financing costs, and a recent surge in completed construction have all contributed to a challenging environment. Many proposed projects will not make it past the underwriting stage.
Those that do are increasingly scaling down, particularly in terms of unit size. The math is straightforward: a 50,000 square foot apartment building can fit twice as many units if each unit averages 500 square feet compared to 1,000.
Of course, this shift doesn’t work in every market. Not everyone wants, or can live in, a 500-square-foot apartment. I live in a studio under 400 square feet, which works for me as a single guy with no kids or pets. But that lifestyle is not universal. Still, the pressures in the housing market are pushing more developers to build what are referred to as micro homes, as reported in the Phoenix Business Journal:
This trend might seem expected in dense metros like New York or San Francisco, but in Phoenix? One of the most sprawling and car-centric cities in the country? Even there, things are starting to change. Young people are prioritizing affordability and access to walkable, vibrant communities. They are increasingly willing to trade space for location.
As both multifamily and single family home construction trends move to smaller units, this could have secondary effects, particularly for the self storage industry. Smaller homes create overflow. Residents need a place to keep the belongings that do not fit into their compact units. That might mean renting a storage unit or taking a visit to the dumpster.
Average New Apartment Size
I do not personally need storage right now. I have crammed everything I own into my space, with my excess belongings tucked neatly under my bed. But if I inherited furniture, wanted to buy a grill, or picked up a gear-heavy hobby like skiing or kayaking, I would definitely have to rethink that setup.
There are many paths to storage demand, and the rise of microhomes may very well be the next one.