As contemporary tenants and buyers are shifting their needs and demands, today’s housing market is undergoing tons of changes – and it’s impacting square footage. In order to accommodate the growing populations flocking to metropolitan areas, multifamily units are getting smaller in major cities all over the country.

The question on everyone’s mind is how this new trend will impact the commercial market. Here’s what investors, developers, and landlords need to know:

Urban Areas are Growing

So what’s the main cause of this sudden shift towards small? Expert analysts are saying it’s all about location.

As growing cities around the world are becoming hubs for business and technology, big metropolitan areas are expanding. Resultantly, they’re attracting new residents looking for jobs, education, and other opportunities within these thriving locations.

Bigger populations mean that the residential market is undergoing some growing pains. The increased volume of apartment hunters requires a boost in supply to balance out the spike in demand. The multifamily module is best fit to accommodate this shift as these assets are able to house a large community within a tighter plot of land.

It’s Focused on the New Developments

Don’t think that all apartment units are going to be downsized to fit into this trend.

The square-footage reduction will be most prominent within the newer developments that are cropping up. The existing multifamily buildings will be largely untouched while the up and coming properties will be much, much smaller.

This relationship will create a massive disparity between the sizings of the multifamily units on the housing market.

Where is the Space Being Cut From?

Bedrooms are taking the hit as square footage is being shaved off of these multifamily units.

Today’s developments are mainly harboring studios and two-bedroom units. The three-bedroom apartment is becoming a thing of the past as many projects are determined to squeeze the maximum number of units into their development module.

Smaller Units are Fueling Affordability

Fortunately for students and members of the workforce, living in cities is becoming more affordable – thanks to the widespread downsizing of apartments. With more single and double bedroom units available on the market, the price points are correspondingly adjusting.

The Wrap Up

All in all, it’s important for everyone involved with the multifamily industry to be aware that apartment units are being downsized.

Investors and developers should note that this trend is responding to a tenant demand. The small apartment module is meeting a need for smaller and more affordable housing options within crowded cities around the United States. New multifamily properties can benefit by responding to this trend which has the power to attract tons of tenants.

However, it also means that bigger apartments will be in short supply amongst newly developed buildings. That said, appealing to the opposite market can come with its fair share of benefits. Families with children will likely need larger apartments for their metropolitan homes, so supplying that can be incredibly prosperous.

Multifamily landlords and property managers should be ready to handle the influx of tenants. With smaller units, buildings will have more individual residents – which can have a huge impact on day-to-day management responsibilities.

These 5 points will keep you ahead of the game. Don’t forget to include these within your upcoming CRE strategies.