Apartments Grow as Work from Home Spreads

RENTCafé, Santa Barbara, Calif., reported many apartments are growing larger, in part due to increased working from home.  

Researcher Florentina Sarac said 36 percent of markets RENTCafé examined are building larger apartment units compared to five years ago.

“Full- or part-time work-from-home is here to stay for the foreseeable future, compelling many people to make room in their homes for a more permanent workspace,” Sarac said. “The need for more space is particularly crucial in apartments, where there isn’t typically much space to spare to begin with. Fortunately, apartment developers are noticing this rising need and their response is already reflected in current projects that are under construction.”

The report examined Yardi Matrix data and found larger apartments increased by nearly 50 square feet on average. Smaller one- and two-bedroom apartments grew by 28 square feet and 39 square feet, respectively and three-bedroom units grew by 105 square feet on average.

“The pandemic and work-from-home has made people more conscious of the space in which they live and work,” said Doug Ressler, Manager of Business Intelligence at Yardi Matrix. “The pandemic has significantly accelerated issues on designers’ minds well before 2020. These issues involve the rise of the home as a workspace.”

RealPage Economist Greg Willett said renters are willing to pay big premiums for big floor plans. “Pricing power is really soaring for larger floor plans in most places, while smaller apartments tend to be rent change laggards,” he said, noting effective asking rents for three-bedroom apartments popped by 4.1 percent year-over-year in April while rents for one-bedroom apartments inched up just 0.4 percent from the year-earlier level.

Willett agreed people who have been working from home during the pandemic have wanted more space and have been willing to pay the higher rents to upgrade to two- or three-bedroom units.

“Shifts in apartment performance levels across floor plans will be interesting to watch over the course of the next few months,” Willett said. “As more workers return to the office at least part of the time, small apartments might not feel quite so cramped. Furthermore, as more people are vaccinated against COVID, fewer renters will spend the bulk of their time within the confines of their apartments.”

Bigger floor plans could maintain their performance premium over their smaller counterparts during the near term, “but it seems unlikely that the differences in results will remain at the levels recorded now,” Willett said.