- A Houston developer backed by New York investors has changed direction on a 24-story, 550-unit microcondo project that has failed to draw the attention of its targeted market of millennials and empty nesters, the Houston Business Journal reported.
- After seeing predominantly investor interest during a presales period, Novel Creative Development shifted to a condo hotel concept, or "contel," where owners will rent out their units to visitors when they're not using them. If the project comes to fruition, it will be one of the first condo hotel developments in Houston.
- Developers thought millennials in particular would snatch up the 304-square-foot to 1,001-square-foot-units but said they found that demographic was "not ready yet" for the concept.
The Ivy Lofts development featured built-in "space-saving" furniture like Murphy beds and other convertible pieces but was able to secure deposits from only 68 buyers, most of those investors. On the other hand, developers now expect a 7% to 9% return on their investment by converting the project to a contel.
Unlike the Houston project, New York's Carmel Place, a prefabricated microapartment building with 55 units, had 60,000 applications for the development's 14 $905-per-month units. While the units are rentals and not for-purchase like Ivy Lofts, New York's tight rental market and existing economy-sized rental stock was most likely more palatable to the New York crowd than their Houston counterparts.
However, there are ongoing microhousing and hotel projects around the country. Another Texas city, Austin, is developing a microapartment building to fill that city's growing need for affordable rentals. Transwestern Development Company said the units target those who want to take advantage of all Austin has to offer in the way of entertainment and urban amenities but who don't want to shell out for the typically high rents.
Skanska is also converting an historic San Francisco building into a 200-room microhotel, branded as a Yotel. The eight-story structure, built in 1904, will undergo a complete renovation including the construction of an additional floor. And in an unexpected location — Grand Rapids, MI — microapartments have become the successful solution for the city's affordable housing shortage. Proponents say the units fill in the gap for those who make too much money to receive rent subsidies but make too little to afford market rates.