From the developer’ s perspective, the units capture higher rents per square foot, almost 50 percent more. With land costs skyrocketing in markets like New York, Los Angeles, and the San Francisco Bay area, it has become cost prohibitive for developers to build multifamily rental projects. Building micro-units, especially when combined with 80 / 20 tax credits and EB-5 funds, are one way developers can justify building multifamily rental projects, instead of multi-million dollar condos. Micro-unit projects are a win-win concept for tenants and developers alike.
Simon Baron is one developer who has embraced the trend, realizing the potential of building micro-unit multifamily projects. The firm is currently developing a micro-unit concept in downtown Los Angeles. Simon Baron previously built their own micro-unit project in the Upper West side of Manhattan called the AMSTRDM. Simon Baron fully leased the AMSTRDM and decided to partner with Ollie™ on their new Los Angeles development. The project that was once the historic Cecil Hotel has had a cult following and has been featured on the television show American Horror Story. It is a 600-room historic hotel that was constructed in the 1920s. Simon Baron is redeveloping the property into 299 hotel rooms and 301 micro units. Los Angeles, like New York City, is a market where high rents have made apartments unaffordable for many young professionals.
The new Ollie™ location, which is within walking distance from LA Live and a new wave of redevelopment projects in downtown Los Angeles, is anticipated to hit the market starting at $ 1,350 per month— notable for a neighborhood where studio apartments with far less amenities typically rent for $ 2,000 per month or more.
Increasingly, millennials are choosing to live in urban areas and in locales that have comprehensive lifestyle options, as opposed to moving to the suburbs like prior generations. For renters who work in downtown Los Angeles and hope to avoid rush hour traffic, these kinds of units eliminate hours of drive time, something typically unheard of in Los Angeles. Young professionals working in the downtown area can live in these units and walk to work. Millennials are also more likely to use car services like Uber and Lyft and may not need to rely on a car for their primary means of transportation.
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EB5 INVESTORS MAGAZINE