Are Micro Apartments a Good Rental Investment?

You might’ve heard about the suffocating, grave-like rooms that were reported in the news earlier in October. University students and food delivery riders stuck in an essentially coffin sized box with the barest minimum in terms of personal space. This does not come new and might inspire a change that is not borne out of actual wants but necessity for survival.

But the limited space can be done right, if it were to take actual people into consideration. The phenomenon of micro apartments can be what tenants need for affordable housing, in exchange for decreased floor space. And for landlords: do these pint-sized properties make a sound investment?

 

What Are Micro Apartments?

 

 

Micro-apartment communities focus on offering renters a small, affordable living space in a premier location often cutting out dining space (giving up luxuries like a dining room). Buildings focused on micro-apartment living often offer only small space floor plans to renters, surprisingly. 

As the cost of living rises, apartments get smaller and smaller to be considered affordable. More and more people are looking to downsize their lifestyles and reprioritise their needs. This might mean getting rid of car payments if it means being able to live closer to the workplaces and escape the dreadful commute.

These communities often focus on an exceptional communal amenity experience to draw away from the downsides of micro-apartment living. You can see this in coliving arrangements. For renters, micro-apartments are attractive for their relative cost savings and numerous amenity offerings. However, they’re also attractive to real estate owners and operators for a variety of reasons.

 

A Market Driven by Urban Dynamics

The appeal of micro-apartments in Malaysia is twofold. First, the country’s thriving economic zones attract a young workforce, many of whom are more focused on career trajectories than setting up a family-centric household. This demographic, seeking affordable living options within bustling city centres, is drawn to the lifestyle of minimalism, functionality, and proximity to urban amenities.

Secondly, the trend reflects broader societal shifts. With the rise of single-person households, minimalistic living, and increasing mobility, traditional property offerings are evolving. 

 

Lower initial costs, higher possible ROI

Micro-apartment complexes generally occupy a more compact footprint, making them cheaper than regular apartment structures. Additionally, the space efficiency of micro-apartments allows investors to maximise their income potential, accelerating their ROI or rate of return on their investment.

You might assume that just because the unit costs less to rent doesn’t mean the owner makes less money as a result. That’s not true. Micro-apartments have higher occupancy stabilisation and generate a higher rent-per-square-root ratio than normal apartments. The demand for micro-housing speaks for itself. Several tenant types in particular would be interested in units like these.

 

 

Setting aside the appeal for lofts, most Malaysians typically prefer to rent out a one or two bedroom apartment over a studio. With the rise of real estate investments, more and more options have cropped up in recent years, some good and some bad. Doing your own research on forums and through anecdotal experience will be your best source of judgement. 

Here’s some examples to get you started.

 

 

Apartment	Built-up Size	Rental Yield
Paramount Utropolis, Glenmarie	150 – 200 sq ft.	RM1000 – RM1200
Pacific Star, Petaling Jaya	374 sq ft – 450 sq ft.	RM1200 – RM1500
Cybersquare, Cyberjaya	450 sq ft.	RM850 – RM1300

 

Of course, location is still king. If the convenience and amenities don’t make up for the unit’s small size, it probably won’t see a lot of interest.

 

Micro-apartments are carving a niche in Malaysia’s rental market, offering tempting prospects for high returns on investment. However, they’re not a one-size-fits-all solution. Success in this venture requires a strategic approach, acknowledging the socioeconomic trends driving demand. For the discerning investor, micro-apartments can indeed be a profitable addition to a diversified real estate portfolio, provided the decision is backed by comprehensive research and a clear understanding of the local market dynamics.