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Subscribe to Brandon Donnelly
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Everybody wants a 3 bedroom condo or apartment until they see what they cost. We've spoken about this before. We know that the barrier is cost (i.e. affordability) and that many cities have more cost-effective alternatives. The result is that developers have a strong incentive to build smaller 1-bedroom apartments. And by strong incentive, I mean that it might be the only way to pencil a new project.
I think some people believe that developers are only doing this to profit maximize and that they could build more family-sized apartments if only they really wanted to. But it's not that simple. There needs to be a market for it at rental rates that can generate a positive margin for developers.
To show just how strong these market forces are, here's a chart from Bobby Fijan showing how Austin has changed its unit mix over the past 25 years. From 2000 to 2005, more than 50% of new apartments were 2 beds. But from 2021 to 2025, this shared dropped to less than 25%, and studio and 1 beds now make up nearly 80% of the new multi-family market.
This is the new construction market in the vast majority of North American cities today.
Cover photo by Jeremy Doddridge on Unsplash
Everybody wants a 3 bedroom condo or apartment until they see what they cost. We've spoken about this before. We know that the barrier is cost (i.e. affordability) and that many cities have more cost-effective alternatives. The result is that developers have a strong incentive to build smaller 1-bedroom apartments. And by strong incentive, I mean that it might be the only way to pencil a new project.
I think some people believe that developers are only doing this to profit maximize and that they could build more family-sized apartments if only they really wanted to. But it's not that simple. There needs to be a market for it at rental rates that can generate a positive margin for developers.
To show just how strong these market forces are, here's a chart from Bobby Fijan showing how Austin has changed its unit mix over the past 25 years. From 2000 to 2005, more than 50% of new apartments were 2 beds. But from 2021 to 2025, this shared dropped to less than 25%, and studio and 1 beds now make up nearly 80% of the new multi-family market.
This is the new construction market in the vast majority of North American cities today.
Cover photo by Jeremy Doddridge on Unsplash
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Back in the late 90’s and early 2000’s my husband and I would go to condo sales centres and pick up suite plans to see what was available for a family of 4 and what we found was that it was MUCH more affordable to put two smaller separate suites together than to purchase a 3 bedroom condo. Not only was it 10’s of thousands of dollars cheaper you actually ended up with more living space 🤷🏻♀️ that’s how we would’ve gone if we didn’t find the loft space that suited our family. I got the idea from a neighbor who did something similar on Queen east—when their family started growing, rather than buy a bigger house, they bought the townhouse next door. Makes it easier to ‘live together’ when the kids grow up.