By Andrew Batt:
Large growing populations and limited land supply mean the world’s major cities all battling to provide affordable and accessible homes for their working ‘squeezed middle’. So why does the development of small, purpose-built units for young singles and couples, so-called ‘shoebox units’ attract such controversy, asks global real estate services provider, Savills.
In its new report Shoebox units – Is small smart or is bigger better? the firm champions the role the shoebox unit can play in the residential markets of key world cities, demonstrating that homes as small as 250 square feet can successfully meet demand for city centre living amongst young professionals, for whom affordability is severely constrained.
“In terms of design and layout, a lot has changed over recent years as technological advances have transformed space needs, while the 24/7 social infrastructure available in most cities has lessened the number of hours typically spent at home,” said Simon Smith, Senior Director of Savills Research.
“Modern designers and architects have been particularly creative in this segment of the market, adapting to improvements in domestic appliances as well as changing lifestyles. Traditionally, shoebox developments have evoked images of squalid 19th century European slums or the ‘caged homes’ of Hong Kong. The reality now is very different.”
But while some cities, particularly in Asia, have successfully shaken off this heritage and created well-designed, desirable units, policy makers and planners in old world cities have been more reluctant modernisers.
Affordability is a major issue for young workers in all world cities. While such units may command a relatively high price per square foot, the unit price is well below the market average and therefore accessible. Young working singles and couples are increasingly low occupiers of their homes, so affordable living space, close to work and amenities arguably represents a better quality of life than a larger space in a less vibrant location, a long commute from the office.
New world embraces designer shoebox model
Asian cities such as Hong Kong, Singapore and Japan have not been squeamish about small unit living. In Hong Kong, quality and location usually take precedence over size, allowing the shoebox to be repackaged as ‘boutique luxury residences’, often located in prime hotspots on Hong Kong Island, achieving premium prices as high as HK$20,000 (US$2,580) per square foot. The relatively desirable nature of this accommodation also means premium yields for investors, netting 3 percent, slightly above the market average. As a result, developers are now entering the market to deliver further stock, underpinned by HK SAR government policy which allows the redevelopment of buildings over 50 years old.
In Singapore, where the ‘shoebox’ term was coined, higher per square foot values have also lured investors and developers. (Currently a premium of around a third is payable compared to other non-landed property values, at over US$1,250). However, government policy recognises the limitations of such small dwellings and future developments will be restricted to core central locations to prevent speculation.
Old world sits on the fence
By contrast, old world regimes are slow adopters. In Sydney, lenders remain reluctant to lend against units under 500 square feet, precluding individual ownership of very small units by the very people who would wish to occupy them. In London, the concept has struggled to shake off negative connotations, and the Royal Institute of British Architecture recently termed speculative developer output as ‘shameful shoeboxes’ which is hardly encouraging.
As a result, like New York and Sydney, London has not yet embarked on the experiment of high quality micro unit developments in prime central locations, and designed to target market owner occupier buyers, investors and renters.
“New world cities have experimented successfully with high specification shoebox units, finding strong demand amongst young workers wishing to live and work in central locations,” said Yolande Barnes, Director of Savills World Research . “The old world now has to make up its mind about the pay off between size, affordability and centrality in its cities, given green belt issues and limits to city growth.”
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