What Is an Efficiency Apartment?

Understand the different layouts while apartment-shopping, and decide whether an efficiency unit is right for you.

U.S. News & World Report

What Is an Efficiency Apartment?

Interior of a new modern apartment in scandinavian style with kitchen and living room

While small apartments make up only a sliver of the rental market, many renters prefer them for convenience and cheaper rent.(Getty Images)

You’re looking for an apartment on your own, but whether your budget is low, you travel a lot for work or you simply consider yourself a minimalist, you want a small space. The fewer walls, the better.

In that case, you may be in the market for an efficiency or studio apartment.

An efficiency apartment is similar to a studio apartment in that it has no separate room for sleeping quarters and is often small in size compared to apartments that offer one or more bedrooms. You’ll likely find that efficiency or studio apartments are the most budget-friendly option in apartment buildings, although they can also be basement or garage apartments offered by homeowners looking for an individual tenant.

The differences between an efficiency and studio apartment depend on who you’re talking to, as some people believe an efficiency has a separate kitchen space and a studio does not, while others will tell you the studio is the larger of the two, with an extra 100 square feet or so.

In its definition of an efficiency unit or apartment, Barron’s "Dictionary of Real Estate Terms" also specifies that the bathroom or kitchen may not be complete – there may only be a shower and no tub, there may be no full-size refrigerator or you may have a convection microwave instead of an oven.

In the multifamily housing industry, efficiency and studio can be assigned different meanings or can be considered interchangeable. “I’ve never thought of efficiency as lesser than a studio, if you will. They’re both providing you all the things you need to live, without a separate bedroom,” says Daniel Rigaux, senior vice president of finance and development for Saul Urban, an apartment building developer and owner based in Bethesda, Maryland.

Whether you prefer to call it a studio or efficiency apartment, stay focused on the specifics of the space as you shop for apartments to ensure your definition of the word matches up with the leasing agent’s. While the smaller size may seem attractive or be the only option in your budget, make sure you know you can live in the space comfortably.

When Efficiency Is Enough

Efficiency and studio apartments cater to a smaller share of the rental market – and are typically only comfortable with one tenant – and as a result make up just a little over 4 percent of the total existing market inventory in the U.S., according to data from commercial real estate information company Yardi Matrix.

You’re far more likely to see these smaller units in high-density, high-cost cities where the difference in cost between a studio and one-bedroom apartment can be a few thousand dollars per year in rent. In Seattle, for example, the average monthly rent for a one-bedroom apartment in July of this year was $2,036, while a studio apartment was a much more affordable $1,490, according to the monthly rent report from RENTCafé, a subset of Yardi Matrix.

“We do see it especially in urban cores, like the Navy Yards in D.C., Atlanta and Austin that also play to a certain demographic – [residents who] don’t want to have kids, they just want a place to work and stay,” says Doug Ressler, director of business intelligence for Yardi Matrix.

In smaller metro areas, apartments without a separate bedroom don’t carry as much weight in monthly rent. RENTCafé reports a one-bedroom apartment in Des Moines, Iowa, costed an average of $860 per month in July, while a studio rented for $710 per month.

In outer suburbs and smaller cities, it’s cheaper to buy or rent more square footage, so there’s less need to live in a tiny space in order to forego roommates. Plus, many renters don’t mind living with roommates, as it may mean more amenities and space for as much or less than an efficiency apartment in the same city.

Looking at market performance, Ressler says studios don’t see as much high and long-term demand as apartments with one or more bedrooms. While studios, efficiencies and even micro-apartments, which can be as small as 250 square feet but typically don't get much bigger than 450 square feet, can attract a good number of interested renters, they certainly don’t appeal to all, especially those who may not want to be there over the long term.

“They’re not performing as well in terms of overall rental rate increases, and it could be because of the fact that the dynamic or the demographic of the person it is rented to could be in transition and there for a small bit of time,” Ressler says.

Efficiency Isn’t Just About the Budget

For some apartment developers and owners, residents in a transitional phase are the ideal demographic. At Saul Urban’s Ampeer Dupont Circle apartments in the District of Columbia, the individual living spaces may have a small footprint, but that’s kind of the point. The major draw of the building is amenities such as the communal dining space with daily breakfast, library for remote work and ballroom for socializing, hanging out and having a drink at the in-house bar.

“This was a very deliberate and conscious decision to make sure that we have amped up the social living spaces to go ahead and kind of be a primary focal point for our residents,” Rigaux says. “So we have made the apartments very luxurious [and] nicely appointed, but it’s all in the belief that either they want to spend their time in these more social, larger spaces, or they’re just fine with a smaller space [to live in].”

Not every apartment in the Ampeer is a studio, but most are, and all are fully furnished to help make moving as simple as possible. Rigaux says the model for the building is to catch those residents who are in some sort of transition, whether they have a contract to work in the District for a few months or they’re new to the area and want to live there for a couple months before settling for a more long-term space. “We have leases as short as one month, which is not typical in the rental world,” he says.

Rigaux says some residents have ultimately decided to sign a longer lease after enjoying the heightened amenities and location, opting for the small personal space over a larger apartment with fewer additional services. Longer lease options in a rental community typically give you a lower monthly cost in exchange for the guarantee that the apartment is occupied further in the future.

Whether you're looking for an efficiency apartment or studio to allow you to be in the right location and amenities or simply because your budget only allows for the smallest square footage available, treat your zero-bedroom apartment hunt as you would any other space. Consider the apartment community, your individual needs for your personal space and the overall location.

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