Urban micro-apartments: The Compact Living trend and the potential for profitability

Urban life is changing — and the real estate market is following suit. Micro-apartments have become an increasingly sought-after solution in large cities, both for young professionals and investors attentive to new housing trends. This compact housing model, known as compact living, combines practicality, strategic location, and high profitability. In this article, we explore how this type of property is establishing itself in Portugal and what opportunities it offers for those who want to invest in small but highly effective spaces.

What are micro-apartments and how does the compact living model work?

Micro-apartments are residential units with an area generally less than 40 m², designed to offer all the essential features in a small space. Compact kitchens, smart storage solutions, and multifunctional areas are part of the concept, often found in buildings with shared common areas (such as laundry rooms, co-working spaces, or terraces).

This minimalist lifestyle is already an established trend in cities such as New York, London, and Paris, and is gaining momentum in Lisbon, Porto, Braga, and Setúbal, where prices per square meter have increased significantly.

Why are micro-apartments attracting investors?

1. Higher profitability per square meter

As they are generally rented at a proportionally higher rate than larger properties, micro-apartments offer an excellent return on investment.

2. Low entry cost

The purchase price tends to be more affordable, allowing new investors to enter the urban market.

3. High turnover and constant demand

People such as students, young professionals, digital nomads, and singles seek this type of housing for its central location and ease of maintenance.

4. Versatility in supply

Whether for long-term rental or temporary accommodation (if authorized), micro-apartments respond well to the dynamics of modern urban mobility.

Tenant profile: who is looking for this type of property?

The target audience for micro-apartments is varied, but they share a common trait: they value location and functionality over size.

• Young professionals and recent graduates starting their careers in cities.
• Hybrid or remote workers who prefer practical housing.
• International students, especially in cities with renowned universities.
• Expats and digital nomads who prefer short, hassle-free leases.

The deciding factor is almost always proximity to business centers, academic hubs, transportation, and services.

Opportunities and challenges for investors

Opportunities:

• High returns in areas of high demand, with low vacancy rates.
• Possibility of integrating turnkey projects with specialized operators.
• Growing demand driven by the shortage of affordable housing in large cities.

Challenges:

• Municipal regulations that limit new construction or the conversion of spaces into very small units.
• Perception of value: properties that are too small or poorly designed may be rejected by the market.
• Efficient management: successful investment requires good management and constant maintenance.

Portuguese cities where micro-apartments have the greatest potential

• Lisbon: Areas such as Arroios, Anjos, Avenidas Novas, and Alcântara have strong demand for this type of property.
• Porto: Cedofeita, Bonfim, and Campanhã stand out as growing areas with still competitive prices.
• Setúbal and Braga: Growing opportunities, especially near university and business centers.

Urban micro-apartments represent a modern response to the housing needs of cities undergoing transformation. For investors, they are a smart way to diversify their portfolio, with an attractive combination of low risk and high demand. Although they require careful planning and attention to legislation, compact spaces are a trend that is here to stay — and investing in them can be a strategic decision.

Want to find the best investment opportunities in Portugal's major cities? IR Group is here to help you identify viable, profitable projects that are in line with urban market trends. Talk to us and start building a smart, future-proof investment today.