Institutional Investors Bet on Manufactured Housing as Occupancy, Rents Continue to Grow

Property fundamentals in the sector remain very strong, making it an attractive long-term investment bet.

There has been stable occupancy and rental collections in 2020 despite the pandemic. As a result, some investors are now betting big on manufactured housing communities.

In the second quarter of 2020, investment sales of manufactured housing communities totaled $821 million, a 12 percent increase compared to the fourth quarter of 2019 and a 23 percent increase over the first quarter of 2020, reports commercial real estate services firm JLL. At the same time, valuations in the sector have continued to increase and cap rates have been compressing. Price per pad in the second quarter averaged $50,792, up 6.6 percent from the first quarter of 2020 and 26 percent year-over-year. During the same time period, prices on multifamily assets have declined by 5.3 percent from the first quarter of 2020 and 0.86 percent year-over-year, according to a JLL report on manufactured home communities. Cap rates on manufactured housing communities averaged 5.84 percent nationally, down seven basis points year-over-year.

“The manufactured housing community sector has overall continued to drive year-over-year occupancy gains, often through investments into new and used inventory to support manufactured home sales and rental programs,” says Scott Belsky, senior vice president and JLL valuation advisory national practice lead for manufactured housing. “Additionally, the stability and growth of homesite rents have generated positive net operating growth even through the pandemic, which has allowed values to remain stable or even rise in some areas due to continued investor interest driven by the sector’s lack of volatility and even rent growth prospects.”

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