CALABASAS, CA—A combination of rising home prices, increased job creation and a large baby boomer population heading into retirement supports improved occupancy in manufactured home communities. This makes the sector more of a draw for investors, says Marcus & Millichap.

As a case in point, Capital Square Realty Advisors announced earlier this month that it had acquired a portfolio of three manufactured housing parks totaling 1,141 units in Ohio and Indiana. It's the latest in a series of investor plays that have included such mega-deals as Sun Communities' $1.32-billion July acquisition of the American Land Lease portfolio from funds of Green Courte Partners.

“Manufactured housing communities are an attractive investment opportunity, with increasing demand and a tight market given barriers to new construction across much of the U.S.,” says Louis Rogers, founder and CEO of Glen Allen, VA-based Capital Square. “There are a number of Americans that are either searching for a manufactured vacation home, or are seeking a new housing opportunity as traditional homeownership becomes economically unfeasible for a growing percentage of the population. Today, manufactured housing offers an affordable and high quality alternative.”

Furthermore, MMI reports, in energy boom areas such as North Dakota, Eastern Ohio and Western Pennsylvania and Texas' Eagle Ford and Barnett Shale regions, the lack of housing options has generated new demand for manufactured homes. The improving economy allow more retirees to purchase a second home, while a stronger housing market enables more homeowners to sell their homes and move to a warmer climate.

“The greater availability of chattel mortgages will enable more of these households to buy homes in manufactured home communities, and with many owners using various forms of self-financing of these on-site home transactions, the new home market will improve,” according to MMI's report on the sector for the second half of this year, which cites regional conditions that will spur investor demand over the next several months.

Through May 2014, the report states, new manufactured home placements in the US have climbed 4.4% year over year, with 70% of the total placed in the Southern region. “Higher occupancy this year will enable operators to push up rents,” the report states.

Investors intending to place capital in manufactured home communities as a way to diversify portfolios and increase yields have generated competition for listings. “The lack of available properties has many investors waiting on the sidelines or willing to broaden investment parameters to include a lesser quality, location or size of community,” according to MMI. Competition is strong among REITs, insurers and equity funds for large, best-of-class assets. That's especially the case with age-restricted assets in retirement areas, where cap rates in the 4% range are not unheard of.

“Properties with more than 100 units on city services are also receiving heightened attention from a wider pool of buyers who are willing to scout nationwide,” the report states. “If priced appropriately, these assets are receiving multiple offers at or near list price.”

Local buyers, in the meantime, gravitate toward properties with upside potential, and they're likely to find less competition among smaller communities without city services. “Overall, high investor demand has pushed prices upward and compressed cap rates in most markets,” says MMI. “Owners looking to retire or exchange into less management-intensive assets will find this an opportune time to list while buyers are plentiful.”