Institutional Capital is Flocking to Manufactured Housing

Institutional investors are flocking to manufactured housing assets as deal activity in the niche sector picks up speed. 

While private buyers have historically dominated the sector, institutional players are picking up steam, accounting for 23% of volume in the past two years, according to new data from Real Capital Analytics. That’s a sizeable increase from the 13% average posted from 2017 to 2019. And four of the top 10 buyers of manufactured housing over the past two years are institutional investors. 

“These players secured their ranking by acquiring their manufactured housing assets in bulk: on average, 83% of their total acquisition activity involved portfolios,” says RCA’s Haley Crimmins.

Manufactured housing represents just 1% of total deal volume across US CRE, but sales of individual properties hit their highest-ever levels in the second quarter of 2021. A report earlier this spring from JLL showed that transaction volume for manufactured housing communities increased 32.2% between 2019 and 2020, from $3.2 billion to $4.2 billion, and valuations are increasing. Zoning restrictions and core development expansion have constrained supply in many markets, pushing net demand upward. 

Acquisitions in the four quarters ending in Q2 2021 totaled $4.1 billion, an increase of 48% over the prior four quarters and 30% above the past peak in 2017. Portfolio sales increased during that period to $2.6 billion.

“Pricing for manufactured housing assets, which are primarily located in suburban locales, has remained tight,” Crimmins says. “RCA Hedonic Series cap rates, which control for quality and locational differences in the underlying sample, fell 30 bps year-over-year to reach 5.0% in the second quarter. For apartments located outside the 6 Major Metros, RCA HS cap rates have been compressing in recent years and also hit 5.0% last quarter. These are the lowest levels ever seen for both housing sectors.