Investors Remain Keen on Manufactured Housing
Rising rents and heightened sales activity are strengthening confidence in the sector, a recent NorthMarq report indicates.
In a year of significant uncertainty, the manufactured housing industry managed to bounce back from a bumpy second quarter and closed 2020 with encouraging numbers, according to the most recent NorthMarq report. This comeback was fueled by an increase in interest from both institutional and individual investors that were drawn to the industry’s stability. With the need for affordable housing only deepened by the pandemic, investor appetite is likely to remain high in 2021.
The last quarter of 2020 saw a more than 20 percent increase in transaction volumes of manufactured housing communities from the previous three months and almost 25 percent from the same period last year. The past year, sales rose by 9 percent, with the biggest increase being for properties priced between $10 million and $15 million, the category experiencing a 35 percent increase compared to the previous year. The median price per space in Q4 reached $45,000, while the year closed at a median price per space of $39,700, a roughly 2 percent increase from 2019. Cap rates in 2020 rose 10 basis points from the previous year to 7 percent.
The most active state was Florida, totaling 15 percent of the sales across the country in 2020, at a median price of $50,200 per space and an average cap rate of 6.1 percent. California was the priciest state last year, with median prices reaching $50,200 per space, but at a cap rate of only 4.6 percent. Inland Empire and Orange County were the most active areas in the state. Additionally, the largest transactions closed in Mesa and Apache Junction in Arizona.
The manufactured housing sector saw a few significant deals close in 2020. For example, at the beginning of December, Capital Square 1031 spent $46 million for Whispering Pines, a 301-homesite property in Kissimmee, Fla. This niche sector also attracted substantial influx of capital from institutional investors and private equity giants such as Blackstone, which announced its intention to acquire a 40-park portfolio from Summit Communities for $550 million in the third quarter.
Shelter from the storm
Occupancy rose 10 basis points in the last quarter, ending 2020 at 93.4 percent. Even though the industry was mostly sheltered from the pandemic-induced aftermath, national occupancy fell 40 basis points in 2020 and recorded the first annual decline since 2011. While the Midwest states saw the biggest occupancy increase of 90 basis points in 2020, the communities in this region recorded the lowest number in the country at just 87.2 percent. Average rents rose 0.9 percent in the last quarter of 2020, reaching $568 per month for a 3.5 percent increase year-over-year.
New supply in Q4 reached 24,600 shipments of manufactured housing units, while the full year saw 94,400 units shipped nationally, nearly the same as the total shipments recorded in 2019.
Seven of the top 10 states for shipments in 2020 are located in the South, which remains the most active region in the country. Texas maintains its top position, with 16,600 units shipped between January and December. The Lone Star state is followed by Florida, which recorded the biggest inventory growth in the South with almost 6,700 units shipped in 2020. California recorded a decline of 20 percent last year, with only 3,200 units shipped. Two traditional high-growth states—Nevada and Arizona—recorded declines in shipments of manufactured housing units.
Read the report by NorthMarq.