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Manufactured Housing Chugs Along to New Heights
Less glamorous than some higher-profile property types, manufactured housing has also told a story of steady growth throughout the pandemic. In fact, according to a Northmarq report covering the sector through the third quarter of 2021, that growth has accelerated lately.
Occupancies rose for the fifth consecutive period in Q3, inching up 10 basis points to 93.9%. This marks the highest national occupancy rate in 20 years, says Northmarq.
Rents increased 4.1% from the year-ago period, a modest annual gain compared to the apartment and single-family rental sectors—and, at $586 per month on average, a comparatively modest rent. Meanwhile, sales velocity spiked 35% during Q3, causing prices to push higher.
The median price recorded year to date is approximately $43,300 per space, while cap rates have compressed to 6.1% on average. Although Florida has led the country in transaction activity, Northmarq says sales velocity has gained momentum in two other states in the South region since midyear 2021.
Transaction activity in Georgia accelerated and the median price in the state spiked to about $72,000 per space as of Q3. In Tennessee, several properties have changed hands priced around $5 million; the median price in these transactions has been $26,400 per space with cap rates around 7%. Q3 also saw transaction activity increase in Michigan and Indiana.
The ongoing demand for manufactured housing is best illustrated by the 60-bp year-over-year increase in occupancy even as shipments are ahead of the pace recorded in recent years, Northmarq says. Year-to-date shipments through Q3 2021 were up 14% compared with the same period in 2020 and 12% ahead of the average pace recorded from 2017-2020.
The top 15 states for shipments, accounting for more than 70% of the national total inventory growth, have all posted increases in units shipped compared with the year-ago period. The average Y-O-Y increase in these states is 16%, while a few states have posted gains of 25% or more. Q3 shipments were about 5% lower than in Q2 due to supply chain issues, and Northmarq expects this trend to linger for a few more months.
“While many other commercial property sectors have recorded significant volatility during the past 24 months, manufactured housing has maintained steady improvement with occupancy rates inching higher in each of the past five quarters and rents rising at a more modest pace than other residential housing alternatives,” Northmarq says. “This affordability advantage should continue to support demand for manufactured housing.”
- ◦Lease
- ◦Sale/Acquisition
