News release

Manufactured Housing values pushed to record levels

JLL’s annual Manufactured Housing Report details the reasons for the unprecedented demand for this alternative real estate asset class 

November 03, 2021

Kimberly Steele

Capital Markets, Agency Leasing and Valuation Advisory PR
+1 713 852 3420

CHICAGO, Nov. 3, 2021The unprecedented surge of investment volume in the multi-housing sector is reaching record levels and pushing valuations for manufactured housing communities (MHCs) to an all-time average high of $46,970 per pad in the second quarter of 2021. Early third-quarter transaction volume is indicating the highest trailing four-quarter investment volume ever recorded at $4.5 billion, which will continue to have a positive effect on valuations.

According to JLL’s Manufactured Housing Report, the sector has continued to produce favorable investor returns and strong loan performances and helps provide a solution for the nation’s growing need for affordable living options. Due to its attractiveness, the last 12 months saw a flurry of institutional investment activity in the manufactured housing sector, resulting in increased demand, as investors sought to place capital in more recession-resilient sectors.

“Increased investor and occupant demand, limited supply and consolidation of single assets and smaller portfolios all contributed to valuations reaching an all-time high,” said Scott Belsky, JLL Valuation Advisory National Practice Lead – Manufactured Housing. 

Investment volume in MHCs soared to new levels in the third and fourth quarters of 2020, but, despite a robust appetite from investors, limited investment opportunities caused transaction volume to normalize in the first and second quarters of 2021, with the second quarter of 2021 dipping slightly to $4.3 billion. 

Investor confidence in the sector continues to grow, also evidenced by low capitalization rates. In the second quarter of 2021, capitalization rates in the MHC sector averaged an all-time low of 4.8 percent, after a year-over-year decline of 50 basis points. 

Additionally, as the need for affordable housing options, which include MHCs, increase, stabilized occupancy reached an all-time high of 95.4 percent. Also, the rate of rent growth increased throughout the pandemic to 2.6 percent, pushing average monthly rents to an all-time high of $800 with collections averaging a 1 to 5 percent discount to contract rents.

“The shortage of affordable housing is one of the largest unresolved issues in commercial real estate – and our society – today,” added Geraldine Guichardo, Director, Americas Living Research. “Some renters struggle to find an affordable place to live, and the problem isn’t improving. Since the growing demand for affordable housing presents an opportunity for unconventional solutions, the manufactured housing industry may be well-positioned to reap the benefits of that pent-up demand.”

With environmental, social and governance (ESG) being top of mind, MHC manufacturers are taking advantage of advancements in various technologies and recycled materials to find new ways of reducing energy usage and waste associated with the production of manufactured homes. Additionally, they are implementing more efficient cooling systems and better insulation to reduce utility costs and carbon footprints, which improves the perception of the sector for investors and community leaders.

“With asset pricing climbing to new peaks as the investment landscape evolves, investors are adjusting their approaches to deploying capital in a recessionary cycle, with MHCs proving to be one of the more reliable performers,” said Zach Bowyer, MAI, Head of Alternative Real Estate Sectors for JLL Valuation Advisory.

JLL anticipates investor sentiment in MHCs to remain optimistic through 2021 and into 2022, with a focus on value and risk, along with ESG goals, shaping investor behavior.

JLL Valuation Advisory is the essential guide to the changing face of real estate values and risk.  We bring together unrivalled human intelligence and experience, with continuous, data-driven insights to uncover a panoramic view of Value and Risk across sectors and geographies.

JLL’s 2,000 qualified valuation professionals are connected across more than 50 countries, sharing insights and real-time data to deliver tailored client solutions and advice for its clients’ real estate and business asset interests. The team is globally connected but also maintains sector-based expertise and deep local knowledge in every market.

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About JLL

U.S. property valuation and tax consulting services are performed by JLL Valuation & Advisory Services, LLC, a wholly owned indirect subsidiary of Jones Lang LaSalle Incorporated.

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.6 billion in 2020, operations in over 80 countries and a global workforce of more than 95,000 as of September 30, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.