Self-Storage and Manufactured Housing Community REITs Performed Well in the First Half of 2018

Self-Storage (SS), Manufactured Housing Communities (MHCs), and Industrial assets are the leading REIT performers so far in 2018. And Prudential RE Group’s head of global real estate believes the MHC and SS asset classes are particularly attractive to long-term real estate investors.

National Real Estate Investor interviewed Marc Halle from PGIM Real Estate in this article that discusses alternative real estate classes. Marc believes there are several reasons these two asset classes are poised for continued success. Below are a few of the most relevant extracts from the article:

Mobile Home Community Highlights:

  • MHCs are becoming institutionally acceptable due to their high cash-flow, bond-like income stream and recession resilient performance.
  • There is strong demand and very limited supply of land for MHCs due to their typical NIMBY stigma.
  • Many MHCs are now professionally run operations, not the TV or movie metaphor from the past.
  • MHCs are moving toward institutional grade, similar to where SS was 10 Years ago; today, there are several nationally recognized publically traded SS companies.

Self-Storage Highlights:

  • SS has achieved institutional quality, evolving beyond the dingy industrial sites of the past, to consumer-friendly facilities in prime retail centers like strip malls and shopping districts.
  • SS has shown resilience to recession and patrons are somewhat indifferent to rental price increases due to low rates.
  • Technology is driving demand more strongly to SS locations, increasing occupancy and returns to sophisticated operators.
  • SS facilities are affordably built today, a double-edged sword which can lead to over-building in some markets; luckily, demand for SS has remained very strong in America.

We believe MHCs and SS are two underappreciated and often overlooked niche real estate markets simply because they do not have the glitzy appeal of higher-end assets. Strong cash-flow and recession resilience make for great potential returns and lower risk. In the spirit of diversification, we recommend taking a closer look at these two real estate asset classes.

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