Multifamily, Industrial, Self-Storage, MHP: Returns, Risk, and Where to Allocate
Four asset classes account for the bulk of LP-accessible private real estate outside office and retail. Each has a different return profile, a different risk shape, and a different operational story. The right allocation depends on what role real estate plays in the portfolio.
Why These Four
Office is structurally distressed and most institutional LPs are reducing exposure. Retail has bifurcated into the very strong (grocery-anchored, necessity) and the structurally weak (enclosed mall, B/C neighborhood centers). Hospitality is operationally complex and economically cyclical in ways that do not fit most LP allocations. Healthcare and life sciences are specialized verticals with limited LP-accessible product.
Multifamily, industrial, self-storage, and manufactured housing parks (MHP) are the four asset classes where institutional and accredited LP capital can find consistent product, with sponsor track records, clear underwriting standards, and active transaction markets. They are the four classes that show up across most fund-of-funds allocations and most accredited investor portfolios.
10-Year Nominal Returns by Asset Class
Approximate NCREIF Property Index data, 2015 through 2025, total return basis. The numbers move year to year; the relative ordering has been stable.
| Asset class | 10-yr annualized total return | Income component | Appreciation component |
|---|---|---|---|
| Industrial | ~12-14% | ~5-6% | ~6-8% |
| Self-storage | ~11-13% | ~5-6% | ~5-7% |
| Multifamily | ~7-9% | ~4-5% | ~3-4% |
| MHP | ~9-12% (private estimates) | ~5-7% | ~3-5% |
Industrial led the decade because of e-commerce-driven demand, infill scarcity, and rent growth that consistently outpaced supply. Self-storage benefited from similar demographic and behavioral tailwinds at lower capital intensity. Multifamily's number is dragged down by the post-2022 Sun Belt supply correction. MHP data is private and dispersed but consistently reports steady total returns with low volatility.
Risk-Adjusted Returns
Volatility and drawdown matter as much as headline return. Approximate ranges:
| Asset class | Annual return volatility | Worst peak-to-trough drawdown (last 10 yr) | Recovery time |
|---|---|---|---|
| Industrial | ~10-13% | ~15% (2022-2023) | 4-6 quarters |
| Self-storage | ~7-9% | ~10% (2022-2023) | 2-4 quarters |
| Multifamily | ~9-12% | ~18% (2022-2024) | still in progress |
| MHP | ~5-7% | ~6% | 2-3 quarters |
MHP's low volatility is the structural feature most LPs underweight. The asset class delivers near-multifamily total returns with substantially lower drawdowns. The catch (and there is always a catch) is that MHP is operationally heavy and good operators are scarce.
Cap Rate Ranges, Q1 2026
Going-in cap rates, institutional-quality product, primary and secondary markets:
| Asset class | Class A primary | Class B primary | Class A secondary | Class B secondary |
|---|---|---|---|---|
| Multifamily | 4.75-5.50% | 5.50-6.50% | 5.25-6.00% | 6.25-7.50% |
| Industrial | 5.00-5.75% | 5.75-6.75% | 5.50-6.50% | 6.50-7.75% |
| Self-storage | 5.50-6.25% | 6.25-7.25% | 6.00-7.00% | 7.00-8.50% |
| MHP | 5.50-6.25% | 6.25-7.50% | 6.50-7.50% | 7.50-9.00% |
The compression in MHP cap rates over the past decade is the largest of any of these asset classes. Class A MHP traded at 8-9% caps a decade ago. The institutional-grade end of the market now trades at 5.5-6.25%. The repricing reflects capital flow into the space, not deterioration in the underlying fundamentals.
Operational Complexity Ranking
From most operationally heavy to most operationally simple:
- MHP. Hundreds of individual lessees of land, lessees own the homes, water and sewer infrastructure to maintain, septic and well systems in many markets, individual home flips when residents leave, regulatory tenant protections, sometimes hostile community dynamics around rent increases. Highest operational lift per dollar of NOI.
- Self-storage. Hundreds of individual tenants, monthly turnover, no in-unit maintenance to speak of, but auctions, billing, online reservations, on-site or remote management, 24/7 access. Less heavy than MHP but more lessees per dollar of NOI than multifamily.
- Multifamily. Apartment-by-apartment leasing, turnover capex, mechanical and structural maintenance, common area, marketing, lease administration. Operationally meaningful but professionalized industry with strong third-party management options.
- Industrial. One to a few tenants per building on multi-year leases, structural maintenance only, minimal common area, NNN or modified NNN typical. Lowest operational lift per dollar of NOI.
This is the single most important under-discussed dimension. An LP investing in a sponsor's MHP fund is implicitly betting that the sponsor's operating platform can absorb the operational complexity. The same LP investing in industrial is making a much smaller operational bet.
Tenant Quality and Credit
- Multifamily. Individual lessees, monthly turnover average 35-50% annually, low individual credit (FICO 600-700 typical), small lease ($1,200-$3,500/month). Income diversified across hundreds of tenants per asset.
- Industrial. Corporate tenants, multi-year leases (5-10 years typical), credit varies from investment-grade Fortune 500 to local logistics startup. Lease size large ($30k-$300k+/month). Income concentrated, often 1-5 tenants per building.
- Self-storage. Individual tenants, monthly turnover 6-8% per month (very high), low credit, small lease ($75-$300/month). Income diversified across thousands of tenants per asset.
- MHP. Individual tenants who own their homes, very low turnover (5-8% annually), low credit, modest lot rent ($350-$800/month). Income highly diversified across hundreds of households per park, with very sticky residents.
The structural insight: industrial has the highest credit concentration risk per asset, while MHP has the lowest. A single tenant default in a small industrial portfolio can wipe out a year of NOI. A single resident default in an MHP is operationally invisible.
Capital Intensity
- Multifamily. Medium-to-high. Roof replacement every 20-25 years, mechanical replacement every 15-20 years, in-unit capex (flooring, paint, appliances) every 5-7 years on turnover, common area refresh every 10-12 years. Reserve for replacement typically $400-$700 per unit per year.
- Industrial. Low. The building is a box. Roof every 25-30 years, parking lot every 15-20 years, structural every 30-40 years. Tenant improvements paid by the tenant or amortized into rent. Reserve typically $0.10-$0.30 per square foot per year.
- Self-storage. Very low. The unit is a box inside a box. Roof every 20-30 years, gates and security electronics on shorter cycles, asphalt and lighting periodically. Reserve typically $0.20-$0.40 per square foot per year.
- MHP. Low to medium. Roads and water and sewer infrastructure on long cycles, but expensive when triggered. Park amenities periodically. Reserve typically $150-$300 per pad per year, but with potential for large infrastructure spend every 15-25 years.
Operating Margins
NOI as a percentage of effective gross income, stabilized properties:
| Asset class | Typical NOI margin | Why |
|---|---|---|
| Industrial | 75-85% | Few tenants, NNN expenses passed through, minimal day-to-day operations |
| Self-storage | 60-75% | Self-service, automated billing, light staffing, but property tax and insurance load |
| Multifamily | 55-65% | Heavy operations, marketing, turnover capex, payroll, utilities, tax, insurance |
| MHP | 40-55% | Infrastructure operating costs, water/sewer, on-site management, regulatory load |
Industrial's NOI margin is roughly twice MHP's. This does not mean industrial is twice as profitable. It means industrial generates less gross revenue per dollar of NOI but converts more of that revenue to NOI. MHP generates more revenue per dollar of NOI but expenses are heavier.
Where Institutional Capital Is Rotating
Q1 2026 capital flow themes, based on transaction volume and fund commitment data:
- Out of: Sun Belt multifamily (oversupply digestion through 2026-2027), suburban office (terminal decline), enclosed mall retail.
- Into: MHP (institutional consolidation continues), self-storage in supply-constrained markets, industrial outside the most overbuilt logistics corridors, necessity retail (grocery-anchored, neighborhood services).
- Selectively into: Multifamily in non-Sun-Belt markets (Midwest, Northeast, Pacific Northwest where supply is constrained), data centers (capital-intensive, hyperscaler tenants).
The rotation away from Sun Belt multifamily is the largest single capital flow theme of 2024-2026. The asset class is structurally fine; the geography overbuilt. LPs who entered Sun Belt MF in 2021-2022 have absorbed the cost of that supply error. New capital is going elsewhere.
2026 Outlook by Asset Class
Multifamily
The post-2024 supply correction is largely complete in non-Sun-Belt markets. Sun Belt has another 12-18 months of digestion. Rent growth nationally is forecast at 2.5-3.5% in 2026, with non-Sun-Belt markets running 4-5% and Sun Belt running 0-2%. Cap rates have stabilized after expanding 100-150 bps from 2022 peak. Vintage 2025-2026 acquisitions look attractive on a 10-year horizon if the sponsor avoids supply-impacted submarkets.
Industrial
The 2020-2022 demand frenzy is over. New supply has caught up in major logistics corridors (Inland Empire, North Dallas, Atlanta, Phoenix). Vacancy has moved from sub-3% to 6-8%. Rent growth that ran 15%+ in 2021-2022 is now flat to 3%. The asset class fundamentals are still strong; the entry pricing matters more than it did. Best opportunities in infill, last-mile, and underserved secondary markets.
Self-storage
Demand resilience proven through multiple cycles. Supply discipline tighter than multifamily because storage development requires less capital and is faster to halt. Rent growth slowing from 2021-2022 peaks but remains positive. Cap rates relatively tight; alpha must come from operations and acquisition basis, not market beta.
MHP
The structural story remains intact: aging US housing stock, no new MHP development of consequence, sticky residents, demographic tailwinds. The risk is regulatory: rent caps and resident protections in California, Oregon, New York, and several other states. The opportunity is consolidation: thousands of family-owned parks still exist; institutional consolidation is mid-cycle.
Decision Tree
Comparison Table: 14 Dimensions
| Dimension | Multifamily | Industrial | Self-Storage | MHP |
|---|---|---|---|---|
| 10-yr return | 7-9% | 12-14% | 11-13% | 9-12% |
| Annual volatility | 9-12% | 10-13% | 7-9% | 5-7% |
| Going-in cap (Q1 2026) | 4.75-7.50% | 5.00-7.75% | 5.50-8.50% | 5.50-9.00% |
| NOI margin | 55-65% | 75-85% | 60-75% | 40-55% |
| Operational complexity | Medium-high | Low | Medium | High |
| Tenant turnover | 35-50%/yr | 5-15%/yr | 72-96%/yr | 5-8%/yr |
| Lease length | 12 months | 5-10 years | Month-to-month | Month-to-month |
| Capex intensity | Medium-high | Low | Very low | Low-medium |
| Tenant credit | Individual, low FICO | Corporate, varied | Individual, low | Individual, low but sticky |
| Income concentration | Diversified | Concentrated | Diversified | Diversified |
| Supply discipline | Variable, currently weak in Sun Belt | Improving from 2022 peak | Disciplined | Effectively no new supply |
| Regulatory risk | Medium (rent control trending) | Low | Low | High in some states |
| Institutional capital flow | Cautious in Sun Belt | Selective | Active | Heavy inflow |
| Sponsor scarcity | Large universe | Moderate universe | Smaller specialist universe | Very specialist universe |
Allocation Framework for $1M Real Estate Capital
A defensible, diversified allocation for an LP with $1M to deploy into private real estate across these four classes. Adjust for individual context and conviction.
| Asset class | Allocation | Rationale | Vehicles |
|---|---|---|---|
| Industrial | 30% ($300k) | Highest 10-yr return, lowest operational complexity, broadly diversifying | 1-2 single-asset deals or 1 fund commitment |
| Multifamily (non-Sun-Belt) | 25% ($250k) | Depreciation flow-through, value-add IRR, post-correction entry | 2-3 single-asset deals in supply-constrained markets |
| Self-storage | 20% ($200k) | Yield resilience, low capex, low volatility | 1 fund commitment to a specialist sponsor |
| MHP | 15% ($150k) | Lowest volatility, sticky cash, demographic tailwind | 1 fund commitment to a verified MHP operator |
| Reserve / opportunistic | 10% ($100k) | Capital available for tactical opportunities (distressed, special situation) | Cash or short-duration fixed income |
This allocation is structurally diversified across return profiles, operational risks, and tenant types. It avoids the largest current overbuild (Sun Belt multifamily). It accepts higher manager-selection risk in MHP and self-storage where specialist sponsors matter more than in multifamily and industrial.
Scenario Matrix
| Scenario | Profile | Best fit asset class | Why |
|---|---|---|---|
| 1 | High W-2 needs depreciation flow-through | Multifamily | Largest cost-segregation deductions |
| 2 | Retiree wanting steady distributions, low drawdown | MHP | Lowest volatility, sticky cash flow |
| 3 | Sophisticated allocator wanting alpha with low operations risk | Industrial | Best 10-yr return per unit of operational complexity |
| 4 | LP wanting yield resilience through cycles | Self-storage | Demand resilience proven across 2008, 2020, 2022 |
| 5 | 1031 trigger, wants institutional product | DST in industrial or multifamily | Largest DST product universe; quality varies |
| 6 | Concerned about rent control risk in coastal markets | Industrial | Lowest regulatory exposure |
| 7 | Believes in long-term US housing affordability crisis | MHP | Most affordable home ownership remaining; structurally inelastic |
| 8 | Wants exposure but doesn't trust any specialist sponsor | Multifamily or industrial | Largest sponsor universe; lower manager-selection risk |
The four asset classes do not rank against each other on absolute terms. They rank differently for different investor objectives. The LP who matches asset class to objective compounds. The LP who chases the highest stated return without understanding the operational and structural cost loses ground over time.