Public real estate investment trusts (REITs) highlighted the same positive trends that have benefited the multifamily sector in recent quarters during their latest earnings calls.
Companies continued to highlight low turnover numbers in the second quarter, benefiting from limited affordable options in the for-sale housing market. MAA and Camden Property Trust reported the level of resident move-outs associated with buying single-family homes remained at historically low levels. Camden chairman and CEO Richard Campo noted the monthly cost of owning a home “is about 60% more than leasing an apartment,” and the renting premium “is not going to change anytime soon.” In addition, according to AvalonBay, that low resident turnover not only supported relatively stable occupancy but drove higher rent change throughout the second quarter.
While the overall employment picture is softening, with the unemployment rate in July reaching 4.3%, public REITs said employment trends among their renters remain favorable. For example, at Equity Residential, president and CEO Mark Parrell noted the employment picture for the company’s target higher-earning renter demographic remained steady in the second quarter.
In addition to sharing financial and operational results, several public companies took time on their earnings calls to highlight the rollout of technology operationally. In recent quarters, Elme Communities has successfully introduced several new technologies, including an artificial intelligence (AI) platform that manages electronic communication with residents, automates payment and collection efforts, and handles maintenance service requests. At Veris Residential, the REIT’s AI-based leasing assistant Quinn converted 34% of leads into tours in the quarter and answered over 60,000 messages, saving an estimated 5,000 staff hours.
Quarterly Results
AvalonBay increased core funds from operations (FFO) per share by 3% on a year-over-year basis in the second quarter to $2.75. The REIT reported same-store total revenue increased 3.2% to $672.9 million, same-store residential revenue increased 3.2% to $666.2 million, and same-store residential net operating income (NOI) increased 3% to $462 million in the quarter.
Equity Residential generated FFO per share of $0.94 in the second quarter, a 1.1% improvement on a year-over-year basis. Same-store revenue increased 2.9%, driven by strong demand and “modest supply” across the REIT’s markets. Same-store NOI increased 3% in the quarter.
Camden Property Trust’s core FFO per share increased by $0.01 to $1.71 in the second quarter, while same-property revenue grew by 1.4% year over year. Same-store NOI improved by 0.9% compared with the second quarter of 2023.
UDR generated core FFO per share of $0.60, down 5% from the prior year but within the REIT’s guidance for the quarter. Same-store revenue and NOI both increased in the second quarter, by 2.5% and 2% year over year, respectively.
Essex Property Trust’s core FFO per share improved by 4.5% year over year to $3.94 in the second quarter. The REIT also achieved same-property revenue and NOI growth of 3.4% and 3%, respectively, compared with the second quarter of 2023.
MAA’s core FFO per share declined to $2.22 in the second quarter from $2.28 per share in the same period in 2023. The REIT’s same-store portfolio grew revenue by 0.7%, while same-store NOI decreased by 1%.
At Elme Communities, core FFO per share declined by $0.01 on a year-over-year basis to $0.23. Same-store NOI increased by 1.3% compared with the prior-year period.
Veris Residential reported growth of core FFO per share to $0.18 in the second quarter compared with $0.16 in the second quarter of 2023. The REIT reported same-store NOI growth of 7.9% on a year-over-year basis and 3.1% on a sequential basis.
Management Commentary and Outlook
“Sectors of the economy that encompass our core customer are at effectively full employment with stable job and income prospects. We also continue to benefit from customers’ strong tilt toward renting versus buying a home, given the lack of for-sale inventory and unaffordability. We [also] continue to benefit from the low levels of new in our suburban coastal markets, a dynamic that should continue to benefit our portfolio versus most of the rest of the sector for another 12 to 18 months.” —Benjamin Schall, president and CEO, AvalonBay
“Underlying [our] positive results and outlook are several trends that continue to support rental housing performance, including high homeownership costs, limited for-sale inventory, and a steady though moderating employment picture. We continue to see high levels of retention among our residents due to elevated homeownership costs, making rental housing a good value alternative.” —Parrell
“Demographic trends continue to be a tailwind, supporting demand for high propensity to rent groups, including young adults aged 35 and under. Apartments should take a larger share of household formations given these demand drivers. 2024 demand should be sufficient despite supply concerns to set up accelerating rent growth in 2025 and 2026, assuming that the overall economy continues the current trajectory.” —Campo
“We feel good about year-to-date results and the opportunities ahead of us in the second half of the year. However, we also remain cognizant of the slowing growth rate in the recent employment data and the effect that may have on pricing in the face of still-elevated new supply through the rest of 2024.” —Tom Toomey, chairman and CEO, UDR
“Demand for West Coast multifamily has exceeded our expectations [year to date], particularly in the Northern California and Seattle regions. While we’ve traditionally relied on the BLS to assess housing demand, the reported data have not correlated to the strength we’re experiencing on the ground. As such, we’ve analyzed alternative demand indicators from third-party sources for better insights into the key drivers supporting demand, [including] job openings at the top 20 technology companies.” —Angela Kleiman, president and CEO, Essex Property Trust
“MAA’s strategy has long focused on positioning our portfolio to capture higher full-cycle demand to drive superior long-term value growth. To best mitigate the occasional periods of supply pressure, we have a unique portfolio of diversification strategies involving large and mid-tier markets. Further, by appealing to a broad segment of the rental market with a more affordable price point, we believe we are able to drive higher demand and absorption across our portfolio. We continue to believe that new supply deliveries across our markets are currently peaking, and we expect to see the volume of new deliveries decline over the back half of this year with 2025 ushering in a new multiyear period where the growing demand for apartment housing will exceed the level of new competing supply.” —Eric Bolton, chairman and CEO, MAA
“While supply remains elevated, it is not expected to increase materially above the current levels in any of our submarkets, and we expect the overall level of demand relative to supply to continue to improve through 2025. Moreover, units under construction and new starts have declined significantly, pointing to better conditions in 2025 and highly favorable supply-demand dynamics forecasted for 2026 and 2027.” —Paul McDermott, president and CEO, Elme Communities
“The second quarter marked another period of strong operational and financial results for Veris, reflecting continued progress across a number of initiatives aligned with our three-pronged value creation plan. … Affordability remained healthy with an average rent-to-income ratio of around 12% in the second quarter.” —Mahbod Nia, CEO, Veris Residential
