Multifamily & Single-Family Show Leasing Divergence in the Second Quarter

The second quarter earnings report for Equity Residential (EQR), Essex Property Trust (ESS), and Mid-America Apartment Communities (MAA) highlights the multifamily market’s resilience despite challenges this quarter.

EQR reported a 2.9% rise in same-store revenue and a 2.7% rise in expenses. According to BisNow, “Equity Residential acquired one property and sold two in the second quarter, according to the earnings report. It purchased the recently completed 160-unit Helix Apartments in suburban Boston for $62.6M in May at a 5.7% capitalization rate.” [1]

CEO Mark Parrell noted, “Steady demand across all of our markets has met limited supply in our coastal established markets” [2]. This is being driven by high homeownership costs and a limited for-sale inventory in a well-established employed market. Their expansion markets, Atlanta and Austin, faced pressure from high supply levels. However, strong demand supported Northeastern markets. Strategic allocation within EQR has included acquisitions in suburban markets that including Atlanta, Boston, and Dallas.

ESS exceeded its guidance for core FFO per share by $0.05. CEO Angela Kleiman emphasized strong demand in western markets, especially in NorCal and Seattle. Job openings by technology companies and net positive domestic migration has allowed this region to be desirable. “The rate of income growth has outpaced rent growth, which has improved affordability metrics in our markets” [3]. On the transaction side, ESS completed over $100 million in acquisitions in quarter two, focusing on well-located, newer multifamily properties.

Mid-America Apartment Communities (MAA) has also exceeded core FFO results, driven by once again a strong demand and steady occupancy. However, new lease rates show the supply wave starting to impact sunbelt markets. CEO Eric Bolton highlighted their diverse strategy of involving both large and mid-tier markets that helped to mitigate negative supply pressure [4]. Significant absorption in Q2 with job growth and strong household formation create new development projects to be expected in the coming months.

[1] Equity Residential Posts Bigger-Than-Expected $177M Profit, Stays In Buy Mode (bisnow.com)
[2] Equity Residential Second Quarter Earnings Transcript
[3] Essex Second Quarter Earnings Transcript
[4] Mid America Apartment Communities Second Quarter Earnings Transcript