Strong Operational Performance in 1st Quarter REITs Earnings Calls

With U.S. apartment supply having peaked for this cycle and demand remaining resilient nationwide, both performance and investment activity experienced strong gains in 1st quarter 2025. Both Coastal and Sun Belt-focused REITs reported that 1st quarter financial and operational performance exceeded expectations, with persistent strong demand alongside favorable wage growth. Still, the Sun Belt region continues to recover from the recent supply wave, which has focused REIT investment strategies on operational improvements and competitive amenities. Conversely, Coastal REITs are aggressively expanding the magnitude of investment volume and development starts.

REITs with primarily coastal portfolio allocations include AvalonBay Communities, Essex and Equity Residential, though both AvalonBay and Equity Residential are increasingly expanding into Sun Belt expansion markets like Dallas, Austin, and Atlanta. REITs including Camden Property Trust, MAA and UDR primarily focus on Sun Belt markets, although UDR also operates in several coastal markets.

Improved Fundamentals Across Most Portfolios, Driven by Operational Performance

AvalonBay Communities reported that 1st quarter 2025 “same-store revenue was slightly ahead of plan, with modestly higher occupancy and lower inventory to lease compared to the prior year. April occupancy was roughly 30 basis points (bps) higher than the same period last year.”

Essex Property Trust also reported that the company's 1st quarter 2025 performance exceeded expectations, led by “stronger same-property revenue growth, higher co-investment portfolio NOI and favorable interest expense.” Management reported 2.8% blended net effective rent growth alongside a significant improvement in delinquency rates, particularly in Los Angeles, which dropped to 1.3% of scheduled rent from 3.9% a year ago. Northern California led new lease rate growth at 1.5%, followed by Seattle at 1.3%. Southern California trailed with 0.2% growth.

In a similar vein, Equity Residential’s CEO Mark Parrell stated that 1st quarter results exceeded expectations driven by “robust demand across all markets, supported by favorable supply-demand dynamics in rental housing.” Underscoring that, COO Michael Manelis reported “record-low resident turnover of 7.9%” with a physical occupancy rate of 96.5% across the portfolio. Manelis also noted strong market performance in New York, Washington, D.C., Seattle and San Francisco. CFO Robert Garechana also highlighted the “strong financial health of residents, with average rent-to-income ratios remaining at 20%.”

Camden Property Trust’s CEO Ric Campo highlighted that Camden exceeded operating expectations for the quarter, also noting that new apartment supply has peaked in their markets, “with starts at a 13-year low and significant reductions in key regions like Austin and Houston.” Same-property revenue growth for 1st quarter was 0.8%, with top-performing markets including Tampa, Los Angeles/Orange County, San Diego, Washington, D.C. and Houston. Leasing activity showed improvement, with 1st quarter occupancy averaging 95.4%, slightly up from the prior quarter.

MAA’s CEO Brad Hill reported that 1st quarter performance exceeded expectations, “driven by strong demand in occupancy, collections and pricing trends.” Hill emphasized the resilience of the portfolio, despite significant supply challenges, with “year-over-year occupancy increasing by 30 bps and average effective rent per unit declining only $9 compared to the same period last year.”

UDR’s CEO Tom Toomey stated that UDR's 1st quarter 2025 performance exceeded expectations in key metrics, with stronger-than-anticipated same-store revenue, expense and NOI growth. COO Mike Lacy attributed the improvement to “strategic leasing and operational measures,” resulting in a “blended lease rate growth of 0.9% year-over-year and a 32% annualized resident turnover rate, the lowest in over a decade.” Lacy also noted improvements across multiple regions, “with D.C. and Seattle showing particularly strong growth.”

Increased Investment Appetite for 2025 and Beyond

With lower vacancy and rents exhibiting higher rates of growth, multifamily investment picked up significantly in 1st quarter and REITs were no exception.

AvalonBay is targeting a $3B development pipeline and plans to commence $1.6 billion in development starts in 2025, with a focus on suburban submarkets and expansion regions. AvalonBay CEO Ben Schall highlighted progress in portfolio diversification, with 12% of the portfolio now in expansion regions and 73% allocated to suburban areas. He noted the East and West Coast markets, comprising 88% of the portfolio, are benefiting from strong occupancy and limited upcoming supply.

Essex CEO Angela Kleiman noted $345 million in acquisitions during 1st quarter 2025 in Northern California, funded through asset dispositions in Southern California, aligning with a strategy to optimize the portfolio for higher rent growth markets.

Equity Residential reaffirmed its 2025 guidance for acquisitions and dispositions, which remain at $1.5 billion and $1 billion, respectively.

With revenue constrained by the recent supply surge wave in the Sun Belt, investment activity in the region was less prominent than in the larger Coastal REITs. Still, Sun Belt REITs remain focused on higher population growth markets, with Coastal REITs also increasingly diversifying into these “expansion” markets now that supply levels are winding down.

Camden CEO Campo emphasized the strength of its Sun Belt assets, citing market-level dominance in job growth, population growth and young adult household formation. CFO Alex Jessett announced that Camden completed two acquisitions in 1st quarter worth $199 million and started construction on a $184 million development project in Nashville. Overall, Camden is “targeting $750 million in acquisitions and dispositions to optimize its portfolio.”

Development investments at MAA totaled $67 million in 1st quarter, with “plans to fund an additional $305 million over the next two to three years.” Hill also emphasized “investments in leasing and reporting tools, Wi-Fi rollout across the portfolio, and unit renovation and repositioning programs.”

UDR completed the sale of two communities in the New York metro area for $211.5 million and initiated development of a new project in Riverside. CEO Toomey emphasized “strategic focus areas including innovation, customer experience enhancements and capital deployment” with value-add initiatives consistently contributing to NOI growth.

2025 Guidance Largely Stays Unchanged, Despite Macroeconomics

AvalonBay reaffirmed its full-year 2025 guidance, noting that “market-specific strategies would be adjusted as needed, with flexibility to adapt to changes in transaction markets or economic conditions.” Equity Residential and Essex also reaffirmed their guidance for 2025, with Essex “citing confidence in the rental market despite macroeconomic uncertainties.”

Camden, MAA and UDR also held 2025 guidance steady.

Most Sun Belt REITs are projecting a return to rent growth in 3rd quarter. MAA reports that “mid-year improvements in new lease pricing are anticipated, with the expectation of slightly positive growth in the third quarter, driven by lower supply delivery and improving market conditions.” Likewise, UDR management projects “stronger performance anticipated in the second half of the year as supply pressures ease.”

Camden’s Campo noted that lease performance and stabilization in Nashville and Austin remain challenged but are expected to improve significantly by late 2025. This is consistent with RealPage forecasting as well.