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Market Outlook: Rent Vs. Buy Premium Drives Strong Performance in Multifamily Sector


Favorable demand conditions as well as the limited supply of competitive housing types, such as existing single-family homes, continued to benefit public real estate investment trusts (REITs) in the third quarter. Despite largely positive results across the board for public-reporting companies—including strong lease renewal and occupancy rates—several REITs did note the delivery of new apartment supply as a potential headwind to rental rate growth among new residents.

Quarterly Results AvalonBay reported core funds from operations (


FFO) per share of $2.66 in the third quarter, a 6.4% increase compared with the third quarter of 2022. Same-store residential revenue increased 5.2% year over year to $625.3 million, while same-store residential net operating income (NOI) increased 5.3% to $432.9 million.

At Equity Residential, FFO per share increased $0.06 year over year to $0.96 in the fiscal third quarter. Same-store revenue increased 4.1% compared with the third quarter of 2022, but the REIT says revenue was negatively impacted by weaker than expected performance in San Francisco and Seattle.

Camden Property Trust reported core FFO per share improved $0.04 per share to $1.73 in the third quarter. Same-property revenues increased 4.1% year over year, and same-property NOI grew 3.5% compared with the third quarter of 2022.

FFO per share also grew on a year-over-year basis at UDR, improving 7% to $0.61 per share in the third quarter. The REIT generated total revenue in the quarter of $410.1 million, a 4.8% improvement compared with the third quarter of 2022. The company attributed the increase to growth in revenue from same-store communities and “past accretive external growth investments.”

At Essex Property Trust, core FFO per share increased 2.4


% year over year to $3.78 per share. Same-property revenue for the REIT increased 3.2% compared with the third quarter of 2022.

MAA reported core FFO per share of $2.29 in the third quarter compared with $2.19 per share in the prior-year period. The REIT’s same-store portfolio increased revenue by 4.1% on a year-over-year basis and increased same-store NOI by 3.7% in the quarter.

Elme Communities delivered core FFO of $21.4 million, or $0.24 per share, up over 4% compared with the same period in 2022. The REIT said the increase was primarily driven by rental rate growth. Same-store multifamily NOI increased 7.3% year over year, and Elme Communities reported a net loss of $43.6 million in the third quarter.

In the third quarter, Veris Residential reported core FFO per share of $0.12. Additionally, the company reported same-store NOI grew by 17.1% on a year-over-year basis.

Commentary and Forward-Looking Outlook “Our strong operating performance also speaks to our portfolio positioning, which is 70% suburban and primarily in suburban coastal markets, which continue to benefit from a combination of steady demand and limited new supply. … We do believe that we are well-positioned given our low leverage, ample liquidity, and unique strategic capabilities to capitalize on opportunities that might result from market dislocations.” —Benjamin Schall, president and CEO, AvalonBay



“While job growth expectations for 2024 are lower than 2023 levels, we’ll continue to benefit from demand from a well-employed resident demographic, [who] we think are going to rent with us longer, given the cost of single-family ownership and powerful social trends like delayed marriage and smaller families. We also see a significant benefit from lower deliveries of new supply in our established markets compared to the elevated deliveries in the Sun Belt markets over the next few years.” —Mark Parrell, president and CEO, Equity Residential



“Fundamentals for our business are good overall, taking the challenges and the opportunities together. On the demand side, growth remains robust. U.S. consumer demographics continue to be supportive of apartment demand. The buy-to-rent premium today is at 30-year highs, with homeownership out of reach for many people. This should increase the apartment business share of the housing market at least through 2026.” —Richard Campo, chairman and CEO, Camden Property Trust

“Continued strength in renewal lease rate growth, occupancy, incremental income from our innovative operating initiatives, and positive rent collection trends enabled us to achieve 2.3% sequential same-store revenue growth on a straight-line basis in the third quarter. Resident financial health remains resilient, but elevated new apartment supply is resulting in less robust pricing power than we had previously expected for the latter part of the third quarter and into the fourth quarter.” —Mike Lacy, senior vice president of operations, UDR

“Unlike many other U.S. markets, total housing supply in our markets is expected to remain at low levels. And we do not see a near-term catalyst for increasing housing supply growth in the Essex markets. This supply landscape also minimizes our risk to job growth relative to other markets, especially if we encounter a softer demand environment and will be a tailwind for Essex when the economy accelerates.” —Angela Kleiman, president and CEO, Essex Property Trust



“Stable employment conditions along with continued positive migration trends to our markets and historically low resident move-outs are combining to drive solid demand. The delivery of new apartment supply is currently impacting rent growth performance associated with new move-in residents, and we expect this pressure to persist for another few quarters. The volume of new apartment starts has begun to decline, and we expect that leasing conditions will be supportive of higher rent growth in late 2024 as markets absorb the current development pipeline. MAA’s uniquely diversified portfolio, along with a strong operating platform and balance sheet, is well-positioned to work through the current new supply pipeline, as well as pursue new growth opportunities that are emerging.” —Eric Bolton, chairman and CEO, MAA

“With the execution risk related to transition to Elme management fully behind us, we are focused on realizing the full benefits of our new multifamily platform and delivering operational upside through 2025 and beyond.” —Steven Freish


tat, executive vice president and chief financial officer, Elme Communities

“The third quarter marked another period of positive results. We continued to outperform, reporting same-store NOI growth of over 17%, while rents across the multifamily sector saw widespread softening. We enter the next chapters of Veris Residential’s evolution from a position of strength, as we seek to continue creating value for our shareholders.” —Mahbod Nia, CEO, Veris Residential


ABOUT THE AUTHOR Vincent Salandro - Vincent Salandro is an associate editor for Builder. He covers products for the Journal of Light Construction and also has stories appearing in other Zonda publications. He earned a B.A. in journalism and a B.S. in economics from American University.


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