Bay Area REITs Report Strong Leasing Activity At Apartment Communities
A slowdown in rent growth has several public REITs boasting only moderate increases in income during the third quarter, but their portfolios are leasing quickly. An influx of new apartment deliveries this year and into next are keeping demand in check for the most part and skyrocketing rents have yet to be reported this year. Despite slower rent growth, new and existing apartments maintain high occupancy and strong leasing activity. Essex Property Trust, Equity Residential, Aimco and AvalonBay reported occupancy in the mid-90s by the end of the third quarter.
Check out how these REITs performed so far this year below:
Equity Residential
Year-To-Date Net Operating Income for San Francisco: $215M (+2.5%)
Total Units: 12,959
Weighted Average Physical Occupancy: 95.9%
Equity Residential’s under-development project in San Francisco, 855 Brannan, was 94% completed by the end of the third quarter and 40% leased. It is expected to be completed during Q1. Average rental rates across Equity Residential's San Francisco properties averaged $3,056 during the quarter and $2,937 year-to-date, compared to $2,914 from the year-ago quarter and $2,863 for the first nine months of 2016.
While San Francisco’s job growth is slowing compared to previous years, Equity Residential expects strong demand to continue. Same-property revenues increased 2.2% during the first nine months of the year, which was ahead of the company’s expectations. The company expects to produce same-property revenue growth in San Francisco of 2.1% through 2017 compared to its previous expectation of an increase of 1.8%.
Essex Property Trust
Total Bay Area Rental Units: 20,806 (As of Oct. 30, including those under development)
Average Daily Occupancy: 96.9%
Essex Property has four major multifamily projects totaling 1,782 units under development, including three phases at Station Park Green in San Mateo. Average monthly rent across its Northern California portfolio increased slightly to $2,645 as of Sept. 30, compared to $2,611 a year ago. Gross same-property revenue year-to-date was $327M, a 2.6% increase from $318M year-to-date in 2016.
Aimco
Year-To-Date Same-Property Net Operating Income for Bay Area: $26M (+3.1%)
Total Bay Area Rental Units: 3,236
Average Daily Occupancy: 96.7%
Average Bay Area revenue per apartment at Aimco increased to $2,926 in Q3 2017 compared to $2,786 in Q3 2016. The Bay Area represented 11.9% of the company's total net operating income in Q3 2017 compared to 10.3% in Q3 2016.
Redevelopments of Class-B apartments have resulted in strong lease-ups. The REIT also reported strong leasing activity of a redeveloped property in San Jose, named Saybrook Pointe, and leased 66 redeveloped homes. That community reached 98% occupancy during the quarter. The developer also opened a new 463-unit apartment community, dubbed Indigo, in Redwood City earlier this year.
AvalonBay
Year-To-Date Net Operating Income for Northern California: $193M (+1.9%)
Total Bay Area Rental Units: 10,321
Economic Occupancy: 95.5%
Average rents for AvalonBay’s Northern California portfolio were stable year-to-date, increasing only 1% to $2,834 compared to $2,805 year-to-date in 2016. Rental revenue increased by 1.5% to $252M year-to-date compared to $248M year-to-date in 2016.
AvalonBay has two Bay Area apartments under development with Avalon Dogpatch expected to deliver by Q3 2018. As of Sept. 30, the complex was about 34% complete and about 32% leased. Average rents are $4,170, its second-highest rent for a project under development. Avalon Public Market is expected to deliver in Q3 2019 in Emeryville. Average rents for that project will be $3,605.
