Multifamily REITs Seeing Strong Demand in Core Markets

Multifamily REITs continue to benefit from strong demand across most of their core markets, according to CEOs presenting at Nareit’s REITweek: 2019 Investor Conference.

Equity Residential (NYSE: EQR) President and CEO Mark Parrell described demand across all of the company’s markets as “vibrant,” with a portfolio occupancy rate of about 96.7%.

“Demand is actually higher than it was this time last year,” and is likely to accelerate for the next few years, he said.

Michael Schall, president and CEO of Essex Property Trust, Inc. (NYSE: ESS), a REIT that concentrates solely on the West Coast, noted that California continues to produce more jobs than housing—a condition that has been in place for the last 30 years.

Eric Bolton, Jr., chairman and CEO of MAA (NYSE: MAA), a REIT with a Sunbelt focus, said the company continues to see “incredibly strong” demand. “Broadly, the demand for our product continues to show real strength,” he noted.

MAA is seeing historically-low resident turnover, and average rent increases of 7% on renewal transactions. At the same time, “rent growth for new leases is really starting to move up,” Bolton said.

The average age of an Equity Residential tenant is 33 years old, earning an average of $158,000, while rent accounts for 19% of their income. “We believe we have the best customer in the business,” Parrell said, offering Equity Residential “a lot of headroom to raise rents.”

MAA’s tenants are also spending about 19 to 20% of their income on rent, while average incomes are in the $65,000 to $75,000 range. “We continue to see no pressures around affordability,” Bolton said.

Meanwhile, REIT executives highlighted the growing role technology is playing across the industry.

Michael Manelis, COO at Equity Residential, said that in the next 18 to 24 months, “we won’t be running the portfolio the same way” due to technology changes.

Schall noted that Essex is part of an industry consortium investing in a venture capital fund focused on real estate technology. “We’re funding a lot of great ideas,” he said.

Bolton added that emerging technology presents “one of the most exciting opportunities we have,” with the potential to impact leasing, resident support, and on-site staffing.