Essex CEO Sees Chronic Housing Shortage in California

Michael Schall, president and CEO of Essex Property Trust, Inc. (NYSE: ESS), joined REIT.com for a CEO Spotlight video interview at REITWorld 2015: NAREIT’s Annual Convention for All Things REIT at the Wynn Las Vegas.

Essex invests in transit-accessible urban and suburban apartment assets within the coastal California and Seattle markets. Schall described the ongoing housing shortage on the West Coast.

“It’s been building for the last several years. We see undersupplied conditions as it relates to all housing,” Schall said.

The combination of robust job growth, mainly from the technology sector, and less than 1 percent supply growth “is of great benefit to us,” Schall added.

Schall emphasized that all of coastal California is undersupplied. The limited supply of housing that is being created is predominantly apartment properties, Schall said. However, the level of supply growth is not matching demand.

“I don’t see anything changing that outlook in the next couple of years because it takes a fair amount of lead time to make those dynamics change,” Schall observed.

“We see chronically undersupplied housing conditions in the California urban coastal market s and a lot of momentum in terms of rent growth going forward,” he added.

Meanwhile, Essex’s suburban assets are outgrowing their urban counterparts by 2 to 3 percent on an annualized basis, Schall said.

“Renters are most concerned about their commute and the affordability of their housing,” Schall said. For-sale housing has increased rapidly in areas where housing was expensive to begin with, Schall remarked, which has pushed increasing numbers of potential homeowners into rental properties.