Essex Property Trust CEO Says Rental Affordability Increasingly Constraining Rent Growth

Michael Schall, president and CEO of Essex Property Trust (NYSE: ESS), joined Nareit in New York for a video interview at REITweek: 2019 Investor Conference.

Schall said that rental affordability has become a growing concern on the West Coast because rents have been outpacing income growth.

“We’re seeing that more and more as a constraint to growing rents, especially in the more affordable price points,” Schall said.

He said that in mixed-use development, Essex sees an opportunity to provide services that are synergistic with the resident experience, including coffee shops and food venues, although sometimes is challenged to find the right tenants.

Schall said that construction costs are a big factor when it comes to building a pipeline for development deals, and that when construction costs grow faster than rents, yields can be squeezed. He said that although Essex is having some difficulty replacing its development pipeline, it has made up some of that deficit by financing development deals for other companies as a preferred equity provider.

Schall added that the REIT’s shareholders play a large role in shaping its overall sustainability strategy and that Essex has a robust sustainability program. The company will publish its first corporate sustainability report in the coming months.