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AvalonBay (AVB) Sees Growth in May Occupancy, Asking Rent

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AvalonBay Communities, Inc. (AVB - Free Report) is witnessing improvements in occupancy level as well as like-term effective rents in May. Also, the average asking rent climbed from the fourth-quarter 2020, while the average concession per new move-in lease executed in May 2021 declined from the fourth-quarter level.

In the recently-released second-quarter operating update, this residential REIT reported that the average physical occupancy for its established communities improved to 96% in May from 95.7% in April. This also marks an increase from 95% in first-quarter 2021 as well as 93.9% in fourth-quarter 2020.

As anticipated, suburban communities are enjoying better occupancy compared with urban communities. The average physical occupancy for suburban communities improved to 96.3% in May, from 96.1% in April and 95.5% in first-quarter 2021 and 94.9% in fourth-quarter 2020. In case of urban communities, average physical occupancy improved 95.1% in May, from 94.5% in April and 93.6% in first-quarter 2021 and 91.4% in fourth-quarter 2020.

Per the operating update, the like-term effective rent change for established communities was a negative 1.9% in May. This marks an improvement from a negative 5.1% in April, a negative 8.3% in the first quarter and 11% in fourth-quarter 2020. While Northern California recorded the sharpest May rent slump, marking an 8.3% decline, Denver and Southeast Florida saw notable recovery, with 9.5% and 6.8% increase, respectively, in the month.

AvalonBay also witnessed an increase in average move-in rent value, which climbed to $2,436 in May from $2,340 in April and $2,248 in fourth-quarter 2020. This reflects an increase of 8.3% from fourth-quarter 2020 to May 2021.

The average asking rent in May 2021 was approximately 14% above the average monthly asking rent during fourth-quarter 2020. Moreover, average concession per new move-in lease executed in May was $465 compared with $1,872 during fourth-quarter 2020.

The company also reaffirmed its second-quarter outlook for established communities total residential rental revenue change, which is expected to decrease 5.5%, year on year, leading to a 0.0% change in established communities total residential rental revenues compared to first-quarter 2021.

For the U.S. apartment market, the first quarter, which is typically a slow leasing period in other years, appeared to be a solid one this year, with impressive demand for rental units, thanks to employment growth that spurs household formation and housing absorption. In addition, the recovery continued in April and May, with improvement in rental rate and healthy occupancy levels, which is encouraging.

The widespread vaccinations and reopening of local economies are raising hopes for residential REITs, including AvalonBay, Equity Residential (EQR - Free Report) , Essex Property (ESS - Free Report) and UDR Inc. (UDR - Free Report) . Improvement in the job market and a significant household formation among young adults are helping in this buoyancy in rental demand.

Further, though the conversion of renters to homeowners has been bogging the residential real estate market for the past year, the substantial increase in for-sale home prices is restricting the number of renters who can afford to purchase, in turn, aiding rental demand.

Currently, AvalonBay, Equity Residential, Essex Property and UDR Inc. carry a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Here’s the price performance chart of the above-mentioned residential REITs in the past six months.

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