AvalonBay Communities, Inc. ( AVB Quick Quote AVB - Free Report) reported a 13% increase in same-store residential rental revenues for the two months ended May 31, 2022 compared with the prior-year period. This is roughly 190 basis points higher than the company’s most recent expectation. In addition to better-than-expected occupancy and effective lease rates, this upside is driven by favorable underlying resident uncollectible lease revenues and the recognition of higher-than-expected delinquent rent payments from COVID-19 rental assistance programs. In the recently released second-quarter operating update, AvalonBay reported that the economic occupancy for its same-store residential communities improved to 96.5% in May from 96.4% in April. This also marked an increase from 96.3% in the first quarter of 2021. The like-term effective rent change for same-store residential communities improved to 13.8% in May from 13.6% in April. The figure also marked an increase from 12.9% in the first quarter. Per the operating update, the like-term effective rent change for AVB’s suburban communities improved to 11.6% in May from 11.4% in April and 10.9% in the first quarter. In the case of urban communities, although the like-term effective rent change slightly deteriorated to 18.5% in May from 19.4% in April, it was up from 17.8% in the first quarter. Region-wise, Southeast Florida reported a whopping 21.4% like-term effective rent change in May, while the Metro NY / NJ and Pacific North West reported a 17.2% and 17.1%, respectively, like-term effective rent change in May. With the reopening of offices and the returning of lifestyle amenities to established markets, a continued flow of residents is observed in the urban and job-centered suburban markets, which is encouraging. Moreover, de-densification and the desire for more space are resulting in fewer adults per apartment, thereby creating incremental demand for renting units. Also, the higher household income is supporting rent growth. There is strong demand from young adults who are gaining from tight labor market conditions and record wage growth. Also, due to the high cost of homeownership, the transition from renters to homeowners is difficult, making the renting of apartment units a viable option. With these positives, residential REITs are expected to experience a solid peak leasing session with high occupancy and rent growth. In terms of markets, while there is a rebound in the demand for coastal markets, Sun Belt markets too continued to experience high demand compared to the supply, which is encouraging. Currently, AvalonBay carries a Zacks Rank of 3 (Hold). You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Shares of AVB have declined 3.4%, narrower than the industry's fall of 4.2% over the past year. Image Source: Zacks Investment Research Stocks to Consider Some key picks from the REIT sector include Mid-America Apartment Communities, Inc. ( MAA Quick Quote MAA - Free Report) , Independence Realty Trust, Inc. ( IRT Quick Quote IRT - Free Report) and BRT Apartments Corp. ( BRT Quick Quote BRT - Free Report) . Mid-America Apartment Communities holds a Zacks Rank of 2 (Buy) at present. Mid-America Apartment’s 2022 revenues are expected to increase 11% year over year. The Zacks Consensus Estimate for MAA’s 2022 funds from operations (FFO) per share has been revised 1.2% upward in the past week to $8.17. The Zacks Consensus Estimate for Independence Realty Trust’s 2022 FFO per share has moved marginally north to $1.05 over the past month. Currently, Independence Realty Trust carries a Zacks Rank of 2. BRT Apartments sports a Zacks Rank of 1 at present. BRT Apartments’ long-term growth rate is projected at 6%. The Zacks Consensus Estimate for BRT’s 2022 FFO per share has been revised 18.5% upward in the past month to $1.54. Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.