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How Are Residential REITs Positioned in Q2 as Demand Stays Resilient?
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Key Takeaways
The U.S. apartment market absorbed more than 227K units in Q2, signaling strong renter demand.
AVB saw a 3% rise in same-store residential revenues and occupancy of 96.3% through May.
EQR, ESS and UDR also posted strong occupancy, aided by tech markets and low homeownership affordability.
The U.S. apartment market remained impressively resilient in the second quarter of 2025, absorbing more than 227,000 units between April and June, a robust second-quarter figure. According to RealPage data, annual absorption surpassed even the peak leasing surge of 2021 and early 2022, defying a backdrop of slowing job growth, weak business sentiment and broader economic uncertainty.
This signals good for residential REITs like AvalonBay Communities, Inc. (AVB - Free Report) , Equity Residential (EQR - Free Report) , Essex Property Trust, Inc. (ESS - Free Report) and UDR, Inc. (UDR - Free Report) . Elevated absorption suggests that the renter appetite for professionally managed apartments is holding firm despite broader macro uncertainty.
While rent growth stayed muted, up just 0.19% in June, occupancy climbed steadily. At 95.6% in June, national occupancy rose 140 basis points year over year. Operators appear focused on maximizing occupancy, even if it means sacrificing rent increases. This “heads-in-beds” approach supports stability during a period of high new supply. However, with operators sharply focused on maximizing occupancy in the months ahead, the use of concessions is likely to increase, potentially masking underlying rent growth until those incentives phase out.
Supply, though moderating, remains historically elevated. More than 535,000 units were completed in the past year, with roughly 108,000 delivered in the second quarter alone. Yet the market’s ability to digest this volume underscores its underlying strength.
Regionally, tech-driven markets like San Francisco and San Jose, as well as Boston and New York, gained momentum — likely aided by easing supply and increased return-to-office trends. Sun Belt markets, such as Dallas, Atlanta and Jacksonville, also showed signs of recovery in the second quarter, sustaining robust demand amid declining deliveries. Tourism-dependent cities, like Las Vegas, Orlando, and Nashville, faltered slightly, possibly reflecting softening discretionary spending. Supply-heavy markets like Austin, Phoenix and Denver continued to see the sharpest rent cuts.
How Are Residential REITs Placed Ahead of Q2 Earnings?
AvalonBay Communities: AVB has established itself as a leading player in the residential REIT sector, with a strong portfolio of high-quality apartment communities. The company's geographic diversification, focus on urban infill locations and disciplined capital allocation have positioned it favorably.
In an operating update, AvalonBay disclosed that for the two months ended May 31, 2025, the company experienced a 3% year-over-year increase in same-store residential revenues, exceeding its internal projections by 35 basis points. Occupancy remains strong at 96.3%, ahead of the 96% experienced in the first quarter, and like-term effective rent change improved from 1.7% in the first quarter to 2.3% in April and May.
AvalonBay is set to announce its second-quarter 2025 earnings on July 30, after market close. The Zacks Consensus Estimate of $761.75 million for second-quarter revenues suggests a 4.92% year-over-year increase. The Zacks Consensus Estimate for the quarterly core FFO per share of $2.80 implies year-over-year growth of 1%.
Equity Residential: EQR boasts a portfolio of high-quality apartment units in some of the key markets of the United States with an affluent tenant base. Improving demand and limited resident turnover have helped sustain the occupancy level and driven rental rates higher, supporting same-store revenue growth in the first quarter of 2025. Per its investor update, physical occupancy remained strong and above the prior year in April and May.
The high cost of home ownership is likely to keep renter demand up in its markets. The company’s diversification efforts into the suburban markets to capture rising demand are encouraging. A focus on technology to drive margin expansion augurs well.
Equity Residential is scheduled to release its second-quarter 2025 earnings on August 4, after market close. Currently, the Zacks Consensus Estimate for EQR’s quarterly revenues stands at $769.26 million, indicating a 4.78% increase year over year. The Zacks Consensus Estimate for the quarterly normalized FFO per share of 99 cents suggests year-over-year growth of 2.1%.
Essex Property Trust: This residential REIT’s substantial exposure to the West Coast market has offered ample scope to enhance its top line. The West Coast is home to several innovation and technology companies that drive job creation and income growth. This region has higher median household incomes, an increased percentage of renters than owners and favorable demographics.
Also, due to the high cost of homeownership amid still elevated interest rates, the transition from renter to homeowner is difficult, making renting apartment units a more flexible and viable option.
Essex Property Trust is set to announce its second-quarter 2025 earnings results on July 29, after market close. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $469.19 million. This suggests a 6.07% year-over-year rise. The Zacks Consensus Estimate for the quarterly core FFO per share of $3.99 also calls for year-over-year growth of 1.27%.
UDR: This residential REIT is well-poised to benefit from its diversified portfolio with a superior product mix of A/B quality properties in the coastal and Sunbelt markets. Healthy demand for rental units in its markets amid favorable demographic trends is likely to benefit the company. Efforts to leverage technological moves to enhance operational efficiency and drive margin expansion augur well.
UDR’s May investor presentation highlighted that key operating metrics, across revenue and expense growth, were tracking above the midpoints of its full-year guidance. Occupancy remained strong at nearly 97%, and blended lease rate growth continued to improve sequentially heading into Q2.
UDR is set to announce its second-quarter 2025 earnings results on July 30, after market close. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $422.24 million. This indicates a 2.15% year-over-year rise. However, the consensus mark for FFO as adjusted per share of 62 cents calls for no change year over year.
Here’s how AVB, EQR, ESS and UDR have performed over the past three months.
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.
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How Are Residential REITs Positioned in Q2 as Demand Stays Resilient?
Key Takeaways
The U.S. apartment market remained impressively resilient in the second quarter of 2025, absorbing more than 227,000 units between April and June, a robust second-quarter figure. According to RealPage data, annual absorption surpassed even the peak leasing surge of 2021 and early 2022, defying a backdrop of slowing job growth, weak business sentiment and broader economic uncertainty.
This signals good for residential REITs like AvalonBay Communities, Inc. (AVB - Free Report) , Equity Residential (EQR - Free Report) , Essex Property Trust, Inc. (ESS - Free Report) and UDR, Inc. (UDR - Free Report) . Elevated absorption suggests that the renter appetite for professionally managed apartments is holding firm despite broader macro uncertainty.
While rent growth stayed muted, up just 0.19% in June, occupancy climbed steadily. At 95.6% in June, national occupancy rose 140 basis points year over year. Operators appear focused on maximizing occupancy, even if it means sacrificing rent increases. This “heads-in-beds” approach supports stability during a period of high new supply. However, with operators sharply focused on maximizing occupancy in the months ahead, the use of concessions is likely to increase, potentially masking underlying rent growth until those incentives phase out.
Supply, though moderating, remains historically elevated. More than 535,000 units were completed in the past year, with roughly 108,000 delivered in the second quarter alone. Yet the market’s ability to digest this volume underscores its underlying strength.
Regionally, tech-driven markets like San Francisco and San Jose, as well as Boston and New York, gained momentum — likely aided by easing supply and increased return-to-office trends. Sun Belt markets, such as Dallas, Atlanta and Jacksonville, also showed signs of recovery in the second quarter, sustaining robust demand amid declining deliveries. Tourism-dependent cities, like Las Vegas, Orlando, and Nashville, faltered slightly, possibly reflecting softening discretionary spending. Supply-heavy markets like Austin, Phoenix and Denver continued to see the sharpest rent cuts.
How Are Residential REITs Placed Ahead of Q2 Earnings?
AvalonBay Communities: AVB has established itself as a leading player in the residential REIT sector, with a strong portfolio of high-quality apartment communities. The company's geographic diversification, focus on urban infill locations and disciplined capital allocation have positioned it favorably.
In an operating update, AvalonBay disclosed that for the two months ended May 31, 2025, the company experienced a 3% year-over-year increase in same-store residential revenues, exceeding its internal projections by 35 basis points. Occupancy remains strong at 96.3%, ahead of the 96% experienced in the first quarter, and like-term effective rent change improved from 1.7% in the first quarter to 2.3% in April and May.
AvalonBay is set to announce its second-quarter 2025 earnings on July 30, after market close. The Zacks Consensus Estimate of $761.75 million for second-quarter revenues suggests a 4.92% year-over-year increase. The Zacks Consensus Estimate for the quarterly core FFO per share of $2.80 implies year-over-year growth of 1%.
Equity Residential: EQR boasts a portfolio of high-quality apartment units in some of the key markets of the United States with an affluent tenant base. Improving demand and limited resident turnover have helped sustain the occupancy level and driven rental rates higher, supporting same-store revenue growth in the first quarter of 2025. Per its investor update, physical occupancy remained strong and above the prior year in April and May.
The high cost of home ownership is likely to keep renter demand up in its markets. The company’s diversification efforts into the suburban markets to capture rising demand are encouraging. A focus on technology to drive margin expansion augurs well.
Equity Residential is scheduled to release its second-quarter 2025 earnings on August 4, after market close. Currently, the Zacks Consensus Estimate for EQR’s quarterly revenues stands at $769.26 million, indicating a 4.78% increase year over year. The Zacks Consensus Estimate for the quarterly normalized FFO per share of 99 cents suggests year-over-year growth of 2.1%.
Essex Property Trust: This residential REIT’s substantial exposure to the West Coast market has offered ample scope to enhance its top line. The West Coast is home to several innovation and technology companies that drive job creation and income growth. This region has higher median household incomes, an increased percentage of renters than owners and favorable demographics.
Also, due to the high cost of homeownership amid still elevated interest rates, the transition from renter to homeowner is difficult, making renting apartment units a more flexible and viable option.
Essex Property Trust is set to announce its second-quarter 2025 earnings results on July 29, after market close. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $469.19 million. This suggests a 6.07% year-over-year rise. The Zacks Consensus Estimate for the quarterly core FFO per share of $3.99 also calls for year-over-year growth of 1.27%.
UDR: This residential REIT is well-poised to benefit from its diversified portfolio with a superior product mix of A/B quality properties in the coastal and Sunbelt markets. Healthy demand for rental units in its markets amid favorable demographic trends is likely to benefit the company. Efforts to leverage technological moves to enhance operational efficiency and drive margin expansion augur well.
UDR’s May investor presentation highlighted that key operating metrics, across revenue and expense growth, were tracking above the midpoints of its full-year guidance. Occupancy remained strong at nearly 97%, and blended lease rate growth continued to improve sequentially heading into Q2.
UDR is set to announce its second-quarter 2025 earnings results on July 30, after market close. The Zacks Consensus Estimate for quarterly revenues is currently pegged at $422.24 million. This indicates a 2.15% year-over-year rise. However, the consensus mark for FFO as adjusted per share of 62 cents calls for no change year over year.
Here’s how AVB, EQR, ESS and UDR have performed over the past three months.
Price Performance
Image Source: Zacks Investment Research
Currently, AvalonBay, Equity Residential, Essex Property Trust and UDR carry a Zacks Rank of 3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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.