For Chicago-based Equity Residential, the third quarter of 2024 had some hits and some misses.

“As is usually the case, we saw some items like occupancy and retention exceed our expectations, while others like blended rate came in lower in terms of our expectations,” CEO Mark Parrell said on the firm’s Q3 earnings call last month.

In Los Angeles, where occupancy is still an issue after pandemic-era eviction moratoriums expired, and the Sun Belt, where supply is a concern, EQR needed to drop rental rates and increase concessions.

The REIT didn’t have “pricing power near the tail end of the quarter,” said Michael Manelis, chief operating officer, on the call. But there were also positive signs. EQR posted 96.1% occupancy and its lowest turnover on record, as the firm saw strong demand in Q3. In its established coastal markets, which account for 90% of its portfolio, it saw little new supply. 

“Big picture, we continue to see a stable environment and a healthy consumer,” Parrell said. “Unemployment is low, and wage growth is steady, both of which bode well for our customers.”

Generally, EQR expects that stable environment to stretch into 2025, but same-store gains may not be realized until 2026 in the REIT’s expansion markets. 

Regional performance

Like other REITs, EQR saw hits to its occupancy and rent rates due to new supply in its expansion markets. Denver was the best performer, while Dallas had the best revenue growth, and Atlanta had the worst. 

“We continue to see demand, but it is a challenging operating environment for both new lease and retention given the amount of new supply,” Manelis said.

On the West Coast, Los Angeles produced headwinds due to new supply, less job growth than anticipated and lingering eviction issues. San Francisco and Seattle performed better than EQR’s modest expectations.

“The big recent story here [in Seattle] is the five-day-week return-to-office announcement from Amazon, which is the 800-pound gorilla in the market,” Manelis said. “For the past several weeks, our local team has reported increased interest from Amazon folks who are living further away from the office and looking for apartment homes in the downtown and South Lake Union submarkets.”

On the East Coast, Boston and New York City produced strong results and are well-positioned for future growth, according to Manelis. However, he said the Washington, D.C., market was “the rock star of 2024.”

“Demand feels good across all of our submarkets and is expected to continue but we do expect some pressure from deliveries in the fourth quarter, particularly in the central D.C. submarket,” Manelis said.

Looking ahead

EQR executives are optimistic about 2025, expecting it to “produce solid same-store revenue results,” according to Parrell.

“We see steady demand from a well-employed affluent renter base, a favorable supply picture [with] 90% of our NOI in the less supplied established markets and continuing cost and lifestyle preferences favoring rental housing,” Parrell said.

However, Parrell doesn’t expect a recovery in same-store revenue in EQR’s expansion markets until 2026. “While the expansion markets still have significant supply expected, the absolute quantity is beginning to come down,” Manelis said.

Manelis said EQR is excited about the potential in San Francisco and Seattle, which comprise 42% of the company's NOI. “Those factors, coupled with the continued performance in our East Coast markets, should deliver solid revenue results for the company in 2025,” he said.

However, 2025 will also bring some unknowns. “While there remains a considerable amount of economic and geopolitical uncertainty that could impact our business and the economy generally, we like our setup,” Parrell said.

Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.