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Top 8 Takeaways from the Apartment REITs’ Q1’26 Earnings Calls
The big apartment REITs wrapped up earnings calls last week, offering up great color on the state of the market, renter financial health, the drop-off in apartment construction, a shift toward buybacks > acquisitions, and of course the rumored merger discussions between AvalonBay and Equity Residential.
And if you missed our REIT recap on the podcast, check out this week’s episode of The Rent Roll on Apple, Spotify or YouTube — with special guest and veteran REIT analyst Alex Goldfarb of Piper Sandler.
Let’s jump into our top eight takeaways. And a big disclaimer before we do: I’m no CFA and this is NOT investment advice of any sort. Just stuff I find interesting from the calls and therefore for informational purposes only.
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#1 AvalonBay and Equity Residential are reportedly considering a merger
The biggest news of earnings call season didn’t come from an earnings call, but came after hours via a strategically planted leak to Bloomberg News. Someone wanted to float the idea of potentially merging two of the biggest names in multifamily. Who? Why? How? We don’t know, and everyone around this has been tight-lipped — and that alone suggests that the merger discussions are legit (even if an actual merger is far from a sure thing). BTW: I wrote more about this in the last newsletter, including some details on why a combined AVB+EQR isn’t as big as some think it’d be.)
It was kinda funny to see after this leak, analysts start probing other REITs about M&A during their earnings calls. So MAA, UDR, Camden all got asked round-about questions clearly probing for perspective on the proposed merger – and whether such a thing could have operational efficiencies, and also whether their companies could pursue the same path. Brad Hill at MAA (speaking in broad terms when asked about MAA’s past M&A activities) said mergers are no slam dunk – and noted that if MAA doubled in size, it probably wouldn’t reduce their cost of capital or certain operational costs. But he said there could be some savings at the property management level if you can pod more properties together in the same geographic micro area.
Alex Jessett, the new CEO of Camden, made a point to dismiss any notion that bigger = better. “Whatever decision other companies make, we’ve got to believe is right for them. For us, the way we think about this is that bigger is not better. Better is better. And if you look at a long-term trends, there’s absolutely no correlation between size of the company and total shareholder return.”
Tom Toomey at UDR made a similar comment: “We look at it and say excellence is the important thing to all successful companies, and size is sometimes an advantage, sometimes not. And excellence, particularly in operations, in capital allocation and innovation.”
#2 Low REIT valuations continue to drive more stock buybacks … and fewer acquisitions
This has been a recurring theme these last few quarters so I won’t dwell on it too much here again today, but REITs continue to buy back their stock. And they’re doing this because Wall Street values REITs for less than the sum of their parts – or below net asset value. Put another way: Apartment properties in the real world sell at higher values than the value implied by a REIT’s stock price.
So REITs are betting on themselves by buying back stock, and I believe all of the big players have joined in at this point.
Here’s the implication: REITs view buybacks as (generally speaking) a better use of capital than buying another apartment property, so acquisitions have slowed. Why? Because when you buy another property at real-world values, it’s immediately diluted in value by Wall Street once part of the REIT portfolio (even if accretive for the long term). So, there is a trade off here. REITs routinely sell off older properties and use the proceeds to buy or build newer apartments, but now they’re using a big chunk of those proceeds to buy back their own stock instead.
Kevin O’Shea at AvalonBay said they’re still trying to do both buybacks AND development (as is MAA). Kevin said “buybacks and development are both highly attractive to us today. So it’s not a binary choice. At current pricing, our stock implies a cap rate in the low 6% range, which makes repurchases attractive and immediately accretive.”
I should also note there’s one REIT in a bit different situation. That’s Camden because they’re selling their Southern California portfolio. They’ve got a buyer lined up at what’s rumored to be aggressive pricing (for the buyer), and that’s expected to close in late June or early July. Camden said they’ll use part of the proceeds to buy back stock, and part to buy Sun Belt apartments through 1031 exchanges. So Camden is an active buyer (or as CEO Alex Jessett put it, “the prettiest buyer”) because they have and will have money they have to put to work.
#3 Results are slightly better than expected, and REITs expect to start pushing rents more in coming months
REIT execs danced a careful dance during earnings calls — celebrating meets-or-beats targets, predicting a return of rent growth in the second half of 2026 and yet … but not raising guidance. In fact, they were very careful to discourage heightened expectations, noting that they had already guided for 2H’26 improvement going into the year.
Still, the Q1 (and April) numbers were reasonably encouraging. Not fireworks, by any means, but very solid — especially when factoring in flattened job growth and heightened economic uncertainty. Occupancy ticked up, and rent momentum is improving. By “momentum,” in some cases (i.e. Sun Belt) that could mean new lease rents are still falling, but to lesser degree than previously.
They continue to see renter retention trend EVEN HIGHER than it already was (how much higher can it go?) while commanding a renewal rent premium of 2-5%, without any hint about potential gain-to-lease headwinds yet.
Laurie Baker at Camden said they outperformed guidance in Q1 primarily due to “timing-related items.” She said Camden “saw a slow but steady improvements across our portfolio as we move through the first quarter and into the beginning of peak leasing season. Our preliminary results for April are on track and indicate modest improvements in both occupancy and blended lease rate growth compared to the first quarter.”
Camden’s Alex Jessett added: “We are anticipating sort of a hockey stick in the latter part of 2026 as we get through this absorption.”
We heard similar themes from others (with variance by market, of course). Much of the improvement traces to reduced supply headwinds, as apartment deliveries fall fast from 40+ year highs. And they expect to shift gears from occupancy protection to rent growth.
Michael Manelis at EQR said: “We are heading into a place of unprecedented times with such low levels of new supply that I think if we can maintain this velocity and get over the peak leasing season, that back half of the year with the setup of such limited new competitive supply coming online really does position this portfolio well.”
Sean Breslin at AVB said “we expect a continued acceleration in rent change. Renewal offers for May and June were delivered at an average increase in the 5% to 5.5% range, which is about 100 basis points higher than where we sent offers for February and March.”
And UDR’s Michael Lacy said they’re pleased with results to date, got high occupancy and retention, and hinted that they’ll shift to more of a rent growth focus as well in coming months.
#4 Slowdown in demand from young adults due to weaker hiring environment? MAA says it’s not happening.
There’s been a lot of concern industry-wide about the weak unemployment rate of young adults coming out of college and the increased number of young adults living with parents again – and what that means for apartment demand. But MAA (the largest REIT by unit count with ~103k units) shared a pretty interesting stat.
MAA said young adults ages 25 and under represent 20% of move-ins — and that share hasn’t changed at all. Furthermore, fewer of them need a lease guarantor today. Super interesting and surprising (in a good way). Related, the Wall Street Journal reported that the number of Americans with prime credit scores is climbing, largely because of good numbers among Gen Z (key apartment demographic).
#5 Renter financial health continues to improve
This continues to be one of the most misunderstood topics in rental housing EVEN AMONG industry pros and investors in the space. So this an important theme for REITs to hit because it’s central to the thesis and to the business model in many ways.
MAA’s Brad Hill said: “We remain encouraged by underlying demand across our markets, declining new deliveries and the strength of our resident base with continued strong collections and affordable rents at a 20% rent-to-income ratio.”
Rylan Burns at Essex said their “current rent-to-median income ratios in Northern California stand at around 21.5% compared to a 20-year average of almost 26%.”
Camden’s Alex Jessett said they “recorded our lowest bad debt level since the onset of COVID-19 at less than 40 basis points” – which means renters are paying the rent more frequently than at any point since pre-COVID. He also said Camden’s rent to income ratio is 19%.
Equity Residential’s Michael Manelis said EQR “saw improvements in bad debt and the financial health of our resident base remains very supportive. Household incomes for new move-ins have increased and rent-to-income ratios have fallen to 19%.”
Now this is all good news, but doesn’t always jibe with the narratives. And here’s a great quote from Ric Campo at Camden that addresses this disconnect. He said: “the consumer is actually doing really well… the feeling they have is bad. The underlying consumer strength is good.”
And improved affordability has implications on the renewal outlook. UDR’s Michael Lacy said: “Rent income levels of our new residents are stronger than the long-term average, which suggests an encouraging outlook for renewal growth going forward.”
One last point on affordability… I’ve talked about this before too but it’s interesting to see a flight to quality effect continue to play out with demand shifting up market. Not just to newer apartments, but to renovated apartments. Here’s a good stat from MAA: Newly renovated units leased nine days faster than non-renovated units, and for a rent premium of $104 per month. IRT said they’re seeing good returns on renovations as well. And that’s another positive sign of affordability.
#6 Rent control ballot measures are freezing new investment in Massachusetts and raising concern for D.C.
Massachusetts voters face a likely ballot measure on rent control in November. And it’s not just any rent control, but a draconian form of rent control called vacancy control — the type of policy that socialist economist Assar Lindbeck famously called “the most efficient technique presently known to destroy a city — except for bombing.”
So, understandable, REITs and their private sector peers are nervous about the ballot measure, and the state has already seen a freeze in new development and in acquisitions until after the vote. If approved (and recent polls show voters favor it), it would likely push REITs and other investors/developers out of the state … or at least dissuade any additional investment.
The REITs spending cash to support the information campaign to get the facts out there to voters – about how rent control always backfires on the people it’s intended to help, and will ultimately just give renters fewer options in worse conditions, far less supply, and much higher costs for what little does get built. (Reminder: Massachusetts voters previously banned rent control in the 1990s, and academics noted positive societal outcomes that followed, including reduced crime and improved maintenance.)
EQR’s Mark Parrell said they’re pausing planned construction in Massachusetts, and probably wouldn’t have built anything there recently if they knew this vote was coming.
And it’s not just new supply, but it’s reduced values for existing supply – and a less liquid market. UDR’s Michael Lacy pointed out that “uncertainty has had an impact. We’ve seen less transaction volume. That makes it harder to decipher exactly where cap rates are, but our experience is uncertainty at this point in time has had an adverse impact on price.”
And it’s not just Massachusetts. The REITs are always watching Washington, DC, which is considering a potential ballot measure that would freeze rents for two years – even for wealthy renters in luxury apartments – and would automatically freeze rents again in the future any time inflation tops 5% — even if operating costs and property taxes keep growing, rents get frozen.
#7 Mixed conditions across the Coastal markets
It’s not as simple as “Coasts vs. Sun Belt” anymore. It’s more nuanced than that.
On the coasts, San Francisco and San Jose remain red hot — with some reporting double-digit rent growth — thanks to AI jobs and low supply. Essex and AvalonBay also noted a “spillover effect” to the East Bay (Oakland), which had previously lagged behind.
And New York continues to be hailed as the No. 2 REIT market behind the Bay Area.
But it’s not as strong elsewhere on the coasts. Seattle’s been a mixed bag (but better in the suburbs than in the urban core) and Boston has dragged behind of late (due to localized demand-side issues) after previously holding strong. Washington, DC, remains slow but REITs seem increasingly optimistic there as supply drops off and DOGE cuts move further in the rearview mirror.
But Los Angeles remains Los Angeles.
Angela Kleiman, Essex: “L.A. is progressing at a glacial pace. It continues to be our most challenging. So for example, if we excluded L.A. portfolio, our April new lease rates actually would be 180 basis points higher.
Sean Breslin, AVB: “L.A. has been tough… I would say we haven’t yet seen a catalyst quite yet in L.A. other than very diminished supply, but we’re looking for it on the demand side”
Mark Parrell, EQR: “Really feeling like there’s been a paradigm shift away from Southern California and just not feeling like those employment drivers are what we thought they were when we made those investments initially.”
Other parts of SoCal (Orange County and San Diego) are holding up better than L.A., but still well underperforming Northern California.
#8 The Sun Belt / Mountain recovery pace varies by market
We’ve got green shoots, and we’ve got laggards, across the supply-drenched Sun Belt and Mountain markets. But nearly universally, supply is dropping fast and expectations are growing, albeit at differing paces. REITs talk about some markets as 2H’26 recovery stories, and others as 2027.
Green shoot markets: Atlanta and Dallas got the most mentions. Most REITs called Atlanta the leader of the pack, though UDR gave that crown to Dallas. Meanwhile, Camden and IRT noted some improvement in Raleigh. MAA called Greenville and Charleston strong markets.
Mixed bag: Florida’s markets seem quite mixed, with better stories told of Orlando than Tampa — and South Florida being somewhere in the middle.
Laggards: Austin, Phoenix and Denver seem to remain the bottom three markets in most datasets, though some positive signs of momentum are emerging. Also, MAA singled out Charlotte for “tons of demand” but “just a whole lot of supply,” and called it a 2027 recovery story.
Also: REITs don’t have much presence in the Midwest, but those that do (IRT, Centerspace) continue to see steady growth in those markets.
— My Latest Posts on LinkedIn —
Here are some recent posts if you missed them:
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Affordability is widely viewed as a headwind, but it’s becoming more of a tailwind for market-rate apartments and SFR.
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Huge news: The White House is reportedly rescinding its support for the Senate’s ROAD to Housing bill, which might kill the attempted ban on BTR.
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Reminder that there have always been fringe views among economists on rent control, but they’re just that.
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EQR and AVB are reportedly discussing a potential merger.
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Give “mainstream media” some credit for getting the facts out there on build-to-rent and institutional SFR investors.
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While apartment completions are dropping off, there are still a LOT of active lease-ups trying to reach stabilized occupancy.
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Encouraging sign: 76 members of Congress signed onto a letter opposing the ROAD to Housing’s limits on build-to-rent construction.
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If you just trended 3.5% annualized rent growth from pre-COVID to today, you’d land right at today’s average effective rents in the Sun Belt and Mountain markets.
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There’s suddenly very little pricing premium for apartments built in the 2020s compared to those built in the 2010s.
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Apartment supply is falling especially hard in urban submarkets.
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A former U.S. solicitor general published a paper concluding that the ROAD to Housing Act’s investor bans are “constitutionally flawed thrice over.”
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Aimco founder and multifamily legend Terry Considine is still at it.
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The latest NMHC Top 50 rankings show that multifamily ownership remains incredibly fragmented.
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Peak apartment completions are now in the rearview mirror.
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Early numbers on the spring leasing season are ho-hum: not bad, not great.
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The build-to-rent construction pipeline is shut down thanks to potential legislation.
— Now Spinning on The Rent Roll Podcast —
For 2025, The Rent Roll with Jay Parsons podcast ranked in Spotify’s top 2% of podcasts for minutes played and in the top 1% for most shared shows. Additionally, The Rent Roll continues to frequently rank on Apple’s charts for investing-themed podcasts, and was recently ranked as the third-best podcast in all commercial real estate (and #1 in housing) by the readers of CRE Daily!
Thank you to everyone who’s made The Rent Roll part of your weekly routine! New episodes are released every Thursday morning.
Find us on YouTube, Spotify, Apple and Amazon. Recent episodes:
Episode 83: 6 Takeaways from Q1’26 Apartment REIT Earnings Calls with Piper Sandler’s Alexander Goldfarb
Episode 82: Spring Leasing + PropTech Update with 20 for 20’s Dom Beveridge
Episode 81: Finding Under-Loved Markets with Bonaventure’s Dwight Dunton
Episode 80: Terry Considine Isn’t Done: The Multifamily Legend’s Next Act with Big 4’s Terry Considine
Episode 79: Q2 Multifamily Update & Outlook with Cushman & Wakefield’s Sam Tenenbaum
Episode 78: The Bizarre Push to Eliminate BTR with Quinn Residences’ Richard Ross and Up for Growth’s Mike Kingsella
Episode 77: Sub-Institutional Multifamily Update, with Adaptive Realty’s Moses Kagan and ReSeed Partners’ Rhett Bennett
Episode 76: Affordable Housing Isn’t What You Think with Dominium’s Nick Andersen
Episode 75: The Evolution of Equity Residential with EQR’s Mark Parrell
