Multifamily real estate investment trusts have faced another mixed quarter as demand stayed resilient, but rent growth and pricing continued to lag, according to a new analysis from RealPage. The combination kept pressure on operating performance, with half of the six largest apartment REITs lowering full-year 2025 funds-from-operations guidance amid persistent supply challenges and shifting demand patterns, while three raised guidance on the back of solid third-quarter results.
RealPage noted that demand held up across many coastal markets, bolstered in part by the artificial intelligence boom, which is fueling job creation in the technology sector. However, with some tech companies expecting AI to take on more development work in the future, that source of momentum may prove limited. In contrast, several Sun Belt markets posted occupancy gains as the pace of new construction slowed, easing the supply glut that had strained fundamentals earlier in the year.
Many REIT operators saw leasing activity peak earlier than usual this year.
“On the new customer acquisition side, we began to see weakness in traffic during the back half of September,” Equity Residential CEO Mark Parrell said during the company’s Oct. 29 earnings call.
“The best way to think about this is for us to say that our normal pattern of a seasonal decline in traffic began one month earlier than usual. In fact, everything this year feels like it was pulled forward.”
RealPage described the third quarter as an “overall slowdown in demand relative to recent quarters,” with notable regional variations. Northern California delivered a strong performance and Seattle maintained steady software-driven demand. East Coast gateway markets benefited from corporate return-to-office efforts, while Washington, D.C., lagged under pressure from the federal government’s job reductions and the recent shutdown. Southern California and the Mid-Atlantic also experienced softer results.
Pricing remained the biggest hurdle. REITs broadly reported weaker rent growth and a slowdown in new lease rates, particularly in supply-heavy Sun Belt metros such as Austin, Dallas, Nashville and Phoenix. The heightened competition among new properties continued to weigh on rent trajectories, even as some markets made headway in absorption.
With revenue growth under strain, REITs shifted their focus toward controlling expenses. Rising costs for maintenance, insurance, utilities and taxes continued to challenge efforts to protect margins through the end of the third quarter.
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