AvalonBay Communities, Inc. Provides Third Quarter 2024 Operating Update and Publishes Updated Investor Presentation

Rhea-AI Summary

AvalonBay Communities, Inc. (NYSE: AVB) has released its Q3 2024 operating update and a new investor presentation. The company's Same Store Residential operating metrics for July and August 2024 align with its expectations announced on July 31, 2024. Key highlights include:

- Economic Occupancy: 95.6% in August, slightly up from 95.5% in July
- Total Like-Term Effective Rent Change: 3.5% in August, marginally down from 3.6% in July
- New Move-in Rent Change: 1.6% in August, decreasing from 2.0% in July
- Renewal Rent Change: 5.3% in August, increasing from 5.0% in July

The company's performance varies across regions, with Pacific NW showing the highest rent change at 5.0% in August, while Southeast FL and Other Expansion Regions experienced negative growth.

Positive

• Economic Occupancy improved slightly from 95.5% in July to 95.6% in August 2024
• Renewal Like-Term Effective Rent Change increased from 5.0% in July to 5.3% in August 2024
• Pacific NW region showed strong rent growth at 5.0% in August 2024
• Northern California and Southern California regions showed improved rent growth in August compared to July 2024

Negative

• Total Like-Term Effective Rent Change decreased slightly from 3.6% in July to 3.5% in August 2024
• New Move-in Like-Term Effective Rent Change declined from 2.0% in July to 1.6% in August 2024
• Southeast FL region experienced negative rent growth of -0.4% in August 2024
• Other Expansion Regions (Charlotte, NC and Dallas, TX) saw a significant decline in rent growth from 1.2% in July to -4.1% in August 2024

Insights

Financial Analyst

AvalonBay's Q3 2024 update reveals a stable rental market with slight variations across regions. The overall Like-Term Effective Rent Change remains steady at 3.5%, aligning with Q2's 3.7%. Notably, renewal rates are outperforming new move-ins (5.3% vs 1.6% in August), suggesting a focus on tenant retention. The Economic Occupancy of 95.6% in August shows a marginal improvement from July's 95.5%, indicating robust demand. Regional disparities persist, with Pacific NW leading at 5.0% rent growth, while Southeast FL and Other Expansion Regions face challenges. This mixed performance across markets underscores the importance of AvalonBay's diversified portfolio strategy in navigating local market dynamics.

Real Estate Market Analyst

The data presents a nuanced picture of the multi-family housing market. The slight decline in overall Like-Term Effective Rent Change from Q2 to August (3.7% to 3.5%) suggests a moderating growth trend. Interestingly, suburban areas are outperforming urban locations (3.6% vs 3.3% in August), potentially reflecting ongoing preferences for more spacious living post-pandemic. The significant gap between renewal and new move-in rates (5.3% vs 1.6%) indicates a strategic focus on tenant retention, possibly to mitigate turnover costs. The regional variations, particularly the negative growth in Southeast FL and Other Expansion Regions, highlight the importance of localized market analysis in real estate investment decisions.

Economic Analyst

AvalonBay's Q3 update offers insights into broader economic trends. The relatively stable rent growth and high occupancy rates suggest resilient consumer spending in housing, despite inflationary pressures. However, the deceleration in new move-in rates (2.5% in Q2 to 1.6% in August) may indicate increasing price sensitivity among new tenants, possibly due to economic uncertainties. The regional disparities in rent changes reflect varying economic conditions across the U.S., with some markets like Pacific NW showing strength (5.0% growth) while others like Southeast FL face headwinds. This data aligns with the uneven economic recovery observed across different sectors and geographies, underscoring the importance of diversification in real estate portfolios to mitigate risks associated with localized economic fluctuations.

ARLINGTON, Va.--(BUSINESS WIRE)-- AVALONBAY COMMUNITIES, INC. (NYSE: AVB) (the “Company”) today provided an update on certain third quarter Same Store Residential operating metrics.

The Same Store Residential operating metrics presented in the following tables were generally consistent with the Company’s expectations for these metrics for the two months ended August 31, 2024 when the Company published its updated outlook for full year 2024 Same Store Residential revenue growth on July 31, 2024.

		Economic Occupancy
		2024
		Q2			July			August
Total		96.0	%		95.5	%		95.6	%
		Like-Term Effective Rent Change
		2024
		Q2			July			August
New England		4.6	%		5.0	%		5.1	%
Metro NY / NJ		4.0	%		3.1	%		2.8	%
Mid-Atlantic		5.5	%		5.5	%		5.3	%
Southeast FL		(0.1	%)		(0.2	%)		(0.4	%)
Denver, CO		3.5	%		2.6	%		3.3	%
Pacific NW		6.0	%		6.4	%		5.0	%
Northern California		2.6	%		2.5	%		3.1	%
Southern California		2.3	%		2.0	%		2.7	%
Other Expansion Regions		(0.6	%)		1.2	%		(4.1	%)
Total		3.7	%		3.6	%		3.5	%
Suburban		3.9	%		3.6	%		3.6	%
Urban		3.1	%		3.5	%		3.3	%
Total		3.7	%		3.6	%		3.5	%
New Move-in		2.5	%		2.0	%		1.6	%
Renewal		4.7	%		5.0	%		5.3	%
Total		3.7	%		3.6	%		3.5	%

The Company has posted an updated Investor Presentation to its website. The presentation can be found in the Investor Relations section of www.avalonbay.com.

Definitions

Economic Occupancy is defined as total possible Residential revenue less vacancy loss as a percentage of total possible Residential revenue. Total possible Residential revenue (also known as “gross potential”) is determined by valuing occupied units at contract rates and vacant units at Market Rents. Vacancy loss is determined by valuing vacant units at current Market Rents. By measuring vacant apartments at their Market Rents, Economic Occupancy takes into account the fact that apartment homes of different sizes and locations within a community have different economic impacts on a community’s gross revenue.

Like-Term Effective Rent Change for an individual apartment home represents the percentage change in effective rent between two leases of the same lease term category for the same apartment. The Company defines effective rent as the contractual rent for an apartment less amortized concessions and discounts. Like-Term Effective Rent Change with respect to multiple apartment homes represents an average. New Move-In Like-Term Effective Rent Change is the change in effective rent between the contractual rent for a resident who moves out of an apartment, and the contractual rent for a resident who moves into the same apartment with the same lease term category. Renewal Like-Term Effective Rent Change is the change in effective rent between two consecutive leases of the same lease term category for the same resident occupying the same apartment.

Market Rents as reported by the Company are based on the current market rates set by the Company based on its experience in renting apartments and publicly available market data. Market Rents for a period are based on the average Market Rents during that period and do not reflect any impact for cash concessions.

Other Expansion Regions include markets located in Charlotte, North Carolina, and Dallas, Texas.

Residential represents results attributable to the Company's apartment rental operations, including parking and other ancillary Residential revenue.

Same Store is composed of consolidated communities where a comparison of operating results from the prior year to the current year is meaningful as these communities were owned and had Stabilized Operations, as defined below, as of the beginning of the respective prior year period. Therefore, for 2024 operating results, Same Store is composed of consolidated communities that have Stabilized Operations as of January 1, 2023, are not conducting or are not probable to conduct substantial redevelopment activities and are not held for sale or probable for disposition within the current year.

Stabilized Operations is defined as operations of a community that occur after the earlier of (i) attainment of 90% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment.

Suburban represents results attributable to submarkets having less than 3,500 households per square mile.

Urban represents results attributable to submarkets having 3,500 or more households per square mile.

About AvalonBay Communities, Inc.

AvalonBay Communities, Inc., a member of the S&P 500, is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California, as well as in the Company's expansion regions of Raleigh-Durham and Charlotte, North Carolina, Southeast Florida, Dallas and Austin, Texas, and Denver, Colorado. As of June 30, 2024, the Company owned or held a direct or indirect ownership interest in 300 apartment communities containing 91,399 apartment homes in 12 states and the District of Columbia, of which 17 communities were under development. More information may be found on the Company’s website at https://www.avalonbay.com.

Copyright © 2024 AvalonBay Communities, Inc. All Rights Reserved

View source version on businesswire.com: https://www.businesswire.com/news/home/20240904244189/en/

Jason Reilley

Vice President

Investor Relations

AvalonBay Communities, Inc.

703-317-4681

Source: AvalonBay Communities, Inc.

FAQ

What was AvalonBay Communities' (AVB) Economic Occupancy rate in August 2024?

AvalonBay Communities' Economic Occupancy rate in August 2024 was 95.6%.

How did AvalonBay's (AVB) Total Like-Term Effective Rent Change perform in August 2024?

AvalonBay's Total Like-Term Effective Rent Change was 3.5% in August 2024, slightly down from 3.6% in July 2024.

Which region showed the highest rent growth for AvalonBay (AVB) in August 2024?

The Pacific NW region showed the highest rent growth for AvalonBay at 5.0% in August 2024.

How did AvalonBay's (AVB) Renewal Like-Term Effective Rent Change perform in August 2024?

AvalonBay's Renewal Like-Term Effective Rent Change increased to 5.3% in August 2024, up from 5.0% in July 2024.