As market conditions continue to improve, Essex Property Trust reportedly remains optimistic with continued plans to acquire, develop and invest in the multifamily sector.
In a June 2021 investor presentation, the West Coast-based real estate investment company detailed how updated market conditions and the continued use of investment strategies have allowed the company to remain successful while increasing first quarter and full year guidance for net operating income and funds for operating.
According to the report, the company has increased its second quarter guidance for net operating income and total funds for operating by approximately $0.14 cents. This change brings guidance ranges in these areas to $0.79 to $0.69, and $2.92 to $2.78 respectively. Full-year guidance for net operating income also was adjusted from negative 4.6 percent to negative 3.8 percent.
In the first quarter of the year alone, SEC fIlings from the company showed both same-property gross revenue and net operating income improved by 0.1 percent compared to the fourth quarter of 2020, which the company attributed primarily to lower cash concessions and delinquency. Individually, Southern California made up for 42.7 percent of total revenue in the first quarter of the year, while Northern California and Seattle made up for 38.9 percent and 18.4 percent, respectively.
“We are pleased with our first quarter results which exceeded the midpoint of our initial guidance. Although the West Coast markets are still in the early stages of an economic recovery, we are cautiously optimistic that declining COVID cases and widespread vaccinations will provide a foundation for a long economic expansion. Encouragingly, the large tech employers in our markets have accelerated hiring and are beginning to reopen their offices which should improve apartment demand, consistent with our expectations at the beginning of the year,” Michael J. Schall, president and CEO of Essex, said at the time of the first quarter earnings being announced.
While the first quarter only saw slight improvement, the company’s presentation shows it is optimistic about the long term health of its West Coast markets’ recovery, which includes Seattle as well as major cities in both Southern and Northern California. The company reported that the region’s recovery is based on several demand drivers. These include limited supply due to high cost of homeownership and restrictive entitlement processes, a higher percentage of renters in all markets and higher median household incomes.
Already, Essex markets have continued to see improvements in the multifamily sector, according to the investor presentation. Essex reported that with California and Seattle home prices continuing to increase by 13 and 14 percent, respectively, in 2021, renting continues to be the preferred choice for residents of these states. Overall, home sale prices are three times higher than the national average in all of Essex markets, making for clear investment opportunities in the multifamily sector, the company reported.
Additionally, the company reported continued job growth as more employees head back to work has helped improve conditions within all of Essex’ markets. In its California and Washington markets, the company reported a 44 percent increase in employment this year.
Particularly, job openings in top tech companies have aided in the repair of Essex markets. According to the report, job openings in major tech companies have increased by 89 percent since 2020, with California and Washington making up for 55 percent of these openings.
Founded in 1971, Essex currently owns and operates 244 apartment communities consisting of 60,000 residential units between its three West Coast markets. An additional five properties throughout the company’s West Coast markets are currently being developed.
Essex Property Trust did not respond in time for an updated comment on this story.