- AvalonBay highlighted that new supply in established regions continues to decline to levels not seen in over a decade, supporting healthy fundamentals.
- Barriers to new development, especially in suburban established regions, are substantially higher than most markets, suggesting supply constraints will persist.
- Low supply levels are expected to sustain for the foreseeable future, potentially leading to stronger pricing power and occupancy rates.
Explore Similar Insights
- Management highlighted positive inflection in new customer rate growth for the first time since March 2022.
- Occupancy remained high at 94.6%, with a 50 basis point increase year-over-year in July.
- Progress in revenue growth is gradual, with expectations of acceleration in the second half, especially in Q4.
- Demand indicators such as rental volume and customer behavior remain positive, despite softer-than-expected revenue growth.
- Apartment demand in Q2 2025 was among the best in 25 years, supported by 31 months of wage growth exceeding rent growth.
- High homeownership costs continue to support apartment demand and reduce move-outs to buy homes.
- Resident retention reached its highest customer sentiment score ever at 91.6, reflecting strong satisfaction and service quality.
- The CRE portfolio remains well-diversified with low nonaccruals and delinquencies, at 0.54% of loans.
- Construction loans are showing signs of lease-up improvements, with buildings filling up despite longer lease-up times.
- The bank expects CRE classified balances to decline further through payoffs and upgrades.
- Management highlighted that recent supply-demand dynamics have affected lease-up times but are gradually improving.
- The bank's disciplined concentration limits and focus on quality are key to maintaining portfolio stability.
- Management emphasizes ongoing strong tenant demand and consumer foot traffic in high-growth street retail locations despite macroeconomic noise.
- Examples include long lines at tenants like Doan on Bleecker Street and double-digit sales growth in key streets.
- Management attributes resilience to retailer adaptation to tariffs, long-term shift to direct-to-consumer channels, and affluent consumer strength.
- Shop occupancy reached a record high of 92.5%, up 270 basis points YoY, with a target to exceed 93% in H2 2025.
- Management highlighted increased pricing power through better lease terms, including exclusives, radius restrictions, and faster store openings, leveraging high occupancy levels.
- Management highlighted the stable macroeconomic environment with rates and spreads settling into ranges after initial shocks from fiscal debates and trade tensions.
- The company maintains a focus on high carry production Agency MBS, with a portfolio concentrated in 30-year coupons, Ginnie Mae, and DUS pools, emphasizing positive convexity and short duration attributes.
- Management sees current spreads as attractive, with potential for leverage increases as market stability improves, especially if the Fed resumes easing.
- Victor Coleman highlighted that the West Coast office market is recovering, led by emerging AI and tech companies, with San Francisco experiencing its largest quarter of occupancy increase in 7 years.
- Over 1 million square feet of positive net absorption was driven by tech sector demand, including new leasing and large deals over 100,000 square feet for the first time in a long period.
- Billions of venture capital dollars continue to flow into AI, with job postings trending upward, and West Coast gateway markets like the Bay Area expected to benefit most due to their talent, funding, and research ecosystems.
- Core AI tenants, creating and licensing AI models and infrastructure, currently represent only 10% of the company's ABR and are concentrated in the Bay Area, indicating significant expansion potential.
- Cap rates are estimated to be in the high 8% range, with some competition pushing them toward 9%.
- The company is cautious about high-growth markets and prefers industrial properties in growth corridors.
- Recent sales indicate cap rates that support capital recycling from office to industrial, with no expectation of cap rates reaching into the 9% range this year.
- Initial sharp decline in market conditions due to tariff announcements on April 2, causing interest rate volatility spike and risk asset sell-off.
- Subsequent stabilization after tariff delay announcement, with volatility declining in May and June.
- Agency mortgage and CMBS assets recovered meaningfully by quarter end, despite early underperformance.
Dafinchi