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Essex Properties Trust saw a strong performance in its Northern California market and reported higher-than-expected revenue gains in the first quarter of 2026, per its earnings report released April 28.

The San Mateo, California-based REIT grew its core FFO per diluted share by 2.3% to $4.06 in Q1 — exceeding the midpoint of the company’s guidance range by 11 cents. That growth was primarily driven by higher occupancy and income, Barb Pak, Essex’s executive vice president and CFO, said during the company’s Q1 2026 earnings call on April 29.

Nonetheless, Essex reaffirmed its same property growth and core FFO per share guidance ranges for the rest of the year.

“While we have started off the year in a solid position with revenue growth trending ahead of plan, we'd like to get further visibility into peak leasing season before adjusting our forecast due to the current macro uncertainty,” said Pak. 

Same-property revenue and operating expenses grew 2.9% and 0.2% year over year, respectively, the REIT reported. Delinquency, cash concessions and vacancies remained close to flat on a quarterly and yearly basis, while scheduled rents rose 2.2% since Q1 2025.

Essex has been the largest investor in the Bay Area over the past two years, President and CEO Angela Kleiman said during the call. Although soft national labor trends, heightened geopolitical tensions and inflation have heightened near-term insecurity, the company saw an occupancy gain of 20 basis points YOY, with strong performance in its Northern California market, she said. 

“Against this backdrop, we delivered a solid first quarter, where core FFO per share exceeded the high-end of our guidance range and same-property revenues trending ahead of plan,” said Kleiman. 

NoCal growth

Regionally, Northern California’s same-property revenue grew 3.9% YOY, while the Seattle metro market rose 2.3% YOY. Southern California — the REIT’s highest revenue-generating market — saw the most modest growth among the company’s markets, up 2.2% YOY. 

The limited supply in the company’s West Coast markets has directly correlated with housing costs, said Kleiman, who attributed “historical low” multifamily permitting activity in California to restrictive regulations. The company projected that new housing entering the market will remain low — at about half of a percent of the existing stock — over the next several years. 

“The low level of housing supply throughout our markets provides resilience across a wide range of economic conditions,” said Kleiman. “Improving demand indicators position the portfolio for sector-leading long-term rent growth.”

Northern California was Essex’s best performing market during the quarter, seeing a 3.2% QOQ blended rent growth and a 50 basis-point QOQ increase in occupancy, said Kleiman. She attributed the better-than-planned numbers to performance in San Francisco, San Mateo and to a lesser extent, Santa Clara County. 

“Attractive affordability, favorable demand drivers and limited supply support our expectations for solid growth to continue in this region,” said Kleiman. 

Despite mass technology industry layoffs, job postings from the top 20 tech companies in the San Francisco Bay Area region have remained steady and the layoffs largely occurred outside of Essex’s markets, said Kleiman. More offices are opening and new venture capital investments in the Bay Area have sparked a wave of startup companies. The REIT is benefiting from the AI boom, particularly in the San Francisco area.

“We certainly anticipate that the benefit of AI will continue and, more importantly, we are also seeing a lot of these large AI companies expand to the [San Francisco] peninsula as well,” said Kleiman. 

Seattle, LA more challenging

Essex saw blended rent growth fall 80 basis points QOQ in the Seattle market, primarily driven by soft demand and new housing supply that entered into the market last year, Kleiman said. The Washington market has historically generated more supply than California.

Still, the company saw new lease rent growth and occupancy in the Seattle metro region improve each month throughout the quarter, and the firm maintains its “conviction with long term outlook for this market,” Kleiman said. 

The Southern California market met expectations with blended rent growth of about 1% QOQ, led by strong performance in Orange County and Ventura, said Kleiman. 

Essex saw incremental improvements in Los Angeles, but at a “glacial pace,” Kleiman said. Los Angeles is the company’s “most challenging” market and the REIT anticipates the region will see “slow and choppy” improvements, not quick growth.

By the numbers

Essex launched an occupancy-focused strategy during the first quarter as it headed into peak leasing season, Kleiman said. The REIT’s same-store blended rent growth reached 1.4% in Q1, meeting its expectations.

Overall, cap rates have remained in the mid-4% range across Essex’s markets, while the company’s stock is trading close to a 6% implied cap rate over the past several months, said Kleiman. 

Essex repurchased $61.9 million shares of its stock at an average price of $243.76, equating to an FFO yield of 6.5% — offsetting the near-term earnings headwinds caused by the structure finance redemption, Pak said. 

That is a “significant discount to private market valuation,” Pak said. “We shifted gears and repurchased approximately $62 million of stock, thereby continuing our strong capital allocation track record of maximizing accretion for our shareholders.

As Essex heads into the peak leasing season, it is focused on driving rent growth across its markets, said Kleiman. Investor interest in multifamily remains healthy throughout the West Coast, especially in the Bay Area, due to “minimal forward-looking supply deliveries and favorable fundamentals.”

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