Essex Property Trust attributed positive same-store revenue growth and occupancy rates in the fourth quarter of 2025 in part to lower concessions, improved delinquency recovery and overperformance in the Northern California market.
Revenue, expenses and NOI all rose 3.8% year over year in the fourth quarter, the San Mateo, California-based REIT reported. The company saw revenue grow in all three of its markets during that time, led by Northern California up 4.2% YOY, 3.8% in Southern California and 3.1% in the Seattle metro area.
Essex has been the largest investor in Northern California over the past two years, said Angela Kleiman, Essex’s president and CEO, during the company’s Q4 and full-year 2025 earnings call on Feb. 5.
The Northern California region outperformed expectations due to an expansion of its technology sector, favorable migration trends in the area and a limited supply of housing, said Kleiman. The limited housing supply — even in a soft employment environment — pushed rental prices above the U.S. average, she said.
And while job growth slowed throughout the year, Essex improved delinquency recovery to near pre-COVID-19 pandemic levels, she said. Overall, “2025 played out generally in line with our initial macro forecast for the U.S., with job growth moderating throughout the year,” said Kleiman.
BY THE NUMBERS
| Category | Q4 | YOY Change |
| Operating revenues | $414.8 million | 3.8% |
| Net operating income | $291.2 million | 3.8% |
| Operating expenses | $123.6 million | 3.8% |
| FFO per share | $3.94 | 6.8% |
| Average rental rate | $2,720 | 2.3% |
| Occupancy rate | 96.3% | 40 bps |
SOURCE: Essex
In 2026, the company’s northern market regions are better positioned for hiring growth than other regions nationally, as technology companies expand their footprint and make investments in artificial intelligence, said Kleiman. Those markets could also benefit from return-to-office enforcement, she added.
Under those conditions, Essex is expecting slow but stable economic growth in 2026, as major employers take a cautious approach to hiring, Kleiman said.
That uncertainty could also temper demand acceleration in the near-term, she said, as the company anticipates housing demand remaining the same this year. The supply of new housing is projected to decline about 20% year over year in 2026, she added.
“We see a path to the high end of our guidance range if hiring trends improve modestly,” said Kleiman. “Given historically low levels of new housing supply across our markets, even a small inflection in demand could have an outsized impact on fundamentals.”
By the numbers
Essex grew its core FFO per diluted share by 1.5% year over year in Q4 and 2.2% throughout the full year in 2025 — exceeding the midpoint of the company’s full year guidance range, the REIT reported.
Throughout 2025, Essex purchased seven apartment communities for a total $829.4 million, while selling five apartment properties at a total pro rata contract price of $563.8 million. For example, in November, the firm bought 1250 Lakeside, a 250-unit apartment community built in 2021 in Sunnyvale, California, for $143.5 million.
Same-property revenue growth grew 3.8% year over year in Q4, led by scheduled rents rising 2.2%.
Reaching 3.3% in year-to-date same-property revenue growth at the end of Q4, Essex hit the high end of its guidance range and 30 basis points ahead of its original projections for the year, said Barb Pak, Essex executive vice president and CFO, during the call.
“The outperformance in the fourth quarter was driven by lower concessions, higher occupancy and other income,” said Pak.
Occupancy also rose 20 basis points in the fourth quarter to 96.3%, with Los Angeles leading all of Essex’s markets in that area, as occupancy improvements in the region increased 70 basis points during the period, said Kleiman. The market’s growth was “a good indication that this market continues to progress towards stabilization,” she said.
Looking ahead to 2026
Essex is forecasting a 3% same-property expense growth by the midpoint of 2026, which would mark the lowest rate of expense growth that the company has seen in several years, said Pak.
The company is expecting controllable expenses to increase about 2% and insurance costs to decrease about 5% year over year — benefits that would be partially offset by increases in utilities and property taxes, she said. Overall, Essex anticipates same-property NOI growth to increase 2.1% by the midpoint, said Pak.
On the revenue side, Pak outlined key drivers of growth in 2026.
Based on Essex’s 2025 results, the company is anticipating its earn-in to contribute 85 basis points to growth, said Pak. The company’s guidance is also assuming a 2.5% blended lease rate growth at the midpoint. Its outlook for market rent growth factors in tempered job growth and a meaningful reduction in new housing supply, she said.
“This should allow us to achieve similar blended net effective rent growth as last year,” said Pak.
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