Essex Property Trust’s West Coast portfolio saw property revenues grow in the third quarter, driven primarily by the red-hot Northern California market, the San Mateo, California-based REIT reported in its third-quarter 2026 earnings release. 

Despite the uncertain outlook for the U.S. economy and labor market, “West Coast multifamily fundamentals offer a compelling case for continued growth above the U.S. average,” CEO Angela Kleiman said on the REIT’s earnings call Wednesday. Deliveries are expected to remain low next year, while “technology center innovation continues to attract investment and drive economic activity, supporting our expectation for job and income growth.”

The firm slightly upped its full-year 2026 guidance for net income per diluted share, core FFO per diluted share, same-property revenue and same-property NOI. Essex had also raised its guidance in Q2.

Essex’s net income per diluted share in Q3 stood at $1.52, down 40.6% compared to $2.56 in Q3 2025, due primarily to gains on the sale of real estate and land recognized in Q3 2025. Driven by same-property revenue growth, the company’s core FFO per diluted share increased by 0.8% YOY, exceeding the midpoint of its guidance range by $0.01 per diluted share.

The REIT saw strong renewals in the third quarter, with Northern California leading the pack, according to Kleiman. Concessions were similar to Q3 last year, at about 10 days, although Essex is offering almost no discounts at its Northern California properties.

Regional matters

With Northern California's booming tech sector, Essex saw a blended rent growth of 7.3% in the region in Q3, “elevated by a strong leasing season with an extended peak that continued through September,” Kleiman said. Within NoCal, Santa Clara, San Mateo and San Francisco counties outperformed, while Alameda and Contra Costa lagged.

Market rents are still catching up in San Francisco, and Kleiman sees plenty of room for more growth. “Just to return to pre-COVID affordability levels, rents could actually increase by over 20% with no wage growth,” Kleiman said. 

The rent-to-median income ratio in San Francisco currently sits at 25.7%, compared to the 20-year average of just under 30%, according to Kleiman, while Oakland and San Jose are seeing ratios of around 21%. “Affordability remains a tailwind in this market for us, and we continue to have conviction that there's more room to run there,” Kleiman said.

Seattle has gradually recovered from a soft start to the year, led by the east side, where tenants are migrating from downtown and other markets, according to Kleiman. The city’s tech jobs are recovering, “and with the office expansion announcements that occurred last year and as supply deliveries continue to decline, we do anticipate that Seattle will have a nice rebound toward the end of next year,” she said.

Southern California’s operating conditions remain stable, with Orange County and San Diego performing most strongly in the region, according to Kleiman. She expects to see a lift there from the defense and aerospace industry, which is estimated to surpass $1.5 trillion in the next decade, with “a third of that funding allocated in Southern California.”

With SpaceX’s engineering and manufacturing headquarters in the Los Angeles region and Anduril Industries building a new campus in the Long Beach area, “two major industry giants having a footprint in those markets is a very good indication,” Kleiman said. That said, “these are relatively new, and money is just getting allocated. Companies are just starting to hire, and so it would be way too early to see that translate to job growth.”

There are “green shoots in LA,” where housing supply has fallen more than 40% over the past two years, according to Kleiman. Even though there have been more entertainment industry layoffs, they make up a small portion of the economy, while professional services remain stable.

Essex’s Q3 activity

One drag on results was legal settlements. Essex agreed to resolve its case related to RealPage in July for $36.5 million and spent $19.3 million on another litigation matter, per the earnings report. Essex paid the second sum to settle a class-action lawsuit alleging it wrongly withheld security deposits, the Times of San Diego reported.

In September, the firm obtained a $275 million unsecured term loan that matures in three years, with two one-year extension options.

In the third quarter, Essex sold three apartment communities for a pro rata contract price of $111.9 million, including a 76-unit community in Seattle for $30 million, according to its release.

On Tuesday, the firm also closed on a 474-unit community built in 2022 in the East Bay area of Northern California, Kleiman announced on the call. “Priced over $200 million and well below replacement cost, this asset is expected to generate a mid-5% yield,” Kleiman said. Essex bought another 378-unit apartment community built in 2024 in Oakland, California, after the end of Q3, per its earnings report.

West Coast transaction volume for institutional assets in Q3 was comparable to last year, according to Kleiman, but with “recent increases in the Treasury rates is still being factored into the transaction market, it would not be a surprise if fourth quarter volume declines as buyers and sellers adjust to the new rate environment.”

Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.