Rents in the Sun Belt are continuing to take longer to bounce back than expected, and MAA’s revenue and net operating income dipped -0.4 and -1.8%, respectively, in the third quarter as a result, the Memphis, Tennessee-based REIT reported in its Q3 earnings release.
Still, MAA President and CEO Brad Hill said the underlying drivers of recovery remain intact, and he is seeing improvement across the Sun Belt-focused firm’s markets.
“Timing and pace will vary by market, but with healthy demand, absorption exceeding new deliveries and markets gradually firming, we see a favorable foundation for the next phase of recovery,” Hill said in an earnings call Thursday.
New lease pricing improved in October from September in defiance of the typical seasonal pattern, per Hill. With better new lease performance and strong renewals, “we are optimistic this leasing momentum will continue to build into the busier spring leasing season,” he said.
Occupancy grew in Q3, but by less than expected. Although the firm kept expenses low in Q3, the delay in new lease recovery prompted it to revise its full-year outlook. MAA lowered the midpoint of its full-year core FFO guidance by four cents to $8.49 per diluted share, and reduced the full-year revenue growth midpoint by 35 basis points to -0.25%.
MAA also lowered full-year revenue, effective rent and occupancy forecasts in Q2, though stronger expense trends allowed it to maintain its core FFO outlook. Hill said company leaders expected less economic uncertainty and stronger customer sentiment in 2026.
“Those two things really ultimately impact new lease pricing and the confidence in the ability for us to push a little bit more on the new lease rate side, and that didn't materialize like we had expected,” Hill said.
BY THE NUMBERS
| Category | Q3 | YOY Change |
| Revenue | $519.1 million | -0.4% |
| Net operating income | $316 million | -1.8% |
| Operating expenses | $203 million | 2% |
| Core FFO | $2.10 | -2.8% |
| Average rent | $1,691 | -0.1% |
| Occupancy rate | 95.3% | -30 bps |
SOURCE: Essex
Managing the supply transition
Market fundamentals look broadly similar to Q2, with excess supply still a challenge, according to Tim Argo, executive vice president and chief strategy and analysis officer. Potential tenants are shopping around and taking longer to sign a lease.
As a result, the firm’s marketing expenses have been high this year, CFO Clay Holder said, but he expects them to come down as more supply is absorbed, likely in the second half of 2027.
As the absorption process plays out, MAA is focused on managing expenses; investing in technology to support increased centralization and specialization; and enhancing its assets through redevelopment, repositioning and property-wide Wi-Fi, according to Hill.
Holder sees relatively low personnel costs as a bright spot as the firm continues to upgrade its operations platform, enabling it “to continue to specialize and centralize some of our roles,” he said on the call.
The firm also repurchased about 400,000 shares of common stock in Q3 at a weighted average price of $126.72 per share, for a total investment of $50 million.
Sun Belt struggles
Concessions have been a key factor limiting rent price growth, according to Argo. Though MAA used slightly more discounts to attract renters in the third quarter, concessions started to “tick down slightly” in late Q3 and into early Q4.
Most of MAA’s South Carolina and Virginia markets as well as Dallas continued to outperform the rest of its portfolio, according to Argo. Charleston had the firm’s highest revenue growth of 3.9% YOY in Q3, with Richmond, Virginia, coming in second at 3.5% YOY growth.
The underperforming Austin, Texas, and Orlando, Florida, markets are improving, but by contrast, “Phoenix, Charlotte, and Savannah are relatively high concentration markets for us that are still working through heavy supply pressure and struggling to gain new lease momentum despite continued strong demand,” Argo said.
Charlotte saw a 19% uptick in housing inventory over the last three years, and MAA’s “two Charlotte lease-up properties have seen the heaviest concession usage, with up to 10 to 12 weeks offered on certain floor plans,” according to Argo. Most of MAA’s urban assets continued to perform better than its suburban ones.
Development and operations
Although the cost of capital is elevated right now, “we continue to believe in development,” Hill said. “Construction costs have consistently come in below what we expected. So generally, the yields we deliver are in excess of what we what we underwrite.”
MAA planned four starts for 2026 and launched construction on the last three projects in Q3: an 88-unit Phase II development in the Kansas City market, a 306-unit pre-purchase joint venture development in Northern Virginia and a 312-unit pre-purchase JV development in Nashville.
“All three projects should reach stabilization in a much lower supplied environment with stronger operating fundamentals in 2029,” Hill said.
MAA Val Vista in Phoenix and MAA Breakwater in Tampa, Florida, stabilized in Q3, while MAA Milepost II in Denver completed construction and moved into lease-up, according to Argo. In North Carolina, MAA Nixie in Raleigh and MAA Liberty Row in Charlotte are expected to stabilize in the fourth quarter.
MAA’s community-wide Wi-Fi initiative, launched in 2024, continues to expand, and the firm brought in $1.35 million from those projects in Q3, per Argo.
The firm also renovated more than 2,000 apartments last quarter, and since they are leasing faster than the non-renovated ones, “we would expect to further accelerate this program in 2027,” Argo said.
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