For the second straight day, an apartment REIT reported results reflecting growing optimism that a multifamily recovery will take shape throughout 2026.
After a fairly optimistic commentary from AvalonBay Communities, Equity Residential executives noted that a burnoff in apartment supply was pushing down concessions across their portfolio in their first-quarter earnings call on Wednesday. Conditions should continue to improve as the year progresses.
“As we turn the corner into the second half of the year, given the decline in supply, we expect concessions to materially decline, especially relative to the increases that we saw in the second half of last year,” EQR Chief Operating Officer Michael Manelis said on a Q1 2026 earnings call.
Manelis said he would model a 20% decrease relative to EQR's second-quarter 2025 rate, which could help set the stage for a strong second half. He expects renewal rate increases to remain around 5% in the coming months, with new leases roughly flat.
“Right now, renewals are doing a little bit better than what we thought,” Manelis said. “New lease is a little bit lighter than what we thought. So we love the setup heading into the peak leasing season. We love this supply picture in the back half of the year. But at this point, it's still probably too early in the year for us to change that full-year outlook for the blends.”
Still, not all markets are the same. Here is a breakdown of what EQR sees in its coastal regions and expansion into Sun Belt markets.
Strength in San Francisco and New York
The clear Q1 overperformers in EQR’s portfolio were San Francisco and the New York City metro, marking a clear contrast from five years ago, when the two large coastal cities struggled after the pandemic.
“The strength in key gateway markets like San Francisco and New York, which both exceeded our already high expectations for the quarter, are offsetting a slower-than-expected start in Boston and Seattle,” Manelis said.
Together, San Francisco and New York constitute about 30% of EQR’s NOI and have the best supply-and-demand outlook in the country, according to Manelis. “Our urban exposure in these two markets is particularly unique to Equity Residential, and should be a relative strength for us versus our peers,” Manelis said.
Of the two markets, San Francisco is performing best, driven by the artificial intelligence job boom downtown and very little new supply.
“It isn't just the actual creators of AI [creating jobs],” said CEO Mark Parrell on the call. “It's all the systems that sit on top of it. A lot of this employment is small groups of people building on top of AI systems — various helpful applications of sorts. So, I think there’s room to run here.”
New York City’s rental performance is powered by a lack of new competition, according to Manelis.
“New York also continues to post excellent performance with demand outpacing supply, and has almost no new competitive deliveries coming online in 2026,” Manelis said. “The large financial institutions continue to produce record profits, and employment in the market is very stable.”
Struggles in Boston, Seattle and Washington, D.C.
Though concessions are falling overall, they’re still lingering in some metros. On the coasts, Manelis sees elevated usage in Washington, D.C., and Seattle.
While the Washington, D.C., area is performing in line with EQR’s expectations, pricing power is “less than normal,” according to Manelis. With deliveries falling off 65% this year, there is hope for improvement. “The real question here is whether we will see any improvement in consumer confidence in this market,” he said.
BY THE NUMBERS
| Category | Q1 | YOY Change |
| Operating revenues | $746.5 million | 2.2% |
| Net operating income | $497.9 million | 1.4% |
| Operating expenses | $248.6 million | 3.7% |
| FFO per share | $0.89 | 5.3% |
| Average rental rate | $3,154 | 2.2% |
| Occupancy rate | 96.5% | 10 bps |
SOURCE: EQR
Seattle traditionally follows San Francisco's cyclical trends by about a year, which leads to hope that it will tighten as 2026 progresses, according to Manelis. However, the city is not experiencing the benefits of the AI job boom seen in San Francisco and is trending below EQR’s expectations.
“Today, the market is still working to absorb the new deliveries from 2025,” Manelis said. “Concession use is down 22% in the quarter, but demand is still price-sensitive, causing this market to lag normal seasonal improvements.”
In Boston, difficult weather conditions weighed on Q1 performance, and a pullback in life science funding is hampering the Cambridge, Massachusetts, area. “This is a very seasonal market, and it's still early,” Manelis said. “Overall, we still think that the city will outperform the suburbs based on the location of the 2026 new deliveries.”
Los Angeles is performing in line with EQR’s tempered expectations, though there are signs of improvement downtown as the city prepares for the World Cup and Olympics. “Continued uncertainty in the entertainment business is an overhang on the market, and we have still not yet seen any catalyst on the job front that will drive growth in the near term,” Manelis said.
Expansion markets
EQR doesn’t have the same stake in the high-supply Sun Belt markets as some of its REIT peers do, with holdings in only Dallas, Denver, Atlanta and Austin, Texas. But it's still seeing issues from new competition.
“We need to see concessions go down,” Parrell said. “That's what we are seeing, in fact, in Atlanta.”
Manelis said conditions are improving in both Atlanta and Dallas, with concessions coming down. “Atlanta is performing the best, and if the current trends continue, this market should deliver slightly positive, same-store revenue growth for the year,” he said.
In Denver, Manelis noted strengthening occupancy and initial signs that the market has bottomed out. Other markets show similar signs of recovery.
“With a sizable decline in new starts, improving operating conditions and current competitive pressure easing, our newer markets, excluding Austin, Texas, all have the right setup for recovery through the balance of this year,” Manelis said.
However, for these expansion markets to fully recover, employment has to outperform the coasts. “We just need more job growth there than anywhere else, because we have more supply there than anywhere else,” Parrell said.
