Apartment owners dip as NYC, San Francisco rents seen soft

Bloomberg

Apartment owners with properties in San Francisco and New York tumbled after landlord Equity Residential said new leases in those cities — two of the most expensive U.S. rental markets — are falling short of revenue expectations.
Essex Property Trust Inc., a real estate investment trust focused on the West Coast, slid 3.7 percent for the biggest decline since February. AvalonBay Communities Inc. and UDR Inc., which operate in both cities, dropped 1.9 percent and 2.8 percent, respectively.
Equity Residential, the largest apartment REIT by market value, on Wednesday lowered its revenue forecast for the second time this year, citing continued weakness in New York and a recent slowdown in San Francisco. The company said rates on newly signed leases aren’t meeting its projections because of an increase in supply. The shares fell 4.1 percent to $66.37, the lowest since October 2014.
San Francisco and New York — favored markets for landlords and developers in recent years because of their outsized rent growth — have had a surge in construction that may now be limiting how much owners can raise rates.
In the West Coast city, where rents climbed 11 percent last year, about 5,100 new units — the most in 26 years — are expected to be listed for rent in 2016, data from Reis Inc. show. In Manhattan, 5,675 apartments will be added to the rental
inventory.
San Francisco effective rents in the first quarter were unchanged from a year earlier at an average of $2,492, according to Reis.
A slowdown in the city’s technology industry has also been affecting the market, said Ryan Severino, director of research at the real estate data company. “Supply has been exceeding demand recently,” Severino said. “Job growth in tech year-to-date is about half of what it was last year.”
Essex Property owned 14,865 apartment units in Northern California at the end of the first quarter, representing about 30 percent of its holdings.