Equity Sees Slow Leasing But Hopes Amazon’s Office Mandate Can Help

Equity Residential (EQR) saw low apartment leasing rates this year, but the real estate investment trust is hopeful that Amazon (AMZN)’s return-to-office mandate will help turn that around.

Equity reported that its new lease change — the difference in rent from an apartment when a new tenant moves in — dropped 1.2 percent during the third quarter of 2024, according to its third-quarter earnings report. Company officials blamed myriad factors for the lowering of rents, including “continuing weakness in the expansion markets,” the company said in its report released Wednesday.

“This is a give-and-take-type process,” Equity CEO Mark Parrell said during a Thursday earnings call. “We can get the new lease rate to be a higher number by letting occupancy decline, [but] that may not benefit same-store revenue growth, which is our ultimate goal. So we’re trying to make as much money as we can in the current quarter and have a nice setup for the next year.”

To hike up those new leasing rates, Equity is banking on Amazon CEO Andy Jassy’s announcement in September that all of the tech giant’s office workers must return to their desks five days per week starting in January.

That return-to-office mandate has caused an “increased interest” among Amazon employees living far from the office to look for apartments near the company’s headquarters in Seattle, Equity said.

Michael Manelis, Equity’s executive vice president and chief operating officer, said during the call that the company hopes to benefit from increased leasing and renewal rates in Seattle as migration patterns show people coming back into the city.

“It’s one of the greenest shoots that we’ve felt and seen in a while,” Manelis said.

Despite the drop in revenue from new leases, Equity saw success during the third quarter with a 96.2 percent occupancy rate and acquiring 14 properties for approximately $1.26 billion, the company said.

Among those acquisitions was Equity’s purchase of a portfolio of apartment buildings from Blackstone for roughly $964 million, as Commercial Observer previously reported. In that deal, Equity took 11 of Blackstone’s properties in Atlanta, Denver and the Dallas-Fort Worth area, totaling 3,572 apartment units, CO reported.

Headquartered in Chicago, Equity owns or invests in about 300 properties across major U.S. cities, including New York City, Washington, D.C., Boston, Seattle and San Francisco. But the company is also looking to expand in markets like Denver, Atlanta, Austin, and the Dallas-Fort Worth area.

As of the end of the third quarter, 10 percent of Equity’s portfolio was in those expansion markets, and the company said it also has 190 million square feet under contract to close in Denver and Atlanta.

Equity said Thursday it is optimistic that rents will rise during the first quarter of 2025, which will translate into higher leasing spreads in the new year.

Isabelle Durso can be reached at idurso@commercialobserver.com.