AvalonBay’s Development Pipeline Grows as It Spends in Expansion Markets

AvalonBay Communities, one of the largest owners of multifamily real estate in the country, has seen an increase in new developments during the third quarter of 2024, as well as progress in its expansion markets.

During the third quarter of this year, Virginia-based AvalonBay saw $450 million in new developments, contributing to a total of $835 million in development starts year-to-date, the company announced in its third-quarter earnings report released Tuesday. The real estate investment trust projected it will reach $1.1 billion in new developments by the end of the year.

AvalonBay also saw more stable occupancy rates during the third quarter and $325 million in acquisitions year-to-date, the company said. And 85 percent of its acquisitions were in its expansion regions, including Southeast Florida and Raleigh-Durham and Charlotte, N.C.

“For next year, we expect our suburban and coastal business to continue to outperform,” Sean Breslin, AvalonBay’s chief operating officer, said during a Tuesday morning earnings call. “Around external growth, we’ve talked about development activity and the buildup and the prospects there. And I think with some enhanced visibility and stability around rates, that will lead to more transaction activity and should allow us to lean further into external growth.”

In the three-month period ending Sept. 30, AvalonBay completed the development of two multifamily properties: the Avalon Bothell Commons in Bothell, Wash., and the Kanso Milford in Milford, Mass. Those communities contain a combined 629 apartment units and 9,200 square feet of commercial space, according to the report.

AvalonBay also started four major deals during the third quarter — two in North Carolina and two in Texas. Those deals include the company’s first investment in Austin, an expansion market where AvalonBay is planning a townhome community of between 1,300 and 1,400 units, Matt Birenbaum, AvalonBay’s chief investment officer, said Tuesday.

“We’re excited about the opportunity set, and we think we can really bring our strategic advantages to bear there and provide more growth opportunities going forward,” Breslin said during the call.

Looking to next year, AvalonBay predicted strong rental revenue growth, high renewal rates, a steady demand for apartment homes, and a lower level of resident turnover due to a lack of affordable alternatives for housing, Breslin said.

The company also said it has several deals in the pipeline in New Jersey, Florida and Massachusetts, where it’s planning simple, low-density construction projects.

Plus, AvalonBay said return-to-office mandates may work in its favor for apartment leasing in Seattle and San Francisco as major tech companies such as Amazon and Salesforce implement stricter requirements for their employees to come back into the office, with Amazon calling for five days per week starting in the new year and Salesforce calling for four to five days back.

While things seem rosy at the moment for AvalonBay, the firm did face a setback in June when it unloaded a 156-unit asset in North Hollywood in Los Angeles to Prime Residential at a $10 million loss, as Commercial Observer previously reported.

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