AvalonBay Warns of Rents Peaking as It Reports Modest Earnings Gain
By Mark Hallum July 31, 2025 2:07 pm
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Residential real estate investment trust AvalonBay reported higher earnings in the second quarter of 2025, but expects “muted” results in the coming months.
Same-store net operating income increased 2.7 percent to $477 million compared to the second quarter of 2024, which was in part the result of a 3 percent increase in revenue to $689 million from the same period last year, the company said in an earnings call Thursday.
Avalon Bay also said it had wrapped construction on the 200-unit Avalon Princeton on Harrison in Princeton, N.J., which cost $79 million, and that it had started building Avalon Kendall in Kendall, Fla., and Avalon Brier Creek in Durham, N.C. The Florida and North Carolina developments will produce 624 apartments and cost $210 million.
“While our expectations for job growth in the second half of the year are a little more muted than they were in January, demand remains healthy across most of our portfolio, and, importantly, new supply in our established regions continues to decline to levels not seen in over a decade,” AvalonBay CEO Ben Schall said during the call.
Slower leasing velocity is expected considering late delivery on new building projects, especially AvalonBay’s development efforts at two sites in Denver. But the REIT believes momentum is just delayed, and the company said it will absorb any costs.
“We’ve seen steady improvement over the past year, but are expecting it to be modestly unfavorable to our original budget in terms of rate and occupancy,” Chief Financial Officer Kevin O’Shea said. “We’re expecting lease rate growth to be 10 basis points below our original forecast, but fully offset by higher occupancy. Our same-store average asking rent exceeded our original expectations through May but peaked in June, earlier than our original outlook, [and that] is contributing to the roughly 10 basis point lower contribution from effective lease rates.”
Another factor in the asking rates stalling out in June was lower job growth on a national level, according to Schall.
Mark Hallum can be reached at mhallum@commercialobserver.com.
