What's Happening Next in Multifamily? Explore 1Q 2022 earnings soundbites from Equity Residential (NYSE: EQR).
Equity Residential 1Q22 Takeaways
1Q same-store revenue results were about 125 bps lower than we anticipated due to this higher bad debt, partially offset by about 25 bps of the better rate growth, leaving the final quarterly same-store revenue number about 100 bps lower than we expected
As we think about the full year, we feel that we are in a stronger operating position than we had initially contemplated in our full-year guidance with a better lease rate growth trajectory more than offsetting our now more cautious view of delinquency.
We are seeing pricing power ahead of our expectations. Strong demand is being driven by the desire of affluent residents to live in our well-located properties, both urban and suburban.
Boston is following normal seasonality with improving demand and pricing heading toward spring. We're almost 97% occupied and the market is benefiting from college campuses opening, the return of international students, and strong demand from lab and life sciences, financials, health care, and education. Competition from the new supply will be modest and market performance strong.
New York continues to thrive and was our best performing market in 1Q22 with same-store residential revenue growth of 13.6%. 96.9% occupied and expect this market to be our best performer in 2022. We're renewing about 60% of our residents, which is healthy, but 5% lower to move out vs. paying the higher current price, but it is not higher rates. We still expect to feel some pressure from new supply in the Jersey Waterfront and Brooklyn later this year.
Washington, D.C. is performing as expected with same-store revenue growth of 3% in 1Q22. This was our best performing East Coast market in 2021 and has the least ground to make up. As is often the case in D.C., new supply is likely to pressure rate growth in the market, but the metro area continues to boast record absorption. Strong employment across job sectors led to 96.7% occupancy. We are renewing about 60% of our residents and feel good about our positioning for the spring leasing season.
Denver continues to demonstrate a very strong demand. We're almost 98% occupied and delivered same-store revenue growth of almost 13% in 1Q22. Despite turnover being on the higher end, we are seeing very good pricing power and healthy occupancy. In Atlanta, our acquisitions are performing ahead of their performance as the market continues to produce strong rent growth.
Dallas and Austin continue to enjoy robust demand driven by very good in-migration and job growth in these markets.
West Coast. Seattle continues to be slow to recover compared to the other markets, particularly in the downtown submarket. The good news is that the city's new mayor is focused on the quality of life issues, which we expect will have a positive impact. Also, job postings in the market are at the highest level we have seen with Amazon leading the pack with over 19,000 positions posted with 16,000 of them being in the city of Seattle, which is a good sign for future apartment demand.
Market occupancy in Seattle currently sits just above 95%, which remains behind our expectations, and turnover, albeit within historical norms, was the highest of all of our markets. The suburban portfolio is outperforming the city with the Bellevue, Redmond submarket seeing immediate demand improvement in March after Microsoft's "return to the office" announcement.
YTD pricing remains flat in the downtown submarket with approximately 60% of new applications receiving a concession at just over a month and occupancy in this submarket is at 93%. Overall, we expect continued strength in the suburban portfolio and remain optimistic that pricing power and occupancy will improve in the downtown submarket.
San Francisco has also lagged in the recovery, but at the moment, feels on stronger footing than Seattle. We are very encouraged by the recent announcements from Mayor Breed and the local large employers about a commitment to bringing office workers back to the city, which should help address quality of life issues downtown. There has been consistently good demand and early signs of improved pricing power that the market lacked in 2021. We're almost 97% occupied and resident retention has improved from a year ago.
Google, which has asked workers to return this month, made a recent announcement that it is investing more than $3.5 billion in California, including a big chunk in the Bay Area with significant projects in Mountain View, Sunnyvale, and Downtown San Jose, all areas where we have a significant number of communities. The pricing trend has increased almost 6.5% since the beginning of the year, which is better than the normal seasonal expectations, which would be in the 4% to 5% range. While this market's pricing remains below pre-pandemic levels, the good news is that point to a continued strong recovery of the market.
Now let me move to SoCal, 3 markets' initial indicators that have performed exceptionally well, but for elevated delinquency. First, Orange County and San Diego continue to show remarkable performance with high occupancy and strong retention, supporting very good new lease rents. Our residents, Home prices in these markets are out of reach for many of which is evident by the significant decline in move-out, citing this reason during the quarter. We expect to see continued record high retention likely impacted by the local regulations limiting our allowable increases, increasing home prices, and very limited competitive new supply. The result of these factors should allow us to maintain elevated pricing power throughout the year in these markets.
Next, Los Angeles. Even with elevated delinquency, L.A. continues to be a star performer. Occupancy is almost 97% and pricing power is strong and better than expected. The urban market's performance is now on par with the suburban portfolio, a scenario that we have not seen since the onset of the pandemic. The percentage of residents renewing is the highest we have seen likely due to the impact of the local regulations limiting our allowable renewal increases, and we expect to continue to renew between 60% and 70% of our residents.
The market has changed a lot in the last 3 or 4 weeks from an interest rate standpoint, but there are countervailing forces that work. There's still all of this capital flowing into our sector and operating results are still so good that it's a really attractive place for people to put money. The frothiness has gone, where a month or 2 ago, we had multiple bidders going in over ask and really bidding the pricing up. And frankly, we didn't buy in that environment because we thought it got so overheated. So right now, it's kind of a feeling-out process, but I don't see distressed sellers out there.
During 1Q22, we did see a decline in the percent of residents that site buying home is the reason when they move out. Remember, the turnover was low. So the absolute number of residents leaving to go buy a home is materially down, and the percentage ticked down to about 11.5% of move out citing that reason (in-line with historical norms but down from 15% in 4Q21).
Read the full release from Equity on Businesswire.
