Essex Property Trust (NYSE:ESS) executives said 2025 results came in at or above the company’s expectations, supported by resilient West Coast rental fundamentals and a continued recovery in Northern California.
On the company’s fourth quarter 2025 earnings call, President and CEO Angela Kleiman said Essex delivered full-year same-store revenue growth at the high end of guidance and funds from operations (FFO) per share growth above the midpoint of its outlook. She highlighted execution in “other income” initiatives and delinquency recovery, which management said improved to near pre-COVID levels.
Fourth quarter operating trends
Within the portfolio, management pointed to Los Angeles as showing notable sequential improvement. Kleiman said Los Angeles occupancy increased 70 basis points quarter-over-quarter, which she framed as evidence the market is progressing toward stabilization. She also said Northern California was Essex’s best-performing region during the quarter, followed by Seattle and Southern California.
In response to analyst questions, Kleiman provided additional detail on Los Angeles, emphasizing progress in economic occupancy (occupancy net of delinquency). She said fourth quarter economic occupancy in the market was 94.7%, up from 94.0% in the third quarter and 93.8% in the second quarter, putting it “just so close to stabilization at 95%.” However, she cautioned that the pace of delinquency improvement is influenced by eviction processing timelines.
2026 guidance framework: revenue, expenses, and Core FFO
CFO Barb Pak said Essex achieved 3.3% same property revenue growth in 2025, which she said was 30 basis points ahead of the company’s original projections and at the high end of its most recent guidance range. She attributed fourth quarter outperformance to lower concessions, higher occupancy, and higher other income.
Looking to 2026, Pak outlined the building blocks of Essex’s same property revenue growth midpoint of 2.4%:
- Earn-in from 2025 results: 85 basis points
- Blended lease rate growth: 2.5% at the midpoint
- Other income: 30 basis points contribution
On expenses, Pak said Essex expects 3% same property expense growth at the midpoint, which she called the lowest pace in several years. She said the company is forecasting controllable expenses up about 2% and insurance costs down about 5% year-over-year, partially offset by higher utilities and property taxes. Based on those assumptions, Essex forecasts same-property NOI growth of 2.1% at the midpoint.
For 2026 Core FFO per share, Pak said Essex is forecasting flat growth year-over-year. She said solid top-line performance and NOI growth are expected to be offset by structured finance portfolio redemptions, which management expects to create a 1.8% headwind. Pak described the structured finance modeling as conservative, excluding any assumed reinvestment of redemption proceeds and assuming minimal income from 2026 maturities. She also said management expects 2026 to be the final year of structured finance-related headwinds due to the book’s substantial reduction in recent years.
Market and regional outlook: supply decline and a “measured” hiring backdrop
Kleiman said Essex’s base case for 2026 assumes demand remains at current levels amid slow but stable economic growth and cautious hiring by major employers. On the supply side, she said the company forecasts total new housing supply will decline about 20% year-over-year, which management expects to support blended rent growth above the U.S. average and comparable to 2025.
Management reiterated its view that Northern California should lead Essex’s markets in 2026, followed by Seattle and then Southern California. In the Q&A, Kleiman added more granular market rent assumptions at the midpoint, describing expectations as similar to 2025 “in an environment of low growth.” She said Essex is assuming:
- Northern California: mid-3% to 4% range
- Seattle: mid-2% range
- Southern California: mid-1% range
On lease spreads, Kleiman said Essex’s 2026 blended lease rate growth assumption is similar to 2025 at about 2.5%. She said the company is assuming new lease growth of roughly flat to 2% and renewals around 3% to 4% for the year. Later in the call, she said renewal rates were running around “fourish to mid-4%” for February and March, with negotiation discounts of about 30 to 50 basis points, which she characterized as consistent with a “normal, stabilized environment.”
When asked about technology-sector volatility and demand in Northern California and Seattle, Kleiman said Northern California’s recovery is “finally starting to take hold,” but she described the jobs backdrop as stable rather than robust. She cited fourth-quarter venture capital funding that she said rose 91% quarter-over-quarter and noted that more than 65% of that spending was in the Bay Area. She also pointed to positive office absorption in San Francisco, San Jose, and Seattle as a constructive signal.
In Seattle, Kleiman acknowledged the fourth quarter was soft, citing corporate layoff announcements. Still, she said the market benefits from a roughly 30% decline in supply and potential tailwinds from return-to-office enforcement, specifically mentioning Amazon enforcement beginning in January and Microsoft in the first quarter.
Transaction market, capital allocation, and balance sheet positioning
Kleiman said West Coast multifamily transaction activity improved materially in 2025, citing $12.6 billion of non-portfolio institutional transactions, up 43% from 2024. She said improving fundamentals and limited future supply contributed to a “significant sentiment shift” toward the West Coast, resulting in deeper bidder pools and cap rate compression, particularly in Northern California and Seattle. She described cap rates in highly sought-after submarkets as occurring in the low-4% range, with the remainder of deal volume in the mid-4% range.
Management also said Essex has been the largest investor in Northern California over the past two years, with most acquisitions completed ahead of cap rate compression, which Kleiman said has resulted in significant net asset value appreciation.
During Q&A, EVP Rylan Burns said the company evaluates opportunities based on FFO per share accretion, NAV per share accretion, and growth profile relative to the existing portfolio, allocating capital where potential accretion is highest relative to cost of capital. Burns said “everything is on the table,” including buybacks, preferred equity, development, and acquisitions, though he emphasized the company’s intent to be thoughtful given relative returns.
On development, Burns said Essex is not expecting any development starts in 2026. He said the company has two land sites it continues to advance, but they are not expected to start in 2026. Burns said Essex underwrote about 100 land sites last year and none made sense economically, adding that making deals work would likely require land price reductions and/or “10%+ rent growth” for some projects. He said a yield around “a six” could be compelling in Northern California submarkets where transactions are occurring around a roughly 4.25% cap rate, assuming clear entitlement and underwriting visibility.
Pak said Essex’s free cash flow covers the dividend and planned capital expenditures and development for the year. She also noted the company addressed a portion of 2026 maturities through a December bond offering and said Essex had more than $1.7 billion in liquidity.
About Essex Property Trust (NYSE:ESS)
Essex Property Trust, Inc (NYSE: ESS) is a publicly traded real estate investment trust that acquires, develops, owns and operates multifamily residential properties. The company focuses on market-rate apartment communities and delivers a full suite of property services including leasing, resident services, asset management, and capital improvement programs designed to preserve and enhance long‑term property values.
Essex concentrates its portfolio in West Coast markets, with a significant presence in California and the Pacific Northwest.
