Essex Upgrade Signals Renewed Optimism for Multifamily Investors
A vote of confidence for the multifamily sector emerged as Raymond James upgraded Essex Property Trust, with analysts pointing to the very fundamentals private investors prioritize: resilient rent growth, steady occupancy, and low delinquency rates despite turbulence in the U.S. real estate market. The shift is significant for more than just institutional players. According to industry experts, the same metrics underpinning Essex’s West Coast performance increasingly apply to smaller transactions, particularly in California’s diverse property landscape.
Ryan Wagner, Senior Managing Director with JLL Capital Markets in San Francisco, explained that the past several years have generated an unusual gap between incomes and rents. “While incomes grew substantially during COVID throughout Northern California, rents dropped 10% to 25% in various locations, and some of these pockets are still not back to pre-COVID rent levels,” Wagner told GlobeSt.com.
This dynamic has pushed rent-to-income ratios in the Greater Bay Area to some of the lowest in the country. With rental affordability at a high and construction pipelines running dry, Wagner believes the stage is set for robust rent growth in the next three to five years.
Private investors have taken notice. Wagner described a marked increase in private buyer activity year-over-year, fueled by more attractive entry pricing, higher initial yields, and continued access to strong debt financing. “In oversupplied markets, new construction starts have declined dramatically, positioning future deliveries well below historical averages,” he said.
Essex’s institutional approach underscores a broader trend toward favoring older, well-located assets—a strategy increasingly mirrored in private markets. The company remains comfortable owning aging properties in high-demand areas like Silicon Valley, translating institutional preferences to smaller-scale deals.
Wagner also observed a shift in capital flows toward transactions in the $10 million to $25 million range, making it easier for owners to refinance or exit. The Raymond James upgrade underscored this momentum, lifting Essex to “outperform” from “market perform” and naming San Francisco, San Jose, and Seattle as standout multifamily markets in 2025, each logging year-to-date asking rent growth of 4.2%, 4.2%, and 2.5% through mid-June, respectively.
Source: GlobeSt/ALM