Q4 2025 Earnings Call Transcript

Good day, and welcome to the Equity Residential Fourth Quarter 2025 Earnings Conference Call and Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Marty McKenna. Please go ahead.

Good morning, and thanks for joining us to discuss Equity Residential's Fourth Quarter 2025 Results and Outlook for 2026. Our featured speakers today are Mark Parrell, our President and CEO; Michael Manelis, our Chief Operating Officer; and Bret McLeod, our CFO; Bob Garechana, our Chief Investment Officer, is here with us as well for the Q&A. Our earnings release and a management presentation are posted in the Investors section of equityapartments.com. We plan to keep this call to one hour as a peer is hosting their call at the top of the hour and will limit to one question per caller. As always, we are available for additional questions after the call.

Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events. Now I will turn the call over to Mark Parrell.

Thank you, Marty. Good morning, and thank you all for joining us today to discuss our fourth quarter and full year 2025 results and our outlook for 2026. I will start us off, then Michael Manelis, our Chief Operating Officer, will speak to our 2025 operating performance and 2026 revenue guidance. Bret McLeod, our Chief Financial Officer, will then cover our 2026 expense and NFFO guidance, and then we'll go ahead and take your questions. 2025 was a challenging year for the rental housing industry, including Equity Residential. While our 2025 same-store NOI results matched our initial guidance, the road to those results was not as straightforward as we had expected.

In many of our coastal markets, we saw stronger-than-expected rental growth through the first half of the year, followed by a deceleration in revenue momentum through the latter part of the year across all of our markets, except San Francisco and New York notable bright spots that we expect to continue to deliver strong results in 2026. This deceleration was particularly pronounced in highly supplied markets. We believe heightened policy and geopolitical uncertainty took a toll on consumer and employer confidence causing an abrupt slowdown in job and rent growth in the second and third quarters.

Looking forward to 2026, there is definitely a broad range of possible outcomes for the U.S. economy, especially as it relates to job growth. Our wider-than-usual same-store revenue guidance range acknowledges that uncertainty. The midpoint of our revenue guidance range assumes steady demand similar to the back half of 2025. So basically a continuation of the current low-high, low-fire environment and a significant improvement in the supply picture especially in the second half of 2026. But with S&P 500 corporate earnings and the economy as a whole, continuing to grow at a brisk pace, we can certainly see a path to an improving job picture as we move through the year.

With our portfolio occupancy currently over 96%, a significantly improving supply picture and social and cost factors that favor our business over owned housing and advantageous portfolio positioning due to 30% of our portfolio being in the well-performing San Francisco and New York markets, we feel like we just need a little bit of wind at our back in the form of improved job growth to see 2026 revenue growth accelerate beyond our current expectations. On the capital allocation front, we remain committed to our diversified portfolio strategy. As we discussed at our Investor Day last year, we think shareholder returns over the long term are maximized by having a portfolio that has exposure to a well-earning renter in a broad collection of metropolitan areas and in urban as well as suburban settings.

The strength of our results in New York and San Francisco, two markets left for dead by some observers just a few years ago are an example of the benefits of our diversification strategy. The prolonged poor performance in the Sunbelt due to supply is another example of the benefits of a diversified portfolio and avoiding relying too heavily on a solely demand-focused strategy. You can expect over time, we will invest in all 12 of our markets through renovations, acquisitions and development activities. Although given our current cost of capital, significant acquisition activity makes less sense at this time.

Development activity will be highly selective. The best capital allocation opportunity we see now is to sell properties that we see as having lower forward return profiles and using the sales proceeds to buy back our stock. As you saw in the release, the company purchased approximately $206 million of its stock during the fourth quarter and just subsequent to quarter end for total stock purchases of $300 million in 2025. We see our company with its high-quality asset base and sophisticated operating platform as greatly undervalued in the public markets versus private market values. Also, by acquiring stock with the proceeds from the sales of slower growth properties, we're effectively improving our forward growth rate as well, a double benefit.

We continue to see stock buybacks at these levels as a good use of shareholder capital while staying aware of the need to maintain balance sheet strength and flexibility and avoiding unduly descaling our business. I also note that having a smaller development platform, with all our funding needs covered by excess operating cash flow and incremental debt capacity from earnings growth, allows us more flexibility to pivot to share buybacks when that is in the best interest of our shareholders. We are proud to have returned cash to our shareholders in the form of quarterly dividend payments and stock repurchases of over $1.3 billion during 2025. Before I turn the call over to Michael, I want to reiterate how excited we are about the forward prospects of our business.

Our internal tracking shows deliveries of competitive new supply in our markets, declining 35% or to be down about 40,000 units in 2026 versus 2025 levels. The results we are seeing in San Francisco and New York demonstrate the earnings power of our business when we are operating in markets with sustained demand and low levels of competitive new housing supply. We believe more markets we operate in will trend in that direction in the latter half of 2026 assuming the job situation is reasonably constructive. Add in that 2026 starts look to be light again, boding well for continuing low levels of deliveries in future years, and you have a terrific supply setup.

We also know that cost and lifestyle factors continue to make our well-located, professionally managed apartment portfolio desirable to a wide segment of the population versus living in owned housing. A tailwind we anticipate will continue for the foreseeable future. With portfolio-wide occupancy of more than 96% and 97% in some of our key markets, we think this sets us up well for a year where performance steadily improves and puts us in an excellent position for 2027 and beyond. In sum, we continue to see the current and future drivers of our business as healthy and the forward momentum is positive.

Finally, a big thank you to my 2,700 Equity Residential colleagues across the country for your tireless work in 2025, taking such good care of our residents. And now I'll turn the call over to Michael Manelis.

Thanks, Mark, and thanks to all of you for joining us today. Our fourth quarter revenue results reflect a continued high level of physical occupancy at 96.4%, driven by solid demand, strong retention and fewer lease expirations. Our blended rate of 0.5% in the quarter came in right at the midpoint of the range we provided, driven by a strong achieved renewal rate of 4.5% offset by negative new lease rates across every market with the exception of San Francisco. Other income growth was a little less than expected, driven by the lack of bad debt net improvement and a little less income from our bulk Internet rollout program and other fees causing us to be slightly off our midpoint.

The New York and San Francisco market showed particular strength in the quarter with growth muted in our Southern California markets and softness in our expansion markets. Our other coastal markets generally performed in line with our modest expectations. Overall, 2025 did not follow typical rent seasonality patterns. Strong gains in the first half of the year were offset by slower growth in the back half as job growth cooled amidst an elevated supply environment.

That said, the hesitancy of our customer to make big life changes, including moving in such uncertain environment, along with our team's relentless drive to provide a seamless customer experience and our very effective centralized renewal process resulted in the lowest reported resident turnover for both the fourth quarter and full year in our company's history. We also continue to see the tailwinds in our business from the unaffordability of homeownership. In fact, only 7.4% of our residents gave 'bought home' as the reason for move out in 2025 which is also the lowest percent we have seen in our company's history.

This combination of great customer service and low resident turnover allowed us to grow occupancy above expectations during 2025, which offset having less pricing power in the peak leasing season. As we begin 2026, you can see in the pricing trend chart, which is included on Page 8 of our management presentation, some momentum in December and January as we started pulling back concessions based on the strength in occupancy. So while it's still early, the setup for the spring leasing season looks good with pricing accelerating in line with the typical year and renewals are pretty consistent with over 60% of our residents renewing.

And right now, we expect to achieve renewal rate increases to remain somewhere around 4.5% for the next several months. Moving forward, our focus is on two major drivers to our business: new competitive supply and job growth. As Mark noted, we should benefit, particularly in the second half of the year, for materially lower supply in our markets, meeting what we modeled to be a generally stable, albeit low job growth market, implying a pricing trend curve for 2026 that looks more like a typical year, which is shown on Page 8 of the management presentation as opposed to what we saw in 2025. Page 7 of the management presentation lays out the building blocks for our 2026 same-store revenue and let me highlight a few that support the midpoint of our guidance.

We begin 2026 with an embedded growth of 60 basis points, which includes approximately 20 basis points of dilution from the inclusion of about 5,000 units in our expansion markets. Going from there, the rapid sequential declines in competitive supply pressure should allow us to return to a more normalized peak leasing season provided job growth remains steady, resulting in continued improvement in operating results in the second half of the year. Given this backdrop, we expect blended rate growth to be between 1.5% and 3% for the year. At the midpoint, this includes a slight improvement in achieved renewal rates and a little more pricing power on the new lease chain side as net effective prices improved, mostly driven by less concession use as the year progresses.

We also expect continued strong resident retention as a result of our focus on customer service, the benefits of our centralized renewal process and the high cost and low availability of owned housing in our markets. This should provide us an opportunity to run the portfolio at 96.4%, which would be about a 10 basis point improvement on this same-store set. In addition to the above, we expect another year of solid other income growth, which is being driven by a 10 basis point reduction in bad debt and a continued growth in revenue from our bulk internet program, which combined will have a total contribution of about 40 basis points to same-store revenue growth in 2026. Achieving the high end of our revenue range would require the job market to improve early enough in the year to impact our peak leasing season.

The low end would most likely result if there are further declines in job growth that result in a flat pricing curve with lower occupancy throughout the year. And while I'm happy to discuss any of our markets during the Q&A session, let me take a minute and highlight a few of them that may be of special interest. I will start by saying that San Francisco and New York are the two markets in 2026 that are driving performance. We continue to have high expectations for these markets, that together, constitute about 30% of our NOI, and have the best supply and demand outlooks in the country for 2026. Our urban exposure in these two markets is particularly unique to Equity Residential and should be a relative strength for us versus our peers this year.

As we've discussed on previous calls, D.C. was a tale of two markets in 2025 with strength in the first half of the year that eroded as the year progressed, driven by a combination of federal job cuts, the National Guard deployment and the government shutdown. This has created a lot of uncertainty in the local market. The real positive in the market is that there's only going to be about 4,000 units delivered in '26, down from 12,000 units in 2025, a very favorable new supply setup and what we hope will be a less uncertainty in the market could lead to D.C. outperforming our somewhat muted expectations for 2026. In our expansion markets, which right now represent just under 11% of our total NOI, high levels of new supply continue to impact operating results in Atlanta, Dallas, Denver and Austin.

Atlanta is faring the best of the four and Denver, the worst. We expect our same-store portfolios in Atlanta and Dallas to have improved pricing power. In Atlanta, we have seen acceleration of rent since November, which continues to support our view that we are pulling away from the bottom here. We expect to see similar performance in Dallas as the year progresses.

Before I turn it over to Bret, I want to take a minute to highlight our current activities around innovation. As I discussed at our Investor Day last year, the first generation of initiatives, which focused on centralization, automation and introduced AI to parts of our leasing process, delivered a 15% reduction in on-site payroll, which is evident by the 1.1%, 5-year compounded annual growth rate in same-store payroll. With the advancements we are seeing in technology, we now expect to automate additional processes and add more AI-enabled applications into the business over the next 18 months including a new CRM and service application currently being deployed.

This level of innovation is expected to deliver another 5% to 10% reduction in on-site payroll over the next several years, and will also enable us to have a more utilized service organization, which will benefit our overall repair and maintenance expenses, creating the foundation of what will be the most efficient and scalable operating platform in our business is very exciting. Finally, I want to give a shout out to our amazing teams across our platform for their continued dedication to our residents while embracing change to further enhance our operating platform. 2026 is a year of opportunity for us to capture market rent growth by running a well-occupied portfolio with a strong operating platform that combines automation and centralization, along with a local team that knows how to keep our customers satisfied.

And with that, I will turn the call over to Bret.

Thanks, Michael, and good morning, everyone. Michael did a nice job describing our revenue outlook for 2026. So let me finish with guidance on same-store expense, our normalized FFO outlook, as well as provide some color on our anticipated capital markets activity this year. Expense management continues to remain a core strength of EQR as we leverage our scale and operating platform to deliver controllable expense growth at inflationary or sub inflationary levels as we did in 2025. As noted on Page 7 of our management presentation, we anticipate 2026 same-store expense growth to range between 3% to 4%, with a midpoint that is 20 basis points lower than 2025. Similar to what we saw last year, we anticipate that controllable expenses, such as payroll, will be relatively stable year-over-year growing at or near inflation.

We would also expect normal inflationary growth for real estate taxes and insurance in 2026. On the same note, we continue to anticipate utility costs to significantly outpace inflation again in 2026, particularly in electricity and water, although we believe the rate of growth will be somewhat lower than the 8% we experienced last year. We continue to roll out bulk WiFi throughout the portfolio, and we'll add 64 new properties to the 113 we stood up in 2025 which will result in an incremental $6.8 million or 70 basis points impact to total expenses. All told, we expect bulk WiFi to contribute approximately $6 million to NOI this year and approximately $10 million once the full rollout is complete by the end of 2027. Moving to norm FFO per share on Page 9 of the management presentation, we've provided a bridge from our full year 2025 norm FFO per share of $3.99 to the midpoint of our 2026 guidance, $4.08 per share, a 2.25% improvement over last year.

Beyond same-store residential contribution, the biggest incremental improvement to norm FFO is from our consolidated lease-ups, which we anticipate will contribute $0.06 this year as a result of two of our developments stabilizing in Q4 '25 and another anticipated to stabilize in Q1 '26. In addition, we have $0.01 in other, which is primarily coming from growth in non-same-store NOI. We anticipate transaction activity will be effectively neutral to norm FFO per share in 2026, a result of investing in share repurchases with the excess proceeds from dispositions in '25. We had $500 million of net sales proceeds in 2025 with much of that activity coming very late in the year, resulting in a $0.06 drag on norm FFO per share in 2026. The offset to this is the $300 million of stock we repurchased in 2025 will now be reflected via lower share count in '26 as well as the assumption we've made in our guidance that we will invest the remaining $200 million of excess sales proceeds to repurchase stock in the first half of this year for an aggregate $0.06 benefit that effectively neutralizes lost norm FFO from asset sales.

We've not assumed additional acquisitions or dispositions in 2026, but will remain flexible and opportunistic as the year progresses. Offsetting these additions, interest expense will be a $0.05 headwind in 2026 with $0.04 driven by a combination of three items: the consolidation of joint venture projects in 2025, the reduction in capitalized interest from expected project completions, as well as the timing impact of 2025 dispositions relative to share repurchases. The remaining $0.01 is related to our May 2025 refinancing and the expected refi of nearly $600 million of low blended coupon debt maturing later this year, which I'll expand on in a moment.

Lastly, we expect a $0.01 headwind from corporate overhead this year as savings in G&A are offset by increases to property management, some of it related to the IT spend Michael outlined in his remarks. In terms of capital markets activity, we only have one significant maturity in 2026, a $500 million, 2.85% note due in November as well as a small $92 million stub payment on an old 7.57% coupon note maturing in August. We would expect to refinance both of these at or near maturity, most likely with unsecured debt. We also successfully refinanced our $2.5 billion unsecured credit facility in the fourth quarter of last year, extending the maturity an additional three years to 2030 and have ample liquidity and capacity under our commercial paper program to remain flexible in the timing of refinancing these upcoming maturities.

Our guidance assumes a range of $500 million to $1 billion of debt issuance reflecting the activity just mentioned, but I would note that expected debt issuance will adjust as investment opportunities present themselves. We ended 2025 with net debt to normalized EBITDAre of 4.3x and were recognized by S&P in November 2025 with a positive outlook, reflecting the strength and flexibility of our balance sheet, which we continue to believe is a competitive advantage in the current economic environment. With that, we're happy to take your questions.

[Operator Instructions] We'll now go to your first question. It's coming from the line of Eric Wolfe with Citi.

Thanks, and good morning. Can you talk about the assets you're selling to fund the repurchases, specifically the CapEx and growth profiles of those assets? And ultimately, I guess, how do you think about the accretion from these trades? Because I think in your remarks, you said that it was going to be net neutral to earnings.

And I guess, anecdotally, I would have thought at least it was modestly accretive.

Eric, it's Bob. I'll start with maybe the asset mix and then the team can extrapolate around that. So these are typically assets that are older, as you can see in the release and typically noncore, which your implication of your question really shows that also that they tend to have higher CapEx flows. So we look at these transactions or we look at these assets as being lower growth, areas that we might have concentration risk, and also areas where AFFO is burdened with capital that we find isn't ROI enhancing and isn't -- doesn't allow us to improve the growth trajectory.

And that's why we've chosen that in the mix. And that's why you see a little bit higher disposition yield overall. Long term, they should improve the growth rate by selling them, they should improve the growth rate of the existing portfolio, both on an FFO and AFFO basis and that should be accretive longer term, although there can be noise amongst the assets given the mix of properties.

Yes, Eric, it's Mark. Thanks for that question. So that's a little bit on rate, but timing matters a lot. So by selling all the assets, most of these on December 30, you effectively lose an entire year of the income from those assets.

The share buyback last year will affect the year account for the entire 2026. But the $200 million we have yet to purchase that we've assumed as a placeholder we will, is not going to fully affect the share count in '26. So it's a little bit of that. It is, in fact, accretive on an FFO basis if everything had occurred December 30. But because of that timing, it doesn't have that effect.

We'll now go to your next question coming from the line of Steve Sakwa with Evercore ISI.

Michael, I was just wondering if you could provide a little bit more color on your comment around the renewals at 4.5%. I'm just curious, where are you sending out notices versus kind of the take rate? And are you seeing just any, I guess, signs of consumer impact or stress or just any issues around the job market, given that, that number still kind of remains lumpy on a monthly basis?

Steve, this is Michael. So the renewals right now for the next, call it, 3 months that are out in the marketplace, the quotes are somewhere right around that 6% level. And again, with our centralized process and kind of all the history we have, we got a lot of confidence and we can clearly see how January is playing out, that we're going to land this thing right around that 4.5%, give or take, 10 basis points in any given month, because it's all subject to actually who chose to renew. Did they have a concession when they moved in last year, et cetera.

So there's still a little bit of noise in those numbers that they can move. But a lot of confidence in that. Right now, we are tightening up that negotiation spread, and that's pretty common for us to do, especially with a portfolio that's positioned at 96.4%. I haven't really seen or heard anything in terms of kind of economic hardship from our resident base in terms of kind of getting on the call with the centralized team to negotiate or really any of those metrics that we're looking at, which is more around transfer request, are they trying to transfer to lower levels.

We haven't really seen kind of any lease breaks due to layoffs or anything like that at an accelerated level. So we still feel like things remain stable. This portfolio is well positioned against this backdrop of less competitive supply. We have a low rent to income ratio for the residents that just moved in with us.

So we're really feeling the economic hardship and a lot of confidence in that renewal number.

Next question will come from the line of Jana Galan with Bank of America.

Another one for Michael. On the 2026 supply outlook, some of the data providers we use have increased their supply numbers, just kind of units from '25 delayed and coming into '26, but also increases for 2027. And I know your teams on the ground have great intel, can you give us some background on how you come up with your competitive supply set?

Yes. Jana, it's Bob. I'll give Michael a break. I'm sure he'll have more questions soon enough.

But you're correct, and we noticed that actually just very recently in the data providers adjusting some of their mix. There's a little art here, I think, for some of the data providers in terms of what they're looking at from an actual perspective and also from what they're just forecasting overall. When we look at competitive supply, we both look at their data from a kind of a justification or a validation guardrail standpoint, but we also really do a boots on the ground approach. So we have investment officers and teams, company-wide in all of our markets that are evaluating what is shovels in the ground, what is the permitting data, et cetera.

And we build from that ground-up perspective. I would tell you that the narrative overall isn't different between our ground up and kind of some of the data providers, which is we see that meaningful amount of decline that is coming in '26 and appears to be there as well in '27. Each market is a little different. Some markets can be a little different. But I think what we're most confident on is we are going to see that decline in '26, and it's pretty pronounced in a number of markets.

Your next question will come from the line of Alexander Goldfarb with Piper Sandler.

Mark, just a question out there. Certainly, legal, advocacy, settlements, all this stuff seems to be a much bigger part of the conversation than years ago in REIT land. Do you -- as you underwrite your business, are you guys sort of factoring in as you assess different markets in different regions sort of layering in, okay, what's the sort of regulatory, if you will, cost of operating in those markets, meaning like when you underwrite cap rates, is that something that you're thinking about more? Or how are you handling that and thinking about as your ongoing business?

Yes. Great question. Thanks for that, Alex. So Yes, we are in two ways.

One, just objectively, we have some idea of just, frankly, litigation costs in the market. And it's everything from slip and falls to spurious lawsuits and the like. And we've added something in California to just our per unit cost to run the portfolio and use that in all our pro formas on acquisitions, development dispositions and the like. So we did do that in that state.

We also taken into account in our portfolio allocation. As you see markets where the climate is particularly challenging, we'll buy us away from those markets. And some of the sales you saw like the Downtown L.A., asset that Bob and his team sold at the end of December of last year, that partly was a sale because those regulatory conditions in that market are really hard. So it's a combination of a direct effect on the numbers in the underwriting as well as a bias against markets where there's, what we think of, as excessive litigation and other costs, regulatory costs, we just tend to not buy there at all or to bias our dispositions towards those places.

Next question will come from the line of Rich Hightower with Barclays.

I know this is probably an unusual question for this time of year. But as I look at maybe the strength in San Francisco and New York, do you have a sense of kind of where your rents are relative to market currently, sort of a loss to lease concept? And I know it's a seasonal thing in there as well, but just to get a sense of what the relative strength of the market is versus where you are currently?

Yes. So maybe I'll just start first. At the portfolio level, I would say we're starting 2026 with a gain to lease of 1.2%. When you start drilling into the markets and you look at the strength that you see in the San Francisco, we clearly have an opportunity to continue to have rents rise as we work our way through the spring and the peak leasing season.

And sitting here today, we're in kind of a moderate loss [ to lease position ]. But that position is going to change as rents keep going up, even at the portfolio level, that gain is going to flip to a loss as we work our way through the first quarter.

All right. So by the end of the first quarter, you'll be in a loss to lease position?

Yes. Yes. And I would just say that even looking at where we start today, it's not uncommon for a portfolio to start in a gain to lease situation or a moderate loss fleet. You always start somewhere pegged around that negative 1% or 1% range.

Next question will come from the line of John Pawlowski with Green Street.

I have a question on just how the pace at which you're deploying capital into the Sunbelt this year. Bob, just based on -- I know there's an element of having a dollar cost average into these markets. But just based on private market pricing and how near-term growth, the outlook has changed. Are you looking to accelerate?

Do you think it makes sense to accelerate the pace of capital deployment or throttle back in the Southeast and Southwest markets?

Yes. John, it's Bob. I guess I would start with like the underlying premise that kind of dictates all of our portfolio allocation, which is kind of cost of capital and what the relative cost of capital is. And so you heard Mark talk about where our opportunity set was in the fourth quarter, and you've heard him talk a little bit about where we sit today and our transaction guidance, et cetera.

And the reality is of what we see and I was just in NMHC and met with a bunch of participants in the private markets. The reality is that right now, the cost of capital for REITs is more challenging and the opportunity set is really the share buyback. And so that's until that changes or the cost of capital changes, I think there's no acceleration, deceleration. It will all depend on where we are on a relative basis.

There's a lot of demand for product in the private markets, in the Sunbelt markets and in our coastal markets, to be honest, and they're priced really attractively, meaning they're much tighter than what the public markets are. And so we're just cognizant of cost of capital, and that is really kind of our starting point to capital allocation and where the proceeds are going.

Okay. That makes sense. One question on 2026 revenue guidance. I know you touched on it briefly. Did I interpret it right that the guidance assumes just very modest acceleration in job growth over the year or no, it's assuming job growth stays basically flat with recent quarters?

John, this is Michael. So yes, our model, first of all, when it comes to job growth, we don't have like this mathematical input into the models around job growth. But right now, what we're assuming really is just a current demand level like we've experienced in the last six months. So demand is going to improve as we get into the spring and peak leasing season.

It's going to moderate as we work our way through the fall, but we're not expecting this acceleration due to kind of improvement in the job market. It's kind of like just a flat demand curve throughout this year as we work our way through the leasing season. What we have in our favor is just so much less supply pressure sequentially, which should allow us to have pricing kind of power mere a more typical year. Not really coming from the demand boost, it's coming from just having less and less supply pressure.

And from starting with a very high occupancy level.

Yes.

Your next question will come from the line of Jamie Feldman with Wells Fargo.

Great. Good to see you guys forecasting acceleration in blends into '26 from '25. Can you just talk about markets where you think rent growth will continue to accelerate in '26 versus markets where you think rent growth has peaked?

Jamie, this is Michael. So I don't know if I'm looking at any of our markets right now that I would say that rents have peaked, right? We're starting off the year, we're modeling to have growth to occur. Now we have moderated our expectations in some of the markets based on the starting point.

But all of the markets are expected to produce growth over kind of where we sit today, and really even where the levels were in 2025. Clearly, the accelerators are San Francisco and New York that are going to have outsized kind of rent growth coming through.

And Jamie, just to give you a little more color, Michael and I have a series of private bets about where things may turn out a little better in markets. And some of that's our positioning and where there's markets we have more anxiety. And I think we would share, as Michael said in his remarks, we feel better about Atlanta. We feel like that's a market.

We also feel like all the negativity in D.C. might be a little overdone. That is a market with a highly employable workforce. People will find jobs, just like the tech job bust in '22. There's a lot less supply. So we've sort of circled those markets as potential for doing a little better than we thought were our expectations.

I'll admit to continuing anxiety over Los Angeles, which kind of lacks both economic drivers and quality of life drivers, but we'll remain hopeful there as well.

I guess I was thinking more in terms of the pace of growth. I know they're all improving. But are there somewhere like the pace of rent growth has peaked? Or do you think all of them can continue to accelerate that growth rate?

I think you have to allow for acceleration through spring and into a peak leasing season really across all of the markets that we're at. We're dialing back concessions right now, so if I just even think about January, 70% of our concession use is still tied into these expansion markets. As Mark just alluded to, you got Atlanta, where we're starting to pull back. So I look at all of these markets and say, we're going to follow a more typical kind of year.

Now some of the markets are going to be a little more muted, but that still means rents go up from where they are today.

Next question is coming from the line of Brad Heffern with RBC.

In the prepared remarks, you talked about San Francisco and New York being left for dead a few years ago. L.A. feels like that today, and you just mentioned your own anxiety. I'm wondering if you see the issues there as structural? And if so, why not pursue a larger rotation there either into other markets or to the repurchase?

Yes, great question. I mean the issues in L.A., and it's Mark, I'll certainly invite my colleagues to add to that. Our quality of life considerations, especially in Central Los Angeles and the West side, they also include just a difficult business climate on the political side. And then just challenging job growth.

The entertainment industry just strikes and just changes in how entertainment is produced has just created a little bit of malaise in Los Angeles on the employment side. So you can only sell what people want to buy. And Los Angeles right now is not a market that is favored by private buyers, by and large. And I think that we are trying to both sell product that provides capital for other uses, including the buyback and sell things at a price that makes some sense.

And right now in Los Angeles, I just think this is just the rotation of capital. People run towards San Francisco now. We could sell every single asset in San Francisco at a great price. And 1.5 years ago, we couldn't sell it at all.

So my guess is L.A. will brighten over time that the politics will improve as you get closer to the World Cup this year. And as you get closer to the Olympics, and we'll have an opportunity to sell some product in Los Angeles as time goes on.

Next question will come from the line of Michael Goldsmith with UBS.

This is Ami on with Michael. What is the expected cadence of same-store revenue growth through the year? I know you mentioned the trends in rental growth with seasonal improvement. Is WiFi rollout still expected to be first half weighted? And are there any other items that could impact the same-store revenue cadence?

Yes. This is Bret. I'll take that. Thanks, Ami.

I think as we think of same-store revenue growth, it's really similar to '25, right? So the second half is going to be stronger than the first, primarily a function of really the significantly reduced competitive supply that Michael mentioned. To your point on other income, that's probably going to be back-end loaded again. We've got some improvements from the bulk WiFi rollouts and bad debt improvement as well as we go to the end of the year.

But I would say, overall, it's a pretty steady cadence. There's not a huge difference between the second half and the first. But certainly, that would be the cadence as we move through the year.

Next question will come from the line of Alex Kim with Zelman & Associates.

Just a quick one on development. You didn't have any new starts in 2025. Just curious what needs to change for you to restart construction activity and are you seeing any improvements in the current development economics?

Yes. Alex, it's Bob. You're correct that we didn't have any starts in 2025. We do expect to have some starts in 2026. And in fact, we acquired a couple land parcels at the end of the fourth quarter and will start in the first quarter, a couple projects in 2026 in Atlanta. Look, we approach development, I think, a little bit uniquely relative to some of the competitive set and that we look for opportunities where we don't have buy opportunities where we can buy -- where we can develop on a risk-adjusted basis, that makes sense.

And we do expect to see some of those. Overall from -- in 2026, and we'll start some deals. Overall, I guess I would also tell you from a kind of competitive landscape or what the landscape looks like from a development perspective, costs have been relatively steady, yields have, therefore, improved a little bit as we've seen some rent growth and our business model with development is often to act as the LP and to use some of these local sharpshooters and not have to carry all of the overhead. And we are in more demand than what others are in the past, meaning we are more attractive because there isn't as much LP capital, and that means that we can structure some really good deals with good terms that make sense.

And we'll be thoughtful and modest about it, and we have to keep it all in perspective relative to cost of capital and use of funds.

Your next question will come from the line of Michael Gorman with BTIG.

Bob, maybe just sticking with the transaction markets for a second there. I wonder if the difference between what you're seeing in the transaction market and the private buyers, is it solely kind of cost of capital related? Or are you seeing them taking different underwriting assumptions, whether it's more aggressive growth or potential for value add? Is there a difference in underwriting as well?

Or is it just strictly cost of capital?

That's a good question. I think it's probably a little bit of both, depending on who the buyer is and what the buyer's perspective is. I will tell you, and this is more anecdotally because we don't operate in these markets. But we see -- when I was at NMHC, we're talking to individuals about markets like Phoenix and Nashville and other places where we see people underwriting really significant growth rates going forward and trades at really low cap rates.

Like those aren't things -- we're not trying to go in those markets, but you do sometimes see a bit of a different perspective and have seen a bit of a different perspective from private market players. I think it's important to understand the difference in objectives between long-term holders and folks that maybe have a shorter time horizon in their perspective. So when we acquire assets, we are looking and develop assets, we're looking to be long-term holders. We're vertically integrated operators.

This is a long-term IRR case. Objectives for many people in the space or many of the private buyers might be different, right? They may be merchant builders that have a very short perspective, they may be folks with more medium term. So I think it's all of the above.

Cost of capital are different and perspectives on performance and hold periods can be different and influence underwriting.

I also just add to that, it's Mark. It's a little rotational too. I mean I think a lot of private guys 10 years ago would also do office, suburban office. They do retail.

And I think, by and large, it's apartments, maybe industrial and of course, data centers. And I just think that holds up the private market values in our NAV, which is great. But it can make it hard sometimes for us to underwrite not just on the cost of capital, but just because, frankly, private folks have to justify their existence and buying apartments is seen as a safe bet. And they kind of make the assumptions suit whatever they sort of solve backwards, and we let the numbers be what they are, and that's why you see us allocating less capital to acquisitions and development right now.

Next question will come from the line of Haendel St. Juste with Mizuho Securities.

So my question, I guess, can you talk a little bit about your expectation for tech employment and how that colors your view for San Francisco and Seattle, obviously, lots of headlines regarding layoffs, AI. So curious how you're factoring that into your outlooks for those markets. And then maybe give us a sense of blends by a major region that you're forecasting this year, East Coast, West Coast, Sunbelt.

All right. You got three things going there. It's Mark. I'm going to start.

I guess Bob can do the AI and Michael can give you a little bit on the blend side. But we don't have a crystal ball on -- that's any more clearer than yours on job forecast, tech related or not. We do go and try and estimate job gains and losses in our markets by talking to our local participants, our investment officers and our VP, PMs, our Vice Presidents in each market and try and understand what they're seeing on the ground. And we got an economics team here in Chicago that watches all that stuff, too.

So we're kind of trying to be generally aware. But we do have, in the back of our minds, in 2022, there was a huge amount of tech layoffs that occurred in both Seattle and San Francisco. And we didn't get keys thrown at us, we didn't have delinquency increases. It did slow down the rate of growth of rent, that's for sure.

But it's just -- these folks that -- our residents are very employable, Haendel. And I think we look at this and figure, like in D.C., the kind of folks that are doing technology or sophisticated project management or advanced finance and consulting stuff can find another job over some period of time, and they like their lifestyle, we're taking good care of them at the property, they'll stay. And by and large, we've seen that. So to do a tech forecast, it's more our belief that these folks are very employable, than it is, I think any particular number is going to go up or down.

And on particular employer. Let's go a few people. We think another employer will pick them up. Michael has mentioned a few times that our company has a middle-sized employer.

When these tech companies lay people off, we're often very excited about the opportunity to hire people that are otherwise very hard for us to get, data engineers and data scientists and the like. So I guess we just believe in the dynamism of the employment market for our kind of resident. I don't know, Bob, if you want to?

Yes. No, the only -- I mean, AI is obviously a big topic out there. I think that -- and it cuts both ways, right, as you think about our portfolio, clearly, having exposure to San Francisco, which is probably the most meaningful hot bed of where AI is being developed and created is helpful from a direct perspective. And then the other side that you get a lot of narrative or discussion around is just what does this due to productivity, what is the studio employment and all the macro level items.

I think it does create the narrative that exists today and the conversation that exists today does create a degree of uncertainty, which I think has created some degree of pause and maybe new college hires, and we see that in the data. I would just remind everyone that if you think about our customer and you think about the distribution of our customer base, we're mostly not the first home for just out of college residents. So that demographic, let's call it, 20 to 24 is a very, very small percentage of our population base in terms of our customer. Our customer's predominantly in their second, third jobs, 24 to 35, et cetera.

So it doesn't have quite the direct implication. So AI, I think we'll see how it develops. We talked about in my era, in my age, the dot-com and the Internet was going to destroy all jobs, and it didn't happen to be the case, and I don't think AI will be either, but it's certainly something that we're following. I'll pass it to Michael on the 3-part question for a favorite topic of blends by region.

Yes. And I think what I would say on blends right now is clearly, if you would just bucket and look at this portfolio, San Francisco and New York are going to deliver the best blends in 2026 and the expansion markets are going to have the lowest blends through the year. And the rest of our coastal markets are really pretty tightly clustered in the middle, some of them better than last year, some of them a little [ worse. ] And it's all just based on kind of the starting point to the year. I did want to take a minute and just walk through like at a company-wide level, the expectations for blends, because I've been reading some stuff.

I just want to kind of just walk through our expectations for it which is, right now, sitting here, the way we think about blends is almost a mirror image of what a typical year would look like a pricing trend. We're expecting things to go back to normal seasonal patterns, which would mean January would deliver stronger blends than December, check. We've seen that. Q1 is expected to deliver better blends than the fourth quarter of 2025. That is our expectation.

Then as the year goes, Q2 would build upon that. Q3 starts your deceleration and Q4 decelerates further. What we see right now is the second half of the year is not expected to decelerate anywhere near like we saw in the fourth quarter or the second half of 2025. That's kind of how we're modeling the year when it comes to blend. And you can almost apply that logic to every one of our markets that we're operating in.

Maybe you're going to have some opportunities in the Sunbelt because of this heavy concentrations of concessions. If we're really getting pricing power and pull those back, maybe the third quarter produces slightly better blends than the second quarter, but you're not going to defy gravity of the fourth quarter kind of coming down off of that third quarter sequentially.

We'll take your next question coming from the line of Linda Tsai with Jefferies.

On your technology initiatives, are you able to use AI or other predictive analytics to understand the likelihood of move-outs when leases are coming up for exploration? And then any initiatives underway to help address?

Look, I would tell you, I don't know if I would label it as AI. I think there's a lot of information right now that we use in our renewal process that's trying to understand the likelihood of a resident to renew. And that information is kind of really at our fingertips when we're speaking to residents as offers are going out. So I don't know that I would say we're fully automating or enabling AI into kind of the renewal process per se.

But clearly, we have a lot of data and there's a lot of automation in place today.

And it appears there are no additional questions at this time. I'll now turn the call back over to Mark Parrell for closing remarks.

Thanks, Shelly, and thank you all for your interest in Equity Residential, and we'll see you out on the conference circuit shortly.

This concludes today's call. Thank you for your participation. You may now disconnect.