Q3 2025 Earnings Call Transcript

Good day, and welcome to the Equity Residential Third 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 Mr. Marty McKenna. Please go ahead, sir.

Good morning, and thanks for joining us to discuss Equity Residential's third quarter 2025 results. 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 is posted in the Investors section of equityapartments.com.

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 thanks for joining us today. I will lead us off with some broader commentary, then Michael Manelis will provide color on our third quarter revenue performance as well as what he is seeing in the markets today, followed by Bret McLeod, our new Chief Financial Officer, who will address expenses and our NFFO guidance, and then we'll go ahead and take your questions. Our third quarter results reflect the resilience of our business.

Despite what is generally a mixed macroeconomic picture, we continue to see good demand and excellent resident retention across most of our markets with results strongest in San Francisco and New York, where continuing high demand has meant modest supply. We see our existing residents as having a generally stable employment situation and good wage growth. When last reported, the unemployment rate for the college educated, our key renter demographic, was 2.7%, considerably below the national average. This is consistent with the experience at our properties as we see continued improvements in delinquency and no other signs of customer financial stress.

We have also seen incomes rise for our new residents by 6.2% year-over-year, a healthy rate of growth. Finally, we continue to see residents react to the uncertainty in the economy and the quality of our properties and people by renewing with us at record rates. In fact, we reported the highest third quarter resident retention in our company's history, allowing us to maintain high occupancy rates in the mid-96% range. In sum, our existing customer is financially healthy and happy to stay with us.

On the new customer acquisition side, we began to see weakness in traffic during the back half of September. This was most pronounced in Washington, D.C., but did manifest itself in other markets as well. The best way to think about this is for us to say that our normal pattern of a seasonal decline in traffic began one month earlier than usual. In fact, everything this year feels like it was pulled forward.

The leasing season started earlier than usual and peaked earlier than usual just as the normal seasonal pattern of traffic decline began earlier than usual. This acceleration of seasonal patterns, weakness in Washington, D.C. and some minor delays in the rollout of an other income initiative that Bret will discuss in a moment, led us to adjust down the midpoint of our annual same-store revenue guidance by 15 basis points to 2.75%. In terms of market commentary, Michael will speak in a moment on specifics in D.C. and elsewhere, but I did want to make a general comment on San Francisco, where we have 15% of our net operating income.

After a prolonged recovery, we are excited by what we are seeing in San Francisco, particularly the urban core, where we have more exposure than our competitors. As we talked about at our Investor Day earlier this year, we thought San Francisco had the opportunity to be a strong performer in 2025, and that is exactly what is happening in this, the epicenter of the AI technology revolution. As a result, we expect San Francisco to be our best-performing market this year. At our Investor Day, we also spoke positively about the Seattle recovery story, and we do see improvement there, but due to higher supply levels in Seattle than San Francisco, this improvement is occurring at a slower pace.

Conversely, but as we generally expected, we are seeing very different conditions in our higher supplied markets, specifically Denver, Dallas-Fort Worth, Austin and Atlanta, where we have about 11% of our NOI. In these markets where the slowing job picture is meeting continued high levels of supply, we see a significant lack of pricing power. And to be clear, the supply pressure includes both recent new apartment deliveries, which are pretty well tracked by all the data providers and the continuing pressure from slow lease-ups of already completed properties as well as the first round of lease renewals at properties that were delivered a year ago, where landlords are struggling to remove lease-up concessions when going through the renewal process in places with many choices for consumers.

This not yet fully stabilized supply is less well tracked by data providers and is not as well understood by investors, but is certainly impactful. Over time, all of this supply will clear the market, and we remain comfortable with the cost basis at which we acquired the assets we own in these markets. We also are positive on longer-term return prospects in these markets, complementing our portfolio diversification goals. But as we've said on prior earnings calls, we do expect to see an elongated recovery in these markets.

Switching over to capital allocation. As you saw in the release, we have been active in buying our shares with the company repurchasing approximately $100 million of its stock during the third quarter and subsequent to quarter end. We see our company with its high-quality asset base and sophisticated operating platform and forward growth prospects as greatly undervalued versus asset prices in the private market. Also, we closed on one acquisition in the quarter, a 375-unit property in Arlington, Texas that has been in process for some time.

This property was just completed in 2023 and is a nice complement to our Dallas area portfolio. We sold 2 deals in the quarter, 1 in suburban Boston and one in suburban D.C. These were older assets averaging nearly 30 years in age. These transactions all traded right around a 5% cap rate.

As you also saw in our release, we have lowered our acquisitions and dispositions guidance for the full year to $750 million of each from $1 billion of each with the vast majority of these transactions already completed. As I just discussed, with private market assets often trading at sub-5% cap rates and at or above replacement cost, our stock presents a compelling value at current levels, making us selective and limited in our acquisition activity for the time being. Dispositions of properties to fund the buyback will occur over the next several quarters, and we'll focus on properties with lower forward growth potential or where we are overconcentrated.

Before I turn the call over to Michael, I want to reiterate how excited we are about the forward prospects for our business. Our internal tracking shows deliveries of competitive new supply in our markets, declining 35% or by about 40,000 units in 2026 versus 2025 levels. The results we are seeing in San Francisco and New York demonstrate the earnings growth 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 2026, assuming the job situation is reasonably constructive.

For example, our internal tracking shows 2026 new apartment supply in the Washington, D.C. market that is competitive with our properties will be declining by over 8,000 units or down 65% to below 5,000 units, a level we have not seen since at least the great financial crisis. With portfolio-wide occupancy of more than 96% and occupancy nearly 97% in some of our key markets, we think this sets us up well for another year of solid performance in 2026. And if job growth reignites, we could see some very good results. In sum, we continue to see the current and future drivers of our business is healthy and the forward momentum is solid.

And with that, I'll turn the call over to Michael Manelis.

Thanks, Mark, and thanks to all of you for joining us today. Our third quarter results reflect solid demand with outsized performance in San Francisco and New York. Currently, general macroeconomic uncertainty remains as a result of tariffs, lower job growth and more recently, the government shutdown. These factors make forecasting demand a little bit more challenging today than it was 90 days ago, but what has not changed is the excellent setup we have going into next year due to the dramatic reductions to competitive new supply.

Breaking down our third quarter operating results, our renewal rate achieved for the quarter remained strong and was up 4.5% with nearly 59% of our leases renewing and both of these were in line with what we thought would happen through the quarter. Our centralized renewal process and intense focus on customer satisfaction has helped deliver the lowest reported third quarter turnover in our history. Across our portfolio, the average length of stay has increased by nearly 20% from 2019 and retention is at record levels. As secular trends and our focus on enhanced customer experiences have driven increased retention, the positive impact on same-store revenue growth from renewals has become more significant.

Our unique value proposition and customized renewal experience reduces costs associated with vacancy and new customer acquisition like marketing and concessions, while enhancing customer satisfaction and removing the friction costs on our residents who choose to remain with us. This strategy optimizes overall revenue and improves customer satisfaction despite potential short-term variability in new lease change, which is an output that is greatly impacted by who moved in or out. With that said, new lease rates at negative 1% came in lower than we expected and resulted in a 2.2% blended rate increase for the quarter, which was at the low end of our range.

As Mark described, pricing trends peaked in July this year at a level that was both lower and earlier than normal. Prices stayed relatively flat through August and started the seasonal descent in September, which is typical. But we did observe some late quarter pricing softness, mostly in Washington, D.C., which I will describe in a minute, which impacted our new lease change. For the entire portfolio, physical occupancy remained high at 96.3% for the quarter, driven by solid demand and strong retention in our coastal markets, excluding D.C., which gave up some occupancy at the end of the quarter.

Let me take a minute and highlight a few of the markets that are driving performance. The recovery in San Francisco, particularly downtown, is real. As the epicenter of all things tech, workers have returned to the market and drove high occupancy and very good rate growth on both new lease and renewal rates. This strength was supported by the positive trends we observed in our migration data with just over 4% more move-ins coming to us from outside both the MSA and the state of California.

In addition, we have a very favorable new supply setup in the market in 2026 with only about 1,000 units of competitive new supply being delivered. San Francisco will be our best-performing market in 2025 and most likely again in 2026 as we are just now approaching 2019 rent levels in our downtown portfolio, while median incomes in the market are up 22% since 2019. Similarly, New York continues to be a strong performer. Job sentiment in the market has been good and competitive new supply has been and will continue to be very low, which should position us to deliver above-average revenue growth again next year.

I would note that our combined exposure to urban San Francisco and New York and the positive demand and supply outlook in 2026 is particularly unique to EQR and should be a relative strength for us versus peers next year. While D.C. will end up having a strong 2025, the year has certainly been a tale of 2 markets. The strength we saw early in the year carried through most of the third quarter. But as I mentioned, in late September, we definitely started to see some softness in demand and pricing power.

A combination of federal job cuts and the National Guard deployment followed by the government shutdown has created a lot of uncertainty in the local market. Most of the pressure is being felt in the district and in pockets of Northern Virginia. In these areas, our current operational focus is preserving occupancy. And while we aren't experiencing residents turning in keys due to job loss, our overall turnover in the D.C. market did increase slightly in the quarter, and the volume of leasing activity has slowed as the overall market still needs to absorb the nearly 13,000 units delivered this year.

The good news is that in 2026, competitive supply in D.C. will drop 65% and remain low for the foreseeable future, which is a marked change from the past decade. Add to that our sense that in the long term, the federal government will continue to be a job engine regardless of the near-term headwinds of temporary cuts or shutdowns. Overall, we feel very good about D.C. as a market in the long term. Shifting to Los Angeles.

The city continues to face challenges and remains a wildcard as we head into 2026. We continue to see overall market weakness driven primarily by slowdowns in the entertainment industry. And although the quality of life issues are improving, they are still not where we would like them to be. We have demand, but less pricing power, particularly in the urban portfolio, where we continue to feel the impact of new supply in our Downtown, Koreatown and Mid-Wilshire portfolios. Our suburban submarkets of Santa Clarita, Inland Empire and Ventura County are performing well.

As in many of our coastal markets, supply will be lower in 2026, but we will need to see a catalyst for demand in order for us to have pricing power return. Our hope is that with the upcoming World Cup in 2026 and the Olympics in 2028, that there will be long-term incentives for the quality of life to improve in L.A., albeit from a low base. In our expansion markets, which currently represents only 6% of our same-store NOI and 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 4 and Denver the worst.

Our same-store portfolios in both Atlanta and Dallas should see improved results and perform better than the broader market next year as we add our recently acquired more suburban assets to the same-store portfolios next year. Before I turn it over to Bret, let me take a minute to highlight our current activities around innovation. In the third quarter, we deployed our AI-driven application processing tool, which has already delivered a 50% reduction in the overall application time. We currently have about half of all applications being completed within 1 day, and this process includes a more robust, comprehensive ID verification process that should help reduce fraudulent activity going forward.

Overall, I am really excited about the opportunities in 2026 as we continue to implement AI in other key areas of the resident experience. Next month, we will begin testing a new service application module that is designed to improve service request intake, provide self-service tips, optimize team schedules and ensure qualified team members address tasks efficiently in a single visit. This is a great example of how we are focused on increasing the utilization of our workforce, while at the same time, creating a more seamless and responsive experience for our residents. 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.

Our portfolio will end 2025 well occupied with a strong platform that combines automation, centralization, along with a local team that knows how to keep our customers satisfied while getting a larger share of the demand pool, whatever that level may be in the markets. And with that, I will turn the call over to Bret.

Thanks, Michael. Before I walk through our updated guidance, I first wanted to say how excited I am to be here at Equity Residential working alongside Mark, Michael, Bob and the rest of our talented corporate team. It's been nearly 100 days since I joined the company, and I'm even more impressed with the organization than when I started. I'm comfortable stating that because one of the first things I did here was hit the road and visit many of our communities and hard-working associates across the country.

My early travels included some of our top-performing markets, such as San Francisco and New York, where I saw the quality and location of our assets firsthand as well as the innovative operating platform Michael and the team have established. I visited Seattle, where we are set up well for 2026, benefiting from local return-to-office mandates and continued AI investment growth. I also traveled to Dallas, one of our larger expansion markets and witnessed constant examples of the outsized demand growth dynamics that are driving our positive long-term thesis on that metro area. I'm grateful to all my new colleagues for helping me get up to speed so quickly.

With that said, let me provide some color on the guidance adjustments we made this quarter, which continued to reflect a stable and resilient business outlook, albeit amidst some macroeconomic and employment uncertainty, as Mark and Michael described. We've adjusted the top end of our full year same-store revenue outlook down as a result of third quarter same-store blended rate coming in at the lower end of our prior range and what we have seen in early fourth quarter trends. In addition, a portion of other income growth related to bulk WiFi that we expected to realize in the second half of 2025 has rolled out slightly slower than planned and will now be pushed into 2026. That said, we still saw strong quarter-over-quarter growth in other income of 9%, demonstrating our ability to continue to pull multiple levers to drive overall revenue.

The combination of these 2 factors resulted in a revised 2025 same-store revenue range of 2.5% to 3% with a midpoint of 2.75%, which matches the midpoint of the range we guided to at the beginning of this year. We've held same-store expenses steady at 3.5% to 4% for the full year and continue to see sub-inflationary trends on payroll, insurance and real estate taxes, partially offset by higher utility expenses, particularly in California. I would remind you that our 2025 same-store expenses are approximately 40 basis points higher this year due to the continued rollout of bulk WiFi, which sits in repairs and maintenance, but is positively contributing to outsized other income growth for the remainder of the year and will continue to do so as we move into 2026. The net result of these same-store revenue and expense adjustments is a revised annual same-store NOI range of 2.1% to 2.6% and a midpoint of 2.35%, 15 basis points higher than our original 2025 guidance, but 15 basis points lower than the midpoint we provided in the second quarter.

For normalized FFO, we've tightened our range of both the top and bottom end and are estimating full year 2025 NFFO per share of $3.98 to $4.02, leaving the midpoint unchanged from Q2 at $4 per share. Slightly reduced same-store NOI should be offset by expected continued improvements in lease-up NOI and lower property management expense. With that, I will turn it over to the operator and open it up for questions.

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

It's Nick Joseph here with Eric. I appreciate the comments on the peak leasing season and totally understand that the timing of each year is a bit unique. But I guess in the past, when you've seen rent growth falling at this time of the year, how do you approach the forecast for next year's growth? And how do you decide whether these are more temporary factors affecting rent growth or it's something that's more likely to persist going forward?

Yes. Nick, this is Michael. I mean that's a great question. I think what I would start with is just say, as what we felt coming out of that peak leasing season and looking at some of the decelerations that occurred in that later part of September as carried through October, we basically just took kind of that seasonality through the rest of the year.

And how it kind of manifests itself into next year, there's still a lot of seasonality to these blends. And I think I'm going to stay away from kind of giving the exact kind of guidance or outlook to next year. But we do expect to start out next year well occupied with some embedded growth that looks very similar to kind of how we started out this year. And I think the wildcard for us is really going to be what does that intra-period kind of rate growth look like.

And for us, in many of these markets, it's going to be when does that consumer sentiment turn positive again. We have such a great setup with the reduction of competitive supply being so much lower in many of these markets. It's not going to take much of a catalyst from that sentiment change or any kind of catalyst in the job growth in these markets to really fuel that intra-period growth. So I think for us, I'm going to stay away, like I said, from giving you the guidance, but we're modeling right now for continued deceleration for the back of the year, but still feel pretty good about the setup and the outlook into next year.

I appreciate that. And then just in terms of capital allocation, you've done $100 million on the buyback so far. Given where the stock is today, what are the factors? Or how are you thinking about really leaning into that and doing it at a much more meaningful scale versus other opportunities with your capital allocation?

Nick, it's Mark. Thanks for that question. There's really 2 inputs. I mean one is the attractiveness of our other investment opportunities, which is predominantly buying existing assets or building new assets versus the stock.

And obviously, we voted for the stock over the last quarter and bought that. There's also the availability and cost is the other factor of the capital we need to acquire the stock, and that's really only 2 places. We either have to issue debt or we have to sell assets because as you well know, as a REIT, we just can't retain much in the way of earnings. We pay a really nice $1 billion a year dividend already.

So our lean right now is to continue to do asset sales of these lower return profile assets or assets where we have an over concentration in the submarket, kind of improve the forward growth potential of the business and arbitrage the private public markets and continue to be thoughtful about buying more stock. But exact levels and stuff are just dependent on where the stock price goes and the opportunity set goes, and we'll be open to that. But I just want to remind everyone, and again, I know you know this, Nick, but there are real tax gain limits. We have a lot of embedded gain in our assets.

We've done a lot of good investing over the years, and our assets are worth a lot more than their -- the basis is a lot lower the tax basis. So there'll be a lot of gain. We also did 1031s. I'd also point out, I want to be careful on not descaling the company too much.

There's a lot of fixed costs in running a public company of this size. So we just want to be thoughtful about that, but we're very open to additional buyback activity in the quarter.

Next question is coming from the line of Steve Sakwa with Evercore ISI.

I was wondering, Michael, if you could provide any color on just kind of where the earn-in sits today as we kind of head towards the end of the year?

Yes. So I think maybe I'm going to just start off and let me define or clarify embedded growth, which is kind of also referred to as that earn-in. And it basically just means that you're freezing the rent roll on 12/31, you annualize all the leases in place with no changes to occupancy or vacancy loss throughout the year. We started 2025 out with approximately 80 basis points of embedded growth on the same-store set.

And while that was slightly below the historical average of 1%, it was still a pretty solid position for us to start off the year. Given the current momentum that we see now and some of that deceleration that I just referred to that we modeled, we now expect 2026 to start out in a relatively similar position than we did this year. And our view is a little bit lower than what we thought 90 days ago. And this is really just a result of us taking down that trajectory of the fourth quarter given some of the deceleration that we saw begin in kind of late September.

And I do want to call out because I know a lot of you guys have these models. And while the math is not perfect, right, rough estimates, you start out with about 50% of the expected full year blended growth. But in 2026, we're going to also be folding in some of the assets in the expansion markets. And while these assets are clearly performing better than the same-store assets in those markets, they're not performing better than the overall kind of coastal same-store portfolio.

So it's going to be a little bit dilutive to that embedded starting point. But again, I think at the high level, we would say we're going to start out 2026 in a relatively similar position as we did in 2025.

Great. That's helpful. And then maybe just going back, it sounds like with the slowdown in the seasonal trend, it sounds like there's a bit more pressure on kind of the new lease trend and kind of top of funnel demand. I'm just curious if you're seeing any change in behavior on the renewal side?

And have you had any kind of real change in the renewal success? Or are you seeing really -- is most of the weakness really happening on the new lease side of the business?

Yes, Steve, this is Michael again. Great question. So I think what we noticed in select pockets of markets in the renewal process, there tended to be a little bit of hesitation. So a little bit more back and forth.

And again, we have centralized are -- we have a centralized renewal team handling all of these negotiations or conversations, and it's really allowed us to execute these various strategies. But we noticed a little bit more kind of back and forth, a little bit of this hesitation. Right now, for the next several months, our quotes have been sent out in the marketplace. We typically send out renewal offers about 90 days in advance.

Those markets -- those quotes were sent out about 6%. And sitting here today, we got a lot of confidence in our process. We would expect to have achieved kind of net effective renewal increases to land right around 4.25%. This is typically a time where we're going to lean into retention, and we'll tend to negotiate a little bit more as we hit the shoulder part of the season.

But I think we saw a little bit of that hesitation, but we still have a lot of confidence in our process. And again, we're seeing really strong resident retention occur. It's just taking a little bit more kind of back and forth, a little more effort to secure those leases.

Next question is coming from the line of Alexander Goldfarb with Piper Sandler.

Two questions. Bret, maybe I'll start with you and kick it off. And by the way, nice job on your Blue Jays last night. So -- this may predate you, but I think you guys did converts back in 2006. Once again, they seem to be all the rates.

You guys have some mid-3% debt coming due next year, just curious where your headset is on the potential to reenter the convert market or if your view is, hey, we did it 2 decades ago, we had an experience. We haven't done it since, and that's the message is that you guys may just stick with traditional. Just trying to understand, especially given some of the receptiveness we've seen from some other large REITs pricing converts pretty tightly.

Alex, it's Mark. I'm going to start here. It is historical context that Bret lacks, but certainly understands converts very well given his experience level. So when we did that back in '06, we did that in part because we were working with the Lexford portfolio sale and buying into lower cap rate, higher growth markets like New York.

And so this was a little bit of an asset matching exercise for us, and the terms were pretty appealing. So I do think converts are an interesting tool. I think there are times, they're very beneficial. If we got our hands, for example, on a portfolio where it was a big lease-up effort that we were going to have or a big renovation effort, and it was pretty material, you might match fund that with some converts.

The accounting disclosure converts is pretty favorable now. And then if it succeeded, the convert holders would benefit, the existing equity holders would benefit and it would all make some sense. Otherwise, we're an opportunistic and infrequent issuer of converts. It's a little awkward to be buying your stock back and issuing converts at the same time.

So we'll just have to balance that out.

Okay. And then the second question is on AI. A lot of discussion on whether it's sort of a net job creator or it's maybe a job eliminator or it's just obviously different headlines on layoffs and stuff. So in your key AI markets like New York and San Francisco, are you seeing a ripple effect where the AI job hiring is benefiting other related industries and you're seeing net overall job growth?

Or are you seeing sort of the reverse where AI job growth is ending up with other positions in those markets being eliminated and replaced by AI?

Yes. What an excellent question. It's Mark. I'm going to suggest that Michael just tell you what he's hearing from people on site and in the markets and give you that intel. And then I'm going to sort of give you what we've been thinking about on the AI side and employment in the long run. But I'd tell you it's very -- of course, very unknown at this point. So Michael?

Yes. I mean I think one of the best indicators we have is when we drill into some of our migration data, which is where our new residents coming to us from, what industries are they working with. I wouldn't necessarily say, Alex, that this is all driven because of AI that we're feeling. But when you look at San Francisco and New York, San Francisco clearly saw in migration, 4% more of our move-ins coming to us from outside the state of California, outside kind of that MSA, which basically is telling us there's a lot of kind of excitement going on.

I mean this is the epicenter of tech. So even though you see the big guys kind of really dominating the headlines around AI, there's a lot of other start-up industries. There's a lot of businesses now that are benefiting from just an overall shift in the technology strategy of companies. And I think we're benefiting from that.

New York, what was interesting for us is we saw a slight uptick in that migration pattern coming in from outside that MSA. But what was cool on the outbound side, people that were leaving our portfolio were staying in the state and in the MSA at a higher degree than what we saw before, which gives us confidence that kind of that market is going to be doing really well for us next year.

Yes. Just to tack on just -- yes, one last thought on the AI side. I mean, clearly, there's been a lot of talk about whether AI is going to get rid of a lot of white-collar jobs. No one knows the answer to that question.

A lot of the comments about vast displacement are being made by folks, Alex, as you know, who greatly benefit from the AI boom. And so it's a little bit about talking your own book. That said, I do think AI is an interesting tool. And I think it's going to change the relationship between colleges, students and employers.

Right now, I think the unspoken deal is colleges turn out smart people with good general skill sets, but not necessarily work-ready skills. And I think what's going to happen going -- and you spend a year or 2 teaching those people your vocation, their vocation, and then they're pretty productive for you. I think colleges are going to have to put at a premium teaching people, data analytics and AI skills. So they're going to show up with the equivalent of second or third year employee skill sets and be able to move forward.

You know the kind of people that we have at our properties. These are highly educated folks. These are often Gen Z and millennials that are digital natives. They understand technology.

They will learn AI, and they'll learn to use it better, I would argue, than anyone else. So my sense is the market will adapt to this, and I'm not a believer in the -- no one will have a job theory of AI employment.

Next question is coming from the line of Jana Galan with Bank of America.

A question for Michael, following up on your San Francisco comments. If you could speak to your prior experience in that market when demand starts to accelerate, how quickly can rents increase? And then does seasonality still hold or kind of not as much given the growth in jobs?

Yes. I mean, obviously, any time you have supply-demand kind of imbalance, and in this case, in San Francisco, you have very little competitive supply and you have more demand coming into the portfolio, that creates this opportunity for rent growth. And I think I alluded to in my prepared remarks, we're just now getting back to 2019 kind of rent levels in our portfolio. But when you look at incomes in that market, it's up 22% since 2019. So I think historically, what you see is any time you have this imbalance and you have strong demand, less supply, you're going to be in a position of pricing power.

I don't know that it's going to completely abate any kind of seasonality trends. So you may see some softening in very strong numbers still like in the fourth quarter or in the first quarter, but we clearly have an opportunity in front of us, and this is exactly what we kind of highlighted earlier in the year at our Investor Day. This recovery is taking hold, and we're really excited to see it kind of playing out at this pace.

And a quick one for Bret. On the WiFi expenses, you mentioned it was kind of a 40 bps delta in 2025. Is there additional expense related to this initiative in '26 or that will kind of just be smoothed out?

Thanks for the question. No, that's primarily for this year. So right now, we're just looking forward to getting the revenue after we've had the expenses run through this year.

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

Can you give your perspective on what you expect to happen in D.C. over the next 6 to 12 months? And how much of an impact has a shutdown historically have? And how much do you expect this one to have?

Yes. Brad, this is Michael. So maybe I'm going to start. I just want to give a little bit of color as to what have we observed in D.C., how did the various submarkets kind of appear today?

And then I'll kind of shift it as to what we would expect for the balance of the year or turning into next year. So first and foremost, I think what we observed in that first or second week of September is a little bit of that hesitancy that I described on that renewal process, but also taking hold with prospects. There was just a little less sense of urgency to buy and sign on the dotted line and commit to kind of move-in dates. So that manifested itself as we worked our way through September into October with just a lower volume of kind of new leases occurring.

The retention side held up strong. When you look at D.C. today, if you peeled out our D.C. market, we have a suburban Maryland portfolio doing very well, right? It's 97% plus occupied. It's got rents slightly on top of where they were last year.

You go into the Virginia portfolio, go deep suburban into Fairfax. I got good occupancy, and I got rents up a couple of percent, start coming in towards D.C. in that Virginia portfolio where you've got a more urban concentration competing with the supply. And I've still got solid occupancies, but I got pockets where I don't have pricing power where I had to start utilizing concessions. And then you get into D.C., Northwest D.C., along with D.C. kind of the district central area, I've got occupancies that are running 95%, 95.5%.

I've got concession use that has clearly increased in the last 4 weeks, and I got net effective prices that are down 4%. So we've modeled that out for the rest of the year. I wouldn't -- we're not seeing kind of folks that lost their job with the government turning in keys. We're not seeing kind of any of this increase in lease breaks.

You're just seeing an overall slowdown in the top of the funnel and this willingness to commit to a lease. And I think for us, we'll have to expect that to continue through the balance of the year. I think consumer sentiment is tricky, right? It can shift on us very quickly and turn back positive.

You can get past the government shutdown. You can get some confidence back in hiring. And then that market is going to be really well positioned again because we just have a huge decline in competitive supply coming to our advantage next year that it's not going to take much for us to have pricing power. The trick is exactly when does that inflection point take hold.

Okay. Got it. And then on San Francisco, you've called out the difference in rent growth and income since the pandemic a couple of times. Do you think we're in sort of a multiyear above-average growth environment where we might see that differential narrow quite a bit? Or is there some component of rent having outrun fundamentals in the past and now we're seeing sort of a catch-up as well?

I mean I think our view clearly, when you look at the recovery is that we have some good years in front of us in that market. Technology is advancing quickly. That market is clearly at the center of that. You see the migration patterns.

You see the incomes going up. You see rent levels that are still at a really good discount relative to historical standards. So that, when you put it all in the blender, tells me that we should expect some outsized kind of growth for the next couple of years there.

Next question is coming from the line of Adam Kramer with Morgan Stanley.

I think, Mark, in your opening comments, you used the word elongated, talking about sort of the recovery in the expansion markets. So I wanted to maybe double-click on that. I'd be interested to hear if that's more of a lease growth comment, if that's sort of relative to expectations about the seasonal curve that maybe you don't expect a normal seasonal curve there in the expansion markets in '26. And I guess just more broadly, any color on market rent growth expectations? I know it's still early, but market rent growth expectations for next year, maybe coastal versus expansion markets would be really helpful.

Yes. Thanks, Adam. I'll start and Michael or Bob may contribute as well. So I was alluding in part to the fact that though people are very aware of deliveries in these expansion markets, in these Sunbelt markets, they don't really think as much about how long it takes to fully absorb, which in a highly supplied market, can it be at least one renewal cycle.

And that was the other point I made in the remarks. So I want to give some perspective, like we're not prescient about all this, but I think we were rational about how quickly absorption would occur and pricing power return to landlords. The assets that we bought a couple of years ago in these markets, when we were looking recently at their performance, we were within 1% of our underwriting on NOI. So I think what we just had in mind was that concessions would persist, that rent growth would be minimal to negative for a while that, that was just what happens when you're in a very heavily supplied situation.

And then you'll get out of it and you'll roll. But I think that inflection point, people have kept wanting to put that inflection point on the date that deliveries declined, and we just didn't believe that. That is, I guess, sums up how we underwrote differently. We were more focused on the full absorption, the full amount of the supply being just part of the normal volume in that market and not pressuring existing owners very much.

I would expect coastal markets to have higher same-store revenue growth by a fair margin next year. All the low leases that were written this year are going to be in next year's rent roll and are going to pressure those numbers. You may see and we expect to see some improvement, I hope earlier next year, but it could be later depending on the job situation in the second derivative and that rate of change number on new lease and otherwise. But it all comes from a really low base.

So again, I think it's a certainty that coastal markets will have higher same-store revenue growth and every market is a little different because they've written better leases this year and that those are going to affect next year. I think the opportunity in the Sunbelt markets, including our expansion markets, is to start to maybe stabilize occupancy and maybe start to move up -- reduce concessions and move up new lease levels. But I think it's just going to be more of higher cash flow late in '26 and into '27 more so.

Great. That's helpful. Maybe just a little bit of a wonky one here, but just wanted to ask about the -- some of the same-store pool changes with some of the kind of prior year acquisitions folding into the same-store, going into next year. Maybe if you could just sort of quantify what percent of -- and I think you mentioned it earlier, but just what percent of the same-store pool today is expansion markets and what that's going to look like next year and then maybe some of the specific assets that are going into the pool as we go to next year?

Yes. So great question. I think maybe stepping back for a minute when we think about just same-store results and kind of the sets we have. Just a reminder, we have 3 same-store sets.

So we've got the quarter versus same period last year, call it about 75,000 units. current quarter versus last quarter, which is sequential, that's about 80,000 units. So there's about a 5,000 unit difference there. Year-to-date, same period, that's about 74,000, 75,000 units as well. So I think as we look to next year, my guess is it's about a 5,000 unit increase that goes into our same-store set in 2026, and that's primarily coming from those expansion markets.

Yes. Just I think that's exactly right. And it's Mark. All I'd add there, Adam, is this is something Michael said.

A lot of the assets we're adding are suburban assets in Dallas, suburban assets in Atlanta, suburban assets in Denver that by and large, are going to look better than the performance of the assets we already own in the same-store set, which because we brought them early, we got pretty good basis, but they tended to be urban assets, and they've not performed as well as our suburban portfolio has in the last year or so. Though when they weren't in same-store, they did pretty well. So some of that is less observable to you. So anyway, I would guess that you're going to see 4,000 to 5,000 more units in the annual same-store set that Michael will give you guidance on in 3 months.

Next question is coming from the line of John Pawlowski with Green Street.

Michael, outside of the D.C. Metro, what other markets do you see a real cooling of demand in the last month or 2?

John, it's a little bit hard to hear you. Are you just asking where else did we see a decline in demand in the last month or so, other markets?

Yes, outside of D.C. Metro. Sorry for the quiet voice.

Yes. No, that's okay. I think I would put Boston kind of into this mix as well for us, which is we've been watching kind of Boston. It's a very seasonal market in general.

But I think what we've seen right now is just a little bit more softening than you otherwise would have expected. And when we started this year, we thought this urban core of Boston was going to do better than the suburban. Again, we're 70% urban in that market, 30% suburban. It's absolutely playing out that way where the urban portfolio is outperforming the suburban.

But it's just not as robust as what we would have thought. So we've kind of taken down that fourth quarter projection as well. And I think I even alluded to some of this on the last quarter call, which is we clearly had headline risk there. And I think right now, what we're seeing is a confirmation that a weaker biotech sector, pullback in university and research funding, immigration challenges are all just chipping away at this overall demand levels in the market.

And I think right now, when we turn the corner and we start off next year, I still think the urban portfolio is positioned to outperform the suburban. But we got to get through some of these kind of near-term demand driver vulnerabilities that we're seeing right now.

Okay. Second one for me. Bob, could you spend a minute or 2 just helping frame like what type of changes are you going to be incorporating in the underwriting process now that you're at the helm of the investments organization and just generally how your approach will be different either philosophically or the data you're using the processes. Could you just spend a few minutes talking through how the investments work and how you're underwriting properties and markets are going to be different in the next 5 to 10 years versus the last 5 to 10 years?

Yes. I don't think there's anything that's like particularly like wholesale change in terms of strategy, et cetera. But I think you pinpointed something that is a huge opportunity that Alec was already really starting on, which is just this data-driven mindset. So I think you guys probably see it in your own investment space where there's just incredibly larger amounts of data sets, and there's better ways of analyzing that data and relational data around that.

And we're fortunate to have a long history of our own data set that we can work together in making kind of better decisions. So I think it's just continuing to lean into something that frankly started before my transition and that I hope to accelerate. And I think that's part of the excitement of the opportunity for me personally is to kind of take it to, call it, EQR 3.0, 4.0, whatever iteration you want to say. And we're fortunate to be on a platform where we have a lot of data and a lot of skilled people who know how to do this.

And so that's the excitement if you can't hear it in my voice.

Next question is coming from the line of Michael Goldsmith with UBS.

This is Ami, on with Michael. What impact, if any, do you expect from the announced Amazon layoffs? How exposed is your portfolio to the specific submarkets most likely to be impacted?

Yes. Ami, this is Mike. I'll take a shot at that. So first and foremost, I think this is one of the benefits you have of us having a diversified portfolio that you kind of derisk some of this kind of direct pressure from any one employer.

That being said, if I looked at the entire portfolio today, again, we capture employment data at the time of application. So we don't follow somebody once they move in as to where they're currently being employed. But if I just looked at that snapshot Today, we have about 3% of our units that had residents employed at Amazon at the time they moved in with us. I looked at the concentration across them, obviously, markets like a Seattle, where you have a heavy employment base from Amazon.

We have a higher percentage there. But for us, that gets very isolated. We have 3 properties in South Lake Union, where we have a high percentage of Amazon employees. I also want to just call out that we've been through this before with these kind of layoff announcements and looking at some of the stuff that's hitting the press now about Amazon.

It is more dispersed across several markets. This is not a light switch. It's not immediate. These are very kind of well-skilled, employed individuals.

Many of them will receive severance packages. I think in the case of Amazon, they're given 90 days to go find alternative roles within the company. I looked yesterday even at a couple of markets like in D.C., they still have 300 positions posted. So it's not like they pulled down all their available positions either.

So I look at this and I say, look, anytime you have these big headlines that take away from the top of funnel demand, that's not a positive, right, in today's day and time where we're looking for job growth. But comparing that to isolated pressure, I just -- I don't see this as a big concern for us.

Okay. That's helpful. And then next question is on leasing concessions. They're still at a relatively low level of rents, but on a year-over-year basis, they jumped up pretty materially. What are you offering in terms of concessions? And are they concentrated in certain markets? And last question, are you offering any concessions on renewals?

So this is Michael again. Very, very limited concessions are being used into our renewal process at all. I think on a cash basis in the third quarter, we did use more concessions than we originally expected. I will just put this in terms of days per move-in.

So in the third quarter move-ins, we averaged about 7 days of rent being concessed, and that increase was clearly targeted into occupancy liens in some of these markets like D.C. and the expansion markets are pretty heavy use of concessions right now. As we think about the fourth quarter, I would expect that concessions on an absolute dollar basis will drop off a little bit just because the sheer volume of transactions on the new lease side drops off. But when I look at that relative to move-ins and days being concessed, my guess is we're going to tick up one day and probably be in a position next quarter to say that we've concessed about 8 days per move-in for the folks that moved in, in the fourth quarter.

Concessions right now are sticky in some of the markets. Even in like a market like Seattle that has some decent demand, you just see some more widespread use happening. And I think this is just a function of where you had supply delivered in 2025 and you're still working through the absorption of that supply, many of the owners of those types of assets increased concessions heading into the fourth quarter and many of the stabilized assets in those submarkets followed suit. And that's kind of what we're feeling.

Your next question is coming from the line of Haendel St. Juste with Mizuho.

My question is on the 4Q '25 blend guide, 50 basis points. I was hoping you could shed some light on the range of expectations there for, say, your weaker coastal markets like D.C., Boston, L.A. as well as some of your better markets like San Fran, New York, Seattle.

Haendel, this is Michael. I'm going to stay away from giving kind of any like specific market numbers relative to blends. I'll tell you, the trends that you see are probably manifest and going to continue in the fourth quarter. San Francisco is going to be one of the better performing markets, same with New York.

You clearly have seasonality in these stats. And I think everybody needs to remember, even if you went back and looked at like 2019 data, you have material declines in the fourth quarter just based on seasonality in it by itself. So markets like Boston will be more negative in the fourth quarter than they were in the third, even when the market is performing well. So I think for us, rather than go kind of market by market, I would expect to say that the trends that you see in the fourth quarter or the pecking order is probably going to continue into -- or what you see in the third quarter is probably going to continue into the fourth quarter, that there will be continued deceleration probably across most of the markets.

Got it. Fair enough. And I don't know if I missed it, but did you give new and renewals for October?

We did not give that, and we're not going to give any kind of spot month kind of stats. I think I gave some of my remarks around the renewal side of the business that the quotes are out in the marketplace, and we have a lot of consistency there and would expect about 4.25% achieved renewal rate increases in the fourth quarter.

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

Mark, I think just to maybe put a finer point on some of the comments on the expansion markets. I guess with some of the absorption dynamics that you described, I mean, do you expect a normal seasonal curve next year starting in? Or is it going to look different kind of in the way it looked this year? And then similarly, can we expect positive market rents given the trends that you're seeing sort of extrapolating?

Just to be clear.

Well, every portfolio is different and every market is different. So you could have people less and more optimistic because of their portfolio composition in a specific place. And again, we don't report to be experts on every submarket in every location. And there's a lot of places in the Sunbelt like Phoenix, we don't do business at all.

So we wouldn't have a perspective on that. I think the answer to that is this job growth thing. If we, as a country, see decent job growth next year, I think the markets will have their normal seasonality. Most markets across the country have less supply in the coastal markets, particularly we've highlighted a lot less supply.

I think if we see job growth, I think we are off to the races in our coastal markets. And I think you'll see the recovery begin in our expansion markets in a more profound way than it has so far. So my bet is that this is a pause in jobs, not a significant and long-lived downturn. The big question, to be honest, is whether the pause continues in and through the leasing season.

If it gets better in the third and fourth quarter of next year, that's nice, but we will have done and our competitors will have done a lot of their leases by then. So I think, Rich, it's just a question of whether when you start to get to April and May, you're feeling better about the job situation. There's reasons you should, right? I mean the Fed, we expect in a few hours is going to lower interest rates.

There is more certainty on the tax and regulatory side than there was even 6 months ago. There appears to be more certainty even on the tariff side, though that is a dynamic input still. So there are a lot of things that look a little better known. And I think maybe employers will be a little more risk on in the new year.

So we'll just have to see. But I think the job thing is the key to the whole puzzle and this certainly is a wildcard at this point.

Okay. That's helpful. And then finally, just a quick one, and maybe this is for Bret. And Bret, it's good to hear you on the other end of the line. Yes, of course. And then just on the guidance really quick, guys. There's a $0.04 swing on $1.04 midpoint for 4Q. So just help explain what the swing factors might be between now and the end of the year, which is obviously not so many days.

Yes. Look, I think we've got clearly other income growth, which we mentioned is going to help alongside with that swing. And then we've got also rental income contributing in the fourth quarter as well. That pretty much makes up the difference on it.

Yes. And just to understand the variation because that you're sort of highlighting that, that's $16 million of total difference. We do have our overhead stuff. A lot of the bonuses and other things, frankly, are determined in the current period.

So we don't know those numbers. The same with a lot of medical reserves and things, Rich, that kind of are inside baseball and not particularly interesting, but do have an effect on the numbers. So that was just giving us the ability to deal with those in the period. I mean we obviously feel good about the midpoint or we wouldn't have said it there, but there are puts and takes at the end of each year, and they are, frankly, relatively unpredictable and uncorrelated to each other.

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

So I guess just some of the line items in our model, we're hoping to get a little more clarity on as we think about '26. Can you talk us through your latest thoughts on loss to lease, if the pushout of other income will affect '26 at all, like there will be any kind of bump there that we should be thinking about? Any thoughts on your insurance renewal for March? And then any other key expense line items we should be thinking about?

Wow, that's the gamut. It's Mark. I'm going to have Michael speak to loss to lease, which right now is to probably be by the end of the year a gain to lease thing and other income a little, and I'll talk to insurance, and we'll work on expenses for you a little bit. But we are, just to be fair, rolling numbers up.

I mean we don't have visibility into a lot of these numbers at the level of precision I think you're asking, but we can talk directionally.

Yes. And I think, Mark, this is Michael. Mark just hit on it, right? Today, the snapshot of the portfolio, we have a gain to lease of about 1%.

This is where the portfolio was in November of 2024. And I think while we originally modeled to have a little more pricing power kind of through this peak leasing season, all of this stuff does appear to be very consistent in the fact that many of the other metrics and that everything is happening about a month sooner than normal. So my expectation is that we're going to start out 2026 in a continued gain-to-lease environment, and then we'll go through the leasing season. And as Mark just talked about, many of those variables is going to dictate how quickly we shift back into a loss to lease, which is kind of what happened to us in 2025 because we started out in a moderate gain to lease and very quickly moved into a loss-to-lease environment.

I'll also hit on one of the other items. So I think as Bret alluded to, some of the shift in the other income that we saw in '25, it's really just a timing delay, and we're talking about -- it's a couple of million dollars that deferred from 2025 into 2026. So yes, it's going to help in '26, but we're still in this process of rolling all of this up to understand exactly what the full contribution from other income will be to revenue.

Yes. And insurance, just to hit on that, for us, pretty small line item, 3% or 4% same-store expense, a good number this year after some really outsized numbers. Let's see how the rest of the hurricane season goes. We don't have hurricane exposure in our portfolio, but it does affect the marketplace as a whole.

So right now, it feels like the loss history or losses these insurers have incurred hasn't been very high. But we'll be pretty careful and thoughtful, Jamie, like we always are on the fourth quarter call with the building blocks on revenue. I mean, clearly, there is going to be more emphasis on intra-period revenue growth next year to get to good numbers because the embedded will be good, but about the same as it was this year. I think we got something we can give you on occupancy because some of the markets are very, very highly occupied like New York.

But we have opportunity in Los Angeles and some of these expansion markets, and that number has opportunity. I think we continue to have really good, interesting other income initiatives that provide value to our residents that continue to roll out successfully. And there's pluses and minuses in timing, but those will be in there, too. So there will be a pretty fulsome discussion with you when we get there.

But I feel confident about next year. It feels like the setup is good. And the biggest thing we need is just some level of job growth. And then I think we're off to the races.

Okay. Great. That's very helpful. And you guys have quoted a couple of times now the 6.2% income growth since 2019. If you were to mark that over the last 12 months or even thoughts going forward, like where are we today on that number? And how does it differ across your markets? And what does that tell you about your ability to push rents?

So Jamie, just to clarify, 6.2% is year-over-year for all our new residents across the whole portfolio. 22% is the increase of all employment in San Francisco Metro area in wages. So it's grown by 22% since 2019, not just our residents, just in general, incomes have and rents in the market are a little above, but in the downtown area below what they were in 2019. So that's what we meant by that. Is that helpful clarification?

Yes, I was thinking more across like other markets. Are you seeing deceleration, acceleration? I assume that will be -- that's a big governor on how much you can push rents. Just any other -- anything else that as you look at the data stands out to you guys?

I mean I guess I would just look at what I would say as an affordability index of rent as a percent of income. And based on new move-ins coming in, in the quarter, we're running just below 20% rent-to-income ratios, which gives us a lot of confidence in the financial health of our consumers and the ability for them to be able to absorb kind of whatever the market rate growth is.

And income growth has been pretty good across all our markets. It's that rent growth is widely varied. So some places, rent growth has been relatively significant until 2 years ago and then went down like in the Sunbelt markets. But places like Seattle and San Francisco, that's the dry powder that people, if we give them a great experience and if the supply picture improves, we have a bigger opportunity there because they have good incomes and they've had good income growth in nominal dollars, while rents in nominal dollars haven't moved very much.

Your next question will be coming from the line of John Kim with BMO Capital Markets.

You're probably going to hate this question. But Mark, you mentioned that your Sunbelt markets are seeing a significant lack of pricing power, and that's due to the lingering impact of new supply. You've been talking about that for the last several years. Michael, you mentioned that net migration trends are favoring San Francisco and New York due to tech and AI demand.

Yet this quarter, your Sunbelt concentration continues to grow with the acquisition in Arlington. But just given those dynamics that you're seeing today and the fact that your same-store NOI in expansion markets are down 7%, have you thought about pausing acquisitions in Sunbelt?

I don't hate that question at all. I like that question, John. Thank you. I mean we're committed to the strategy of having a sort of all-weather diversified portfolio.

Like we said at Investor Day, we're trying to balance supply-demand opportunities and risks as well as regulation and resilience and kind of have a portfolio that is very consistent and is just a cash flow growth machine. That said, we don't have a clock over here. Right now, it is not in our shareholders' best interest to continue to move quickly into these expansion markets, not just because of the forward next year's likely numbers in those markets, but because of the price. When we were buying earlier, we were buying better at better prices.

And right now, 5%, 4.75% cap rates that Bob and his team have been bringing to us and premiums to replacement cost from our perspective, given where the stock is, is not a prescription for long-term investment success. So again, no clock over here. We like being more diversified in the long run, but we will do the best thing in the current period and in the long run. The great thing about the buyback this quarter and potentially going forward is by selling these lower growth assets in our existing markets, in the coastal markets, we're improving the growth rate of our NOI going forward.

We are improving the percentage of exposure because we're lowering the denominator in these expansion markets. So -- and by the way, we're making a great arbitrage trade between private and public. So it kind of works all those ways, but you shouldn't think that we feel like we've got a clock going off that we need to finish this by a date. There's an opportunity to do it accretively, we're going to hit it.

And if not, we're going to stand still or buy our own stock.

Okay. Michael, you mentioned in your response to Brad's question about what you're seeing in D.C. today that net effective pricing is down 4%. And I just wanted some clarification on what that meant. Is that what you're seeing currently on leases signed or what you're seeing kind of year-to-date?

Yes. John, this is Michael. So what I was saying, so D.C., I want to make sure we're clear. I'm talking about the micro submarket of like D.C., the district, D.C. kind of Northwest, excluding Maryland, Virginia kind of portfolios.

And when I referenced the rates, that's our pricing trend. So basically, you were out looking on our website and you basically snapshotted today with the net effective price against all those concessions compared it to the exact same day last year, same methodology, where would rents be on a year-over-year basis. How that manifests itself through the blends and through the new lease change, it's not fully correlated because new lease is very much subjective to who moved out and then who moved into that unit and the time duration in between all of that. But I think just that spot check in time of where rents are -- absolute rents are on a year-over-year basis is an indicator of what when I was saying that we felt pressure in isolated pockets.

What did I mean by that?

But the pricing trend tends to be a leading indicator of where blended rates are?

Yes. I mean there has to be some correlation, right? If rents are down 4% and I'm getting ready to generate renewals, that's going to put pressure on the quoted renewal offers that go out in the marketplace.

Your next question will be coming from the line of Alex Kim with Zelman & Associates.

Could you talk about what you're seeing in the transaction market and just the quantity of for-sale supply in your markets? What does the kind of bid-ask spread look like? And could you put that in the context of the share buyback.

Yes. It's -- Alex, it's Bob, and I'll start and maybe some of the team will augment a little bit. In terms of transaction volume, and we're seeing pretty healthy transaction volume in the private markets, right? So it's a very big -- as Mark has mentioned a few times on the call already, there's a fairly large disconnect between what you're seeing in the public markets versus the private market.

So volume overall is about on parity with 2024, which in broader kind of historical context is about 50% of what we would have done pre-pandemic, but has, in fact, been accelerating. It's a tale of different markets and different assets. So when you have assets that are in that kind of down the middle of the fairway, call it, $80 million to $100 million relatively new, maybe a little bit of light value add, you see a lot of bidders in the tent. You see a decent amount of transactions and you see sellers getting good prices around that kind of 4.75% cap rate that Mark alluded to in his last response, and that's fairly active.

If you look at larger scale transactions, larger assets, assets that might have a mixed-use component of it, there isn't much of a bidding tent. There isn't a lot of people interested there. And that also applies to some of the geographies, right? Some of the markets that are more geographically challenged because the operating momentum may be a little bit weaker, you're not seeing a lot of activity there.

But there are -- there is plenty of private capital out there in general, and it's fairly liquid and pretty aggressive on pricing. So the opportunity set, as we've said on the call already, is our share is more at the moment.

Got it. Yes, I appreciate the detail there. And then I noticed that the completion date for your unconsolidated development in Washington State was pulled forward about a year. Could you talk about what allowed for the faster construction time line?

Yes. So Bret and I were actually just out there in August. And it's a market where the rain and seasonal patterns matter a lot, and they got the footings in early and some of the more complex riskier excavation work done faster than they thought, and it was just kind of binary. And it's moving along really, really well.

Kirkland is a great place to have a brand-new asset. We're really excited about that and thrilled that we'll be getting our hands on it a little sooner. But it really was we made a sort of average estimate on how long it would take. And some of this more complex and riskier, frankly, excavation and other work just got done really quick and really well without any problems at all and off to the races we are now with framing and a lot of stuff that is generally more routine.

Next question will be coming from the line of Omotayo Okusanya with Deutsche Bank.

As we're about to go into election cycle, just curious if there are any states or counties that you're kind of watching for anything on any kind of ballot that could have an impact on your rent practices? And then specifically also kind of around New York, any thoughts on the mayoral race and any potential implications?

Sure. It's Mark. Thanks for that question. So I'm going to start by taking a little bit of what I think is a fair and more optimistic take on regulation.

I mean we've had good activity in California with Governor Newsom's leadership and passing a new law that really liberalizes zoning in areas that are near transit hubs and will create more supply and is really good public policy. And similar, frankly, to what was done in a very red state down in Florida. So there are a lot of places where there's a lot of good things going on in terms of increasing housing supply. Congress or at least excuse me, the Senate passed a bill that was bipartisan, again, supporting housing.

The federal government doesn't have nearly the tools that the states and localities do, but that was very positive as well. In terms of areas of concern, areas of focus, New York, I mean, we've talked about it on prior calls. We are assuming, I think, like many that Mr. Mamdani will win.

The industry associations we belong to have been in conversation with him. He has said in his various campaign announcements he'd like to increase supply a lot in New York. And the private sector builders are the ones who can do that for. So our message to him through our association is use us to help add to New York's housing supply and that rent control is bad.

By the time he gets in office, if he wins and the rent control stabilization Board speaks on these rent issues, we're just going to have a very small percentage of our units subject to that risk. So for us, it's not as significant directly. But certainly, we want to keep having those conversations if he ends up being the mayor and push these supply-side solutions, programs like the new 421a program and things like that are really positive. We are keeping our eyes on Seattle.

There's a big mayoral election there next year -- or next week, pardon me, that is important for the city to continue to make progress. So those are the areas. But again, we've seen a lot of positives as well as things we need to keep focused on as an industry.

That's helpful. Then one more for me. From an operating expense perspective, kind of any other opportunities to kind of keep making progress there? Again, I know like same-store payroll was down like 2% year-over-year. So just curious, any other levers that can be pulled in that area to kind of contain operating expense growth?

Maybe I'll start and Bret can kind of add some color on top of it. I think just in terms of operational excellence, the reality is you're just -- we're never done with that pursuit. This is something that's wired into the DNA of our company. We just outlined in my prepared remarks, some of the initiatives that we've been working on to layer in kind of continuations of automation, centralization.

And all of those do lead to kind of reduced payroll and operating efficiencies being garnered inside the portfolio. So we're really excited. I wouldn't even say that we're in the early inning. There's still a lot of opportunity in front of us to become a more efficient kind of operator by leveraging technology.

I might add, just I think one of the things we called out was utility expenses were a bit higher. I think one of the areas that stood out was cash. And I think there's some opportunities for us, as Michael alluded to, to put some best practices in place where we can actually really drive that specific number down. And I think that will be helpful as we go into next year.

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

Thank you, Shelley. I thank everyone on the call for their interest in Equity Residential, and we'll see you on the road over the next few months. Thank you very much.

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