AvalonBay Communities (NYSE:AVB) used its fourth-quarter 2025 earnings call to highlight record-low resident turnover, an active year of capital allocation, and a 2026 outlook that assumes modest near-term revenue growth but improving fundamentals as supply declines across many of its core markets.
2025 results: retention strength and development ramp
CEO Ben Schall said AvalonBay’s 2025 operating results reflected portfolio quality and a focus on execution, pointing to high resident retention and renewal acceptance rates that helped support 2.1% overall revenue growth for the year. The company’s 41% turnover rate was the lowest in its history, Schall noted, alongside a near all-time high mid-lease Net Promoter Score of 34.
Capital allocation: equity raised, shares repurchased, and a higher dividend
Management emphasized balance sheet strength and flexibility in capital sourcing. Schall said AvalonBay was the only company in its peer group to raise equity “in size” during 2024, with nearly $900 million raised on a forward basis at an implied initial cost of roughly 5%.
He also said AvalonBay repurchased nearly $490 million of shares by the end of 2025 at an average price of $182 per share, describing an implied yield “north of 6%.” The repurchases were funded with incremental debt and proceeds from selling lower-growth assets, a move management said improves the company’s long-term growth profile.
For 2026, the board approved a quarterly dividend increase to $1.78 per share, which Schall said keeps AvalonBay among the more conservative payout ratios in the apartment REIT space.
2026 guidance framework: modest same-store revenue growth, improving in the back half
AvalonBay’s 2026 outlook assumes 1.4% same-store revenue growth, with COO Sean Breslin saying the key driver is higher lease rates, supported by contributions from other rental revenue and bad debt. The company expects growth to be stronger in the second half than the first half, citing slightly better job growth, softer year-over-year comparisons, and the cumulative benefit of lower supply.
Management guided to a 2% like-term effective rent change for 2026, with the first half expected to average in the low 1% range and the second half improving into the mid-2% range. Breslin said fourth-quarter leasing was modestly below internal expectations, but January improved versus November and December, and renewal offers for February and March were sent out in the 4% to 4.5% range. He cautioned that renewals historically settle below offered levels, noting typical “dilution” of about 100 to 125 basis points depending on market conditions.
On the demand backdrop, Schall cited a National Association for Business Economics (NABE) forecast of 750,000 net new jobs in 2026 and discussed potential catalysts such as improved policy certainty, tax legislation benefits, and potential Federal Reserve easing. He also pointed to rent-to-income ratios below 2020 levels in established regions and said the rent-versus-own gap remains large, estimating it is “over $2,000 per month more expensive to own a home” in those areas given prices, mortgage rates, and other ownership costs.
Regional commentary: East Coast stability, West Coast mixed, Denver challenged
In prepared remarks, Breslin outlined market-level expectations. In New York/New Jersey, AvalonBay expects roughly 2% revenue growth, driven by New York City and Westchester projected in the mid- to high-3% range. Boston demand was pressured by job losses in the back half of 2025; AvalonBay’s outlook assumes occupancy declines of about 40 basis points, mostly in the first half, and another 40 basis points of pressure from lower rent relief payments.
For the Mid-Atlantic, management cited the region as having the largest job losses among established markets in late 2025. The company forecast just under 1% revenue growth, with occupancy expected to improve by around 20 basis points and underlying bad debt improving by about 30 basis points. On the call, Breslin said the Mid-Atlantic lost roughly 60,000 jobs over the last six months of 2025, and characterized the key uncertainty as whether additional weakness is still to come.
On the West Coast, AvalonBay projected mid-3% revenue growth in Northern California with relatively stable occupancy around 96%. Seattle was described as having flat employment in the last six months of 2025, with 2026 outlook calling for modest net effective rate growth and a roughly 20 basis point occupancy decline.
In the expansion regions, Southeast Florida was described as the strongest, with about 1.5% revenue growth expected. Denver was singled out as the most difficult market, after essentially zero net job growth in 2025 alongside approximately 16,000 new apartment deliveries. For 2026, management expects modest job growth but another 9,000 units delivered, with built-in lease rate growth of -1% and rents projected to decline throughout the year.
Expenses, development earnings, and capital structure updates
AvalonBay expects 3.8% same-store operating expense growth in 2026, above an organic growth rate of 2.5%. Breslin said expense pressures include the phase-out of property tax abatements (about 70 basis points) and a headwind from a favorable fourth-quarter 2025 property tax appeal that creates a roughly 50 basis point drag in 2026 comparisons. He added that abatements should remain a headwind “for the next few years,” though the magnitude can vary year to year.
Management also discussed legislative impacts on “other rental revenue,” including Colorado legislation affecting fee caps and California’s AB 1414, which provides residents an option to opt out of bulk internet programs under certain circumstances.
CFO Kevin O’Shea walked through the company’s 2026 Core FFO per share building blocks, including:
- +$0.04 from same-store NOI, partly offset by -$0.03 from overhead management fees and JV income
- +$0.10 from net development earnings
- +$0.07 from the Structured Investment Program and 2025 share repurchases (including $0.02 from SIP and $0.05 from buybacks)
- -$0.07 from refinancing activity and -$0.10 from transaction activity
O’Shea said the transaction headwind reflects 2025 actions including the sale of assets in a challenged Washington, D.C. submarket and the acquisition of communities in Texas, and he characterized part of the impact as timing-related.
On development, AvalonBay plans to start $800 million across seven projects in 2026, targeting yields between 6.5% and 7%. Chief Investment Officer Matt Birenbaum said the lower starts level is driven by a combination of a smaller “quick start” opportunity set and a higher yield bar, with 2026 starts more heavily weighted to established East Coast regions.
Birenbaum also outlined the lease-up ramp, with development occupancies expected to rise from 1,812 homes in 2025 to roughly 3,175 in 2026 and over 4,100 in 2027. He said this corresponds to $47 million of development NOI in 2026 and an incremental $75 million in 2027.
Separately, O’Shea said AvalonBay expects to maintain a higher level of commercial paper outstanding, noting the company increased the size of its program and views commercial paper as an attractive source of floating-rate debt. He said balances will likely run around $400 million to $500 million, flexing based on business needs.
About AvalonBay Communities (NYSE:AVB)
AvalonBay Communities, Inc (NYSE: AVB) is a publicly traded real estate investment trust (REIT) that owns, develops, redevelops and manages multifamily residential properties. The company focuses on professionally managed apartment communities, offering a range of rental housing options and related resident services. As a REIT, AvalonBay’s core activities center on the acquisition and development of apartment assets and the ongoing operations and leasing of those communities.
AvalonBay’s operating activities include ground-up development, strategic redevelopment of existing properties, property and asset management, and on-site leasing and resident services.
