Equity Residential shifts focus to fast-growing Sunbelt cities

Equity Residential, one of the largest apartment real estate investment trusts in the United States, is redirecting new investments from traditional coastal hubs to twelve Sunbelt and other non-coastal markets. The Chicago-based company, which trades under the ticker EQR, aims to capitalize on population growth, job creation and lower development costs in regions such as Raleigh, Atlanta, Austin and Denver.

Expansion strategy concentrates on 12 high-growth markets

Before the pandemic, Equity Residential’s portfolio was concentrated in four coastal states, mostly in large metropolitan areas. Management has since outlined a plan to diversify by targeting a dozen inland and southern cities where housing demand is rising rapidly. Current expansion projects include suburban communities surrounding Raleigh, the tech corridor of Austin, rapidly growing neighborhoods in Atlanta and several transit-oriented developments in Denver.

The shift is driven by a combination of economic and demographic factors. Domestic migration toward the Sunbelt has accelerated, bolstered by comparatively affordable living costs and strong labor markets. Data compiled by the U.S. Census Bureau show that states in the South accounted for more than half of the nation’s population gains in 2023, a trend developers and landlords are closely monitoring.

Equity Residential expects the new focus to balance its revenue base and reduce exposure to regulatory changes in coastal cities. By expanding into lower-cost regions, the REIT can pursue ground-up construction or value-add acquisitions at price points that are difficult to match in markets such as New York or San Francisco.

Portfolio size, tenant profile and financial results

As of the end of the first half of fiscal 2025, Equity Residential owned or held interests in 319 properties totaling more than 86,000 apartment units. Approximately 95 percent of those units are wholly owned. The typical renter is a professional in their early thirties, a demographic benefiting from robust employment trends and favoring rental flexibility over homeownership.

Total rental revenue reached $2.98 billion in calendar year 2024. Management attributes the solid performance to limited inventories of for-sale housing and higher mortgage rates, conditions that keep many potential buyers in the rental market. The company continues to emphasize Class A assets—properties offering upgraded amenities and proximity to employment centers—to attract and retain high-income tenants.

Occupancy levels remain healthy across the portfolio, though regional variations persist. Sunbelt properties have registered faster lease-up times and higher renewal rates than some coastal assets, reinforcing the strategic pivot toward inland markets. Equity Residential also reports that operating expenses in the new target regions are generally lower, supporting margin expansion goals.

Why the Sunbelt appeals to large apartment REITs

Several structural trends favor Equity Residential’s current direction. Job growth in technology, healthcare and logistics has spread beyond traditional coastal powerhouses, boosting demand for rental housing in secondary and tertiary markets. Additionally, jurisdictions in the Sunbelt often enforce fewer rent-control measures, allowing landlords to capture market-based rent increases more readily.

Lower land prices give the company flexibility to design modern, amenity-rich communities without the high entry costs associated with dense urban zones. While construction pipelines have grown, analysts believe the influx of new residents will absorb much of the upcoming supply, provided that economic conditions remain stable.

Outlook and potential risks

Management has not disclosed specific guidance for unit acquisitions or completions in 2025, but it reiterated plans to allocate most incremental capital to the twelve designated growth markets. Key risks include potential oversupply in select submarkets, interest-rate volatility that could raise development costs, and macroeconomic slowdowns that might curb job creation.

Equity Residential continues to monitor local regulatory developments, especially proposals that could introduce rent caps or inclusionary zoning requirements. Diversifying across multiple jurisdictions is intended to mitigate the impact of any single policy change.

Investors will watch upcoming quarterly reports for evidence that the Sunbelt strategy can sustain above-average same-store revenue growth and margin stability. If successful, the approach could serve as a template for other large REITs seeking geographic balance.

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