Essex Property Trust Inc. expects rent growth of roughly 150 basis points in 2027, underpinned by structurally constrained new supply and easing construction costs across its California and Washington portfolio, the company told investors at the Bank of America New York Global Real Estate Conference on Wednesday.
Management based the forecast on leases already signed through August. The outlook represents a 65-basis-point improvement over the prior year, the company said, as it worked through a one-time drag from structured finance and preferred equity investments that is expected to recede in 2027.
Essex operates 63,000 apartment units along the West Coast. CEO Angela Kleiman and CFO Barb Pak spoke during a session moderated by Bank of America residential REIT analyst Jana Galan.
Northern California, Essex's largest market, has one of the most acute affordability imbalances in the country. The rent-to-income ratio currently stands at 21%, down from 25% before the pandemic, management noted. A Bay Area home now costs about 2.5 times more to own than to rent, reinforcing sustained rental demand. New supply remains near record lows — roughly 30 basis points of total stock — with little prospect of relief over the next four to five years.
In Los Angeles, economic occupancy held near 94% for much of the year. Delinquency sat at 150 basis points of rent, above the historical norm of 80 basis points, driven in part by court backlogs that have extended eviction timelines to four or five months from the pre-pandemic two to three months. Total portfolio delinquency was 50 basis points versus a historical 40 basis points. First-half 2026 revenue growth in Los Angeles came in 80 basis points ahead of the same period in 2025, the company said.
The employment mix in Los Angeles is also shifting. Entertainment-sector jobs fell to about 100,000 from 340,000 in 2015, while aerospace and defense demand is growing alongside a projected $1.5 trillion aerospace market over the next decade.
Seattle's supply pipeline continues to tighten. Annual deliveries dropped to 1.7% of stock in 2025 from 2.4% in 2024 and are expected to fall below 1% in 2027. Eighty percent of Essex's Seattle portfolio sits in the East Side, North and South submarkets, the company said.
Development timelines are improving. Entitlements now take about 2.5 years under accelerated permitting, down from roughly three years historically. Podium mid-rise projects of 250 units or more still require at least 36 months to build. Construction costs are rising about 4% to 5% annually, a significant moderation from the 10% to 15% increases seen before the pandemic.
Rent-growth assumptions remain bounded by regulation. California's AB 1482 allows annual increases capped at the greater of CPI plus 5% or a 10% ceiling. Seattle's statewide rule permits CPI plus 7%, also capped at 10%. Essex said it imposed a self-contained 10% cap as an anti-gouging policy well before either jurisdiction enacted legislation.
On financial metrics, Essex reported a gross profit margin of 68.77% and a financial-health score of 2.73. Cash flow from operations before capital spending and redevelopment was about $200 million. Structured finance and preferred equity holdings generated a 2.5 percentage-point negative impact on FFO growth in 2026, a headwind management expects to fade next year as the portfolio is reduced to a $100 million accrual level. The company has invested close to $2 billion in asset acquisitions over recent years.
Essex trades as an S&P 500 constituent with a dividend yield of 3.75%. It has raised dividends for 32 to 33 consecutive years, management noted, and carries a market capitalization of roughly $24 billion.
