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Presentation

Operator: Good afternoon, ladies and gentlemen, and welcome to AvalonBay Communities’ First Quarter 2026 Earnings Conference Call. [Operator Instructions] Your host for today’s conference call is Matthew Grover, Senior Director of Investor Relations. Mr. Grover, you may begin your conference call.

Matthew Grover: Thank you, operator, and welcome to AvalonBay Communities First Quarter 2026 Earnings Conference Call. Before we begin, please note that forward-looking statements may be made during this discussion. There are a variety of risks and uncertainties associated with forward-looking statements, and actual results may differ materially. There is a discussion of these risks and uncertainties in yesterday afternoon’s press release as well as in the company’s Form 10-K and Form 10-Q filed with the SEC. As usual, the press release does include an attachment with definitions and reconciliations of non-GAAP financial measures and other terms, which may be used during today’s discussion. The attachment is also available on our website at investors.avalonbay.com, and we encourage you to refer to this information during the review of our operating results and financial performance.

[Operator Instructions] And with that, I will turn the call over to Ben Schall, CEO and President of AvalonBay Communities for his remarks. Ben?

Benjamin Schall: Thank you, Matt, and thank you, everyone, for joining us today. I’m here with Kevin O’Shea, our Chief Financial Officer; Sean Breslin, our Chief Operating Officer; and Matt Birenbaum, our Chief Investment Officer. As is our custom, we’ve also posted an earnings presentation, which Sean and I will reference during our prepared remarks before turning to Q&A. Starting with the key takeaways on Slide 4. Our first quarter results exceeded our expectations, driven by lower expenses, higher development NOI and the benefits of our share buyback activity, which was not included in our original outlook for 2026. Our portfolio is well positioned heading into peak leasing season with very low turnover, solid occupancy and rents tracking as expected through the first 4 months of the year.

We are also benefiting from the ramp in development NOI in 2026, which will further accelerate during the year and into 2027. Leasing velocity at our projects in lease-up has been strong in a typically slower first quarter, which bodes well for the upcoming peak leasing season. And during the quarter, we completed $340 million of dispositions and repurchased $200 million of our shares at an implied cap rate in the low 6% range. Turning to Slide 5. Same-store residential revenue grew 1.6% year-over-year with occupancy up 10 basis points to 96.1%. During the quarter, we started nearly $190 million of new development with 2 starts in suburban New Jersey and are on track for $800 million of planned 2026 development starts with projected initial stabilized yields of 6.5% to 7%.

Our performance in Q1, both operationally and from a capital allocation perspective sets us up well for the balance of the year. Slide 6 details the components of our favorable first quarter core FFO per share results relative to our initial outlook. Of our $0.02 of NOI outperformance: 20% was revenue driven, and 80% was attributable to lower operating expenses. On the expense side, certain operating costs budgeted for the first quarter are now expected to be incurred over the balance of the year. Other drivers of our outperformance for the quarter were $0.01 of favorable development NOI from our lease-up communities as well as $0.01 from our share repurchases in the quarter. Looking ahead, Slide 7 highlights several factors that continue to support apartment demand and our operating outlook as we move through 2026.

First, market occupancy in our established regions remain solid, supporting near-term fundamentals and allowing us to enter the peak leasing season with relative strength. Second, our customers continue to experience healthy wage growth, which will support rent growth throughout the year. Third, the supply backdrop remains very constructive in our markets with new market rate apartment deliveries expected to stay at historically low levels for the foreseeable future. And fourth, the economics of renting versus home ownership remain very favorable. During the quarter, the percentage of customers leaving us to purchase a home declined to 8%. Taken together, these factors give us confidence in the resiliency of apartment fundamentals and in the positioning of our portfolio as we move through the balance of the year.

Slide 8 highlights the strength of our operating and development capabilities to drive differentiated internal and external growth in the years ahead. On operations, we continue to leverage our scale and leadership in centralization, technology and AI to deliver superior service for our residents and drive operating efficiencies and incremental NOI. Our forecast has us on track to generate $55 million of annual incremental NOI by year-end, our original Horizon 1 target. Our next set of priorities include the further deployment of AI solutions and our seamless digital self-service experiences, additional enhancements to our technology and data platforms and further optimization of neighborhood and centralized staffing, all on our way to our Horizon 2 target of $80 million of annual incremental NOI in the coming years.

On development, our sector-leading platform is poised to contribute meaningful earnings and value creation in the coming years with $3.5 billion of development underway with a projected initial stabilized yield of 6.3% at quarter end. These investments were match funded with capital raised over the past 3 years at a weighted average initial cost of 4.9%. This spread is well within our strike zone, targeting yields of 100 to 150 basis points above our cost of capital and underlying market cap rates. These deals were conservatively underwritten on an untrended basis and in many instances, are seeing favorable construction cost buyouts relative to pro forma. These communities will also deliver into an operating environment with meaningfully less new supply.

With this tailwind of activity, we continue to expect a meaningful ramp in development NOI and are projecting $47 million of development NOI this year, increasing to $120 million in 2027. Turning to Slide 9. We had 3 dispositions closed during the first quarter, and we continue to deploy capital into accretive share repurchases. Beyond crystallizing the significant public-private disconnect in asset values, selling 40-year-old high-rise assets improves our go-forward cash flow growth profile, particularly after factoring in CapEx. Including our repurchases last year, we’ve now repurchased $690 million of our stock and have $914 million of remaining authorization. In summary, we have a high-quality portfolio, well positioned heading into the peak leasing season, operating and technology initiatives that continue to drive internal growth, and a development platform that we expect to contribute an accelerating stream of earnings over the next several years.

And with that, I’ll turn it over to Sean to walk through the operating environment and leasing trends in more detail.

Sean Breslin: All right. Thank you, Ben. Turning to Slide 10 to address recent portfolio trends. Year-to-date asking rent growth has been pretty consistent with historical norms and our original expectations for this year. Since January 1, the average asking rent for our same-store portfolio has increased in the high 4% range. And importantly, the growth we’ve experienced this year is well ahead of what we realized in 2025, setting us up well for better rent change as we look forward. Turning to Slide 11. Our same-store portfolio is well positioned as we look ahead to the peak leasing season. Occupancy has been north of 96% and trending modestly ahead of our budget. Turnover remains well below historical norms and even ticked down 50 basis points compared to Q1 of last year, supported by a variety of factors, including a historical low 8% of residents moving out to purchase a new home and declining new supply in our established regions.

As a result, the number of homes available to lease has been lower than last year and has contributed to the 260 basis point ramp in rent change we’ve experienced since the beginning of the year. Looking forward, we expect a continued acceleration in rent change. Renewal offers for May and June were delivered at an average increase in the 5% to 5.5% range, which is about 100 basis points higher than where we sent offers for February and March. In terms of regional color, the stronger performance continued to be the New York Metro area and Northern California, both of which produced revenue growth slightly ahead of our budget through Q1. Within the New York Metro area, the strongest markets were New York City and Northern New Jersey. In Northern California, San Francisco has been the strongest market, followed by San Jose and then the East Bay.

The entire region has benefited from relatively healthy net job growth the last few quarters. So the strengthening we’ve experienced in San Francisco and San Jose started to spill over into the East Bay this past quarter. The Mid-Atlantic also outperformed our revenue budget for the quarter, albeit modestly, with slightly higher occupancy across the region and greater other rental revenue. With the hangover from job cuts over the past year starting to fade, we believe the meaningful reduction in new supply will help support the stabilization of the Mid-Atlantic region sometime this year. I wouldn’t say it’s turned the corner just yet, but it’s definitely more stable than mid- to late last year. In terms of the weaker markets: Boston, L.A. and Seattle modestly underperformed our revenue expectations during the quarter, and the other regions were collectively on plan.

Moving to Slide 12 to address our lease-up portfolio. We generated very strong leasing velocity of 32 per month during Q1, well ahead of our historical velocity of 23 a month. And we generated that velocity at an average effective rent that’s slightly above our original pro forma. It’s clear our customers value the new differentiated product we’re delivering in these various submarkets and selected an average lease term that exceeded 15 months during the quarter. The occupancies that result from our leasing activity will continue to support the meaningful increase in development NOI projected for this year and into 2027, as Ben noted earlier. So overall, we’re off to a good start this year with same-store metrics trending at or slightly ahead of expectations, strong leasing activity in our lease-up communities, and the recycling of capital into buybacks at a compelling value.

So now I’ll turn it back to our operator, Chamali, to begin Q&A.

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Operator: [Operator Instructions] Our first question comes from the line of Jamie Feldman with Wells Fargo.

James Feldman: So I guess just if you could provide an update on your thoughts on hitting your new renewal and blend guidance for the rest of the year, you still have a pretty meaningful ramp. So can you just remind us what you’re thinking in terms of, one, kind of the math behind it and what kind of tailwind that gives you? And then as you think about the markets that are doing better, the markets that are doing worse, and you also didn’t mention the expansion markets, but how they fit into the story. But just, what gives you comfort on keeping the guidance where it is and your ability to hit those numbers?

Sean Breslin: Jamie, it’s Sean. Yes, in terms of the outlook, just to remind everybody what we said is we expected rent change to average 2% for the calendar year 2026, which reflected the first half forecast at 1.25% and the second half at 2.5%. And then in terms of breaking it out between move-ins and renewals, we essentially reflected move-ins being about 0 for the year and renewals averaging around 3.5%, blending to that 2%. As I mentioned in my prepared remarks, asking rent growth is pretty much tracking about where we expected. It’s actually slightly ahead, just a little bit. So where we came out in the first quarter was slightly better than we anticipated, and we have pretty good momentum going into the second quarter.

Obviously, you can interpolate the math required for Q2 to get to the 1.25%. We feel very confident that we’re in the right strike zone, so to speak, in terms of hitting those numbers. In terms of the various markets, what I would tell you, consistent with my prepared remarks in terms of where the momentum is, it’s certainly the New York Metro area, as I mentioned, the Bay Area certainly has good momentum. It’s nice to see things start to spill over into the East Bay part of Northern California in the first quarter, which we sort of expected to happen. It typically lags behind San Francisco and San Jose. And then the expansion regions are performing pretty much collectively as expected at this point. Some are slightly ahead, some are slightly behind.

But as a basket, they’re pretty much on track.

Operator: Our next question comes from the line of Eric Wolfe with Citibank.

Eric Wolfe: It looks like the percentage of available homes in April is down year-over-year, and you mentioned the very low turnover in April as well. My question is if that allows you to be a bit more aggressive on asking rents and new leases going forward? Maybe just some thoughts on what the current data is telling you about pricing power in May and some of the early sort of results on new leases in May.

Sean Breslin: Yes, Eric, happy to take that as it relates to what we’ve been seeing. I would tell you that based on what we saw in the first quarter, as I mentioned, and Ben also indicated in his prepared remarks, we’re slightly ahead of our revenue plan. That’s a little bit on rate, a little bit on occupancy. As we look forward in terms of our expectation, again, if you interpolate the math based on what we needed in the second quarter, I think to get to our 1.25% blended for the first half, and we start with April kind of in the high 1% range, almost 2%, I think we’re in good shape overall as we look forward. And in terms of the low turnover, the low availability, all that does continue to support slightly better pricing power, and we’re certainly seeing that relative to what we experienced in 2025, where around this time of year, things started to soften.

And so you’re starting to see those lines continue to spread further, which certainly bodes well for the rest of the leasing season in the second half of the year.

Operator: Our next question comes from the line of Steve Sakwa with Evercore ISI.

Steve Sakwa: Just wanted to focus maybe a little bit on the dispositions and the buyback. Can you help us kind of frame out how, I guess, aggressive or how large you’d be willing to pursue, I guess, both sides of that equation given the dislocation we’ve seen in apartment valuations of late?

Kevin O’Shea: Yes. Sure, Steve. This is Kevin. I’ll offer a few comments. Others may want to offer their own as well. I guess I’d start off by saying with respect to the buyback question, we are in a very strong position, as you mentioned, to create value through both development and share buyback activity, supported, of course, by our balance sheet and continued access to the asset sale in the debt market. So in terms of how we’re thinking about the buyback activity we’ve done so far to date and what we might do going forward, I’d probably frame it out with a few points. The first is buybacks and development are both highly attractive to us today. So it’s not a binary choice. At current pricing, our stock implies a cap rate in the low 6% range, which makes repurchases attractive and immediately accretive.

At the same time, development remains compelling for us with projected initial stabilized yields in the mid-6% range or higher, while also driving longer duration earnings growth and portfolio refreshment. So that’s important to us. Second, our capital plan for the year contemplated that we would be a net seller of about $500 million — sorry, net seller of $100 million with roughly $500 million of dispositions and $400 million of acquisition activity. Year-to-date, as you could see from the release, we’ve completed already $340 million of asset sales and $200 million of share repurchases, which has effectively replaced a portion of the acquisition activity that we originally had planned. The third point is, looking forward, we are already marketing additional communities for sale.

So that will give us additional proceeds here. As those sales are completed, if our stock remains attractively priced, we would consider additional repurchases. And to the extent we did so, we would do that instead of acquiring the remaining $200 million of acquisitions that are in our plan, and we do so on a leverage-neutral basis. How much we might do beyond that? We’re certainly open to the idea of doing more. We’re prepared to be nimble, while also preserving our balance sheet strength and flexibility, so that we could deploy capital to the incrementally, the highest best use that’s available to us. I wouldn’t put a single fixed number on how much more we could flex dispositions up to fund buyback activity. We can do a fair bit, quite a bit, I’d say.

But the ultimate level of activity will depend in terms of buybacks, will depend on the timing and amount of future asset sales, the valuation of our shares at the time and the remaining capital gains capacity that we have. As you know from our prior discussions, we typically have in a normal year without engaging any special tax planning efforts about $500 million in disposition capacity where we can keep the proceeds. So that’s essentially part of what we were thinking about with our plan this year. So we do have capacity in that regard. Beyond that, we have a very clean tax position. We could use onetime levers to increase disposition capacity up and have that proceeds available for any purpose, including a buyback activity. But as I said, I wouldn’t put any fixed number on how much more we could flex it up beyond what’s contemplated in our plan by potentially repurposing proceeds to acquisition activity.

Operator: Our next question comes from the line of Jana Galan with Bank of America.

Jana Galan: Congrats on the strong start to the year. Just a question on the decision to maintain the midpoint of FFO guidance despite the $0.05 outperformance in the first quarter. And I think you said close to $0.02 is the expenses that may be incurred later in the year, but then you’re also benefiting from the share repurchases being maybe a little bit larger and earlier. So if you can kind of walk us through that.

Kevin O’Shea: Sure, Jana. This is Kevin. We think affirming guidance is a disciplined and appropriate decision today. To be sure, as you point out, we are off to a strong start with revenue trends on track, our first quarter earnings beat and completed buyback activity that should add a couple more cents of incremental earnings as the year progresses. At the same time, as you know, we’re still early in the year with peak leasing still ahead of us. And some of the Q1 beat was expense timing, as we’ve alluded to, not a full year run rate change. So while full year earnings are currently tracking modestly ahead of our original plan, we think it’s more appropriate to affirm full year guidance today and revisit it on the second quarter call when we’ll have a much better read on the peak leasing season in the balance of the year.

Operator: Our next question comes from the line of John Pawlowski with Green Street.

John Pawlowski: Matt, a question for you on the Avalon Sunset Tower sale. Are you able to share the cap rate both on your seller NOI as well as your best guess of the cap rate on the buyer’s NOI? I think you owned the property since the mid-’90s. So I’m just curious what type of property tax reset would be felt on that property.

Matthew Birenbaum: Yes. John, that is a very atypical transaction. You’re right, it’s a very old asset, early 60s vintage and — or late 60s vintage, and it’s subject to San Francisco rent control. So it really is not representative of where the San Francisco asset sales market would be today. There’s also quite a bit of overhang there with some regulatory upgrades that are going to be required, seismic and sprinkler retrofits, which really was part of what drove us to sell it. The cap rate, kind of what we would talk about as a market cap rate, which would be kind of the buyer’s forward T12, we think was probably in the low 5% range. But that does provide an allowance for a certain amount of CapEx that the buyer is going to have to do related to that retrofit work.

So it doesn’t really map cleanly to anything else. I would say — there are other assets we own in the city of San Francisco, where I would say, given the loss to lease that are — that would probably be honestly in the low to mid-4 cap rate today. And so if you think about it just relative to how to value the portfolio, that’s probably more typical.

John Pawlowski: Okay. And then, Sean, a question on two markets where the economies have been kind of stuck in the mud. Maybe a multiple choice question. So D.C. and Los Angeles, do you expect pricing power to either reaccelerate from here in the coming quarters, just muddle along or get worse before it gets better in both D.C. Metro and Los Angeles?

Sean Breslin: Yes, John, good questions. A little bit of crystal ball questions, I guess. But what I’d say is, as I see it today, based on what we know, things feel a little bit better in the Mid-Atlantic. Things were rough mid- to late last year in the Mid-Atlantic. What we can tell in terms of the feedback from our teams, both on the ground in terms of people coming through the front door in terms of leasing or people contacting our renewals team, definitely not as much angst in the system in terms of prospective renters and/or existing renters executing renewals. We’ve been able to peel back on concessions a little bit. The average asking rent year-over-year is about flat right now. We thought it’d be down a little bit. So I’d say it feels a little bit better in the Mid-Atlantic.

The job worries have faded. I’d say maybe there’s even in certain submarkets, probably more defense sector oriented, maybe a little bit of optimism. So if I had to pick 1 of the 2 right now, I’d say we’re getting a little more anecdotal feedback and on the ground data that supports the Mid-Atlantic probably being a little bit better as we look forward. I wouldn’t say that it’s overly positive compared to the Bay Area or something, but I think it looks pretty good. And then in L.A., L.A. has been tough, as you well know. And so there’s not necessarily a near-term catalyst other than potential investments that relate to World Cup, Olympics, things like that kind of bringing in jobs. They did pass some tax subsidies, as you may know, last year to help promote entertainment content being developed in L.A. broadly across California but mainly L.A. That hasn’t really trickled in just yet, but it’s still early.

So I would say we haven’t yet seen a catalyst quite yet in L.A. other than very diminished supply, but we’re looking for it on the demand side.

Operator: Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.

Austin Wurschmidt: Sean, maybe sticking with you. You had referenced the operating momentum you’ve seen into the second quarter. I guess, was there any specific pickup in demand into April that drove the acceleration in lease rate growth after what kind of appeared to be a fairly modest improvement from 4Q to 1Q? Or just anything specific, I guess, as we get into the early part of the spring leasing season that drove the improvement?

Sean Breslin: Yes. I mean I wouldn’t necessarily point to significant macro factors, Austin. I think it really is kind of regional drivers for the most part. You probably just heard my commentary on the Mid-Atlantic and why that’s feeling a little bit better. Yes, there’s been good momentum in the New York Metro area for obvious reasons there in terms of the employment growth that we’ve experienced there in other markets. And the softer places are what we would have expected. I mentioned L.A., still last 6 months, basically no job growth in Boston, very little in Seattle. So I think it’s more of a regional story in terms of where you’re seeing the momentum versus not as opposed to a macro shift one direction or another at this point.

Operator: Our next question comes from the line of Adam Kramer with Morgan Stanley.

Adam Kramer: I wanted to ask, maybe it’s a little bit more of a philosophical academic question. But I know in the past, we’ve sort of focused on job growth. I know you guys have had job growth charts in the deck for some time. Noticed today sort of has a wage growth chart in there. Obviously, 2 different data points can mean different things and sort of work together. But wondering, again, maybe a little bit more philosophically, if you sort of think one is a better indicator of apartment demand, be it wage growth or job growth. And then I guess maybe a second part to that question is, just with regards to job growth, I think if I remember correctly from the last deck, there was sort of an increase embedded into the assumptions, I think, sort of using the NABE forecast for 2H.

Wondering if that’s sort of still the assumption that you guys are working under that there’s going to be that uptick in job growth in the second half or maybe there’s a different forecast out there now?

Benjamin Schall: Adam, this is Ben. I’ll start us off there. So in terms of drivers of rental demand, it is both, right? It is both jobs and wage. We very much look to total income growth as the drivers of rent growth over time. To your second question, our guidance and our reaffirmed outlook for this year is based on sort of an economic environment that we were experiencing in the second half of last year and sort of continuing into the first quarter. So we weren’t — our outlook was not based on any inflections looking forward. Really the 2 main drivers that we talked about being different in the second half of the year. One was the cumulative benefits of lower levels of supply, which, as we’ve noted, is now down to 80 basis points in our established regions.

And the second is just the dynamic of softer comps in the second half of the year, which you can see on one of the presentation slides. So those are the main drivers. We naturally do look at job forecasts. Those are tough to peg month-to-month. We’ve generally looked at NABE. NABE’s forecasts are down some. But when we put the pieces together, it doesn’t change our outlook for the second half of the year. And given Sean’s commentary and our start to the first 4 months are feeling pretty good about our progress so far and the setup for peak leasing season and the remainder of the year.

Operator: Our next question comes from the line of Rich Hightower with Barclays.

Richard Hightower: To ask a question on development. And just given the progress you’re seeing year-to-date, I think Matt mentioned that construction costs are maybe a little more attractive here and there versus original underwriting. So how quickly can you possibly ramp up the development pipeline given all of the moving parts and, of course, other potential uses of available capital, maybe to increase the development start number? Or what’s the lag on that sort of a process internally?

Matthew Birenbaum: Sure. Rich, it’s Matt. It’s always a bit of a combination of what I’d say is bottom up and top down. So bottom-up is the deals themselves. And at any given point in time, we have a significant pipeline that we’re always managing through entitlements, through final design and permitting. At the end of the first quarter, I think our development rights pipeline was about $4 billion, a little more than that, $4.2 billion. And through the normal course of time, those deals would bubble up over the next couple of years to being ready. Then there’s the top down, which is how are they underwriting and what is our cost of funds and what are our other alternatives investment uses and what is the capital allocation decision we’re going to make.

So we do focus a lot on preserving flexibility, and I think we do a really good job with that. So we would have the ability to dial up development more, whether that’s next year or even later this year if conditions are favorable and it’s the right capital allocation decision. The other thing I would say is that in addition to our own pipeline, most of that $4.2 billion is kind of AvalonBay development. We also have our developer funding program where we provide capital to third-party merchant builders. I think maybe 5 of the 30 deals or 25 deals we have under construction today are DFP deals. Those deals we can ramp up even more quickly because in those cases, somebody else is doing all that early prework and it’s ready and just looking for capital.

And there’s a lot of that business out there right now. Most of it doesn’t underwrite, which is why you’re not seeing start activity pick back up in any meaningful way. And we like that. We are very consciously trying to take a larger share of what is a shrinking pie of development activity, and we think we’re well positioned to keep doing that.

Benjamin Schall: Yes, Rich. This is Ben, just to add on to Matt’s commentary, at points in the cycle like we’re in now where others are pulling back, but we’ve got a set of competitive advantages and a cost of capital that’s differentiated. It also allows us to structure deals more optimally. And so when Matt talks about having $4.2 billion in a development pipeline, we control that at a very low cost. And we do see that shift, and we’ve seen that in this environment, which we’re able to get control of land with much more flexibility in today’s environment than in past environments.

Kevin O’Shea: And Rich, this is Kevin to add on. We do have the financial flexibility to lean into those opportunities should they manifest. Our access to the loan market is excellent. We priced 10-year debt in the low 5% range. We have access to the transaction market. We just sold $340 million of 40-year-old assets at a 5.4% cap rate. We could sell more representative assets at a lower cap rate. So that would give us an opportunity to fund accretively deals, development projects that might stabilize in the mid-6s if there’s more that we want to have as a quick start to lean into.

Operator: Our next question comes from the line of Haendel St. Juste with Mizuho Securities.

Haendel St. Juste: I was looking earlier at the turnover chart in your report, and it’s pretty striking how we’ve gone from almost 60% back in 2009, 41% a year ago and sitting in the low 30s today. And so understanding some of that is the affordability dynamics you laid out, some maybe demographics, some of the operating platform. But I guess I’m curious, as you think about it and as you look at it, is this level in the low 30s, is it sustainable? Is it a new norm? Curious on perhaps what you feel the more appropriate longer term or intermediate-term way to think about turnover over the next year or 2? And remind us again what’s embedded in the guide for this year?

Sean Breslin: Yes, Haendel. This is Sean. I’ll take that one. In terms of the turnover rate, the one thing I would try to parse out a little bit is the seasonal shifts here. So that 31% is really a Q1 number, tends to be one of the lower quarters of the year. If you looked at it on an annual basis, the last couple of years, we were kind of in mid-40s and then low 40s. Our expectation for this year is we remain in the low 40s. And there’s a number of different factors that really drive turnover. Some of it relates to substitutes, which includes the availability of for-sale product. That is one sort of macro factor we don’t see changing anytime soon. Even if you see rates come down some, just the available inventory is not there across especially our established regions.

So we think that remains certainly a tailwind or at least a neutral impact on the business for the next couple of years, at least the foreseeable future. The other thing that comes to mind in terms of substitutes is other available supply. That certainly has ticked in our favor over the last couple of years, coming down to historical levels and projected for the next year or 2 to dip down even further. So the substitute factor isn’t really there. And then the rest of it really comes down to kind of normal life events. And that’s the stuff that you really can’t control. So whether it’s people getting married, people getting divorced, people having children, taking care of parents, multigenerational things like that come and go. That’s typically embedded in that data year in, year out.

So I think the primary things that tend to tick it up or down are the things that I mentioned in terms of other options within a market. The life stuff just continues to happen. And I don’t think there’s a lot that I would point to that would tell you that we’d see a meaningful uptick in the next couple of years based on what I know today in terms of the — those particular factors. It takes a while to build new multifamily, takes a long time to build and title single-family in these markets. So we’ve got a pretty good runway for a couple of years on that point.

Operator: Our next question comes from the line of Michael Goldsmith with UBS.

Michael Goldsmith: I’m here with Ami Probandt. On the renewals, nice acceleration there. What’s driving that? Is that in line with your expectations? And then how have renewal negotiations trended recently?

Sean Breslin: Yes, Michael, this is Sean. Overall, in terms of renewals, we’ve seen nice acceleration this year, as we indicated in our earnings release in terms of the movement from the first quarter into April. I also mentioned earlier in response to the question that both occupancy and lease rates are blending to slightly ahead of our original budget. So we’re in pretty good shape there overall. In terms of the various markets, for the most part, we see a seasonal uptick in asking rents. Renewals tend to drift that behind it. The markets that I mentioned earlier that are the stronger markets tend to see a little nicer pickup as compared to some of the ones that have been softer, as I mentioned, like Boston, L.A. and Seattle. But we’ve seen good movement across most of the regions with a few exceptions, and it’s slightly ahead of our original expectation.

Operator: Our next question comes from the line of Alexander Goldfarb with Piper Sandler.

Alexander Goldfarb: Going to the lease-ups, the pace of lease-ups that you had and certainly, we’ve seen similar from private developers. If new rents overall are still sort of muted, but the pace of leasing is exceeding what normally would be a normal monthly pace. How do we think about this as far as you talked about like sort of only 2 shout-out markets, New York and Northern California, and yet a lot of your development is in other places. So how do we think about the pace of leasing versus still the muted rents overall? Is it just heavy concessions? Or what’s the read-through on why lease-ups are so strong yet rent pricing is still soft?

Sean Breslin: Yes, Alex, it’s Sean. I’ll make a couple of comments, and then Matt can chime in here. So on those — on that lease-up basket for the quarter, that’s 9 communities in there. Just to give you a little bit of insight what’s in that basket. There’s 4 in New Jersey, 1 in Charlotte, 2 in the Mid-Atlantic, 1 in South Miami, 1 in Austin, those are 9. And I think in general, what we’ve seen is that in these submarkets, people are really compelled by the product that we’re offering in many of these cases. I’ll let Matt talk about New Jersey. But in terms of the concessions and stuff, I mean, we’re talking about people choosing on average, a longer lease term over 15 months, and we’re doing like 6 weeks free. So it’s around 9% or so. So that’s not terribly different from what we would normally do. So I think it’s really about the product. I’ll let Matt talk a little bit about what we’re doing with some of the products there.

Matthew Birenbaum: Yes. Alex, as Sean mentioned, it’s really a combination of offering a compelling product in many cases, in submarkets that just have not seen much new supply in a long time. So a lot of it is the geographic mix. And where the — most of the development NOI is coming from is from the 4 New Jersey deals plus South Miami. That’s — those are the ones where the rents are quite a bit higher than the other markets that Sean mentioned. And in most of those cases, that’s really what it’s about. There’s plenty of supply in South Florida, but not in a location like South Miami where that community is over a brand-new Fresh Market on the kind of South/East side of U.S. 1 and all the competition is in kind of other neighborhoods that don’t have the same walkability, that don’t have the same schools.

Similarly, you think about New Jersey, give you one example, Avalon Wayne, where we have both townhomes and flats. That’s the first new product Wayne has seen in probably 35 years. And that’s very much a part of our development strategy. When you look at our 2 starts this quarter, one of them is Saddle River. That’s another place 7-figure home values up there in Bergen County and another place that hasn’t seen any new multifamily and 2 generations. So again, it’s part of the same story where we really are getting an outsized share of the demand that’s there because of the differentiated and compelling nature of what we’re offering.

Operator: Our next question comes from the line of Brad Heffern with RBC Capital Markets.

Brad Heffern: Sean, just to follow on, on that average lease term number that you’ve given a couple of times over 15 months. Does that come from you just nudging people in that direction to lower expirations in the off-season? Or is there something that’s driving a broader shift of tenants away from selecting just a normal 1-year lease term?

Sean Breslin: It’s a little bit of both. So in the season that you’re in and the expiration profile that we want in the subsequent year does matter. But it’s nice to see in some of these markets where we’re leasing townhomes as an example, and some of these assets. Matt mentioned Wayne, South Miami, some townhomes. They’re bringing their kids. They want to get through the school year and have some time that on average, I would say we were nudging less in Q1 than normal and people were picking up on the longer lease terms and product like that. So a little bit of a combination of both, but it’s nice to see the preference for a slightly longer lease term come through from customers as well.

Operator: Our next question comes from the line of Rich Anderson with Cantor Fitzgerald.

Richard Anderson: So I guess I wanted to sort of dive into a specific metric that being, well 2, new and renewal lease rate growth. You mentioned, I think offers out 5% to 5.5% into the spring leasing season, yet your guidance still has 3.5% renewal for the full year. Understanding you’re looking to gather more information before you revisit guidance. But is it fair to say that as you sit here today that the flat new lease rate growth that’s embedded in the current guidance would be something greater than that based on the numbers you see today, but you don’t know yet what the future holds, so you’re sort of holding the line. Is that a reasonable way to think of your mindset as it relates to that specific part of your guidance going forward?

Sean Breslin: Yes, Rich, it’s Sean. In terms of the way we think about it is, one, what we have — what we put forth in terms of our original guidance. And I would say that we’re generally tracking on plan. I mentioned rates are slightly ahead. But the Q1 leasing period, there’s fewer expirations in Q2, Q3. We see a nice trajectory as it relates to asking rent growth, and we’re basically in a position where things look pretty good, but we’re going to have a much better set of data as we get through the second quarter, a lot more leasing to do with the expiration volume in Q2 that we would be able to revisit where we are at midyear and give you an update as to what our thinking is at that point in time. But we’ve not seen anything yet that says we should be doing anything different other than what we reaffirm what we already said.

Operator: Our next question comes from the line of John Kim with BMO Capital Markets.

John Kim: I wanted to know what you’re seeing in terms of the market concessions that your competitors are offering, if there’s been any noticeable change as you’re entering the peak leasing season? And what you’re expecting in terms of offering concessions versus what you provided last year?

Sean Breslin: Yes. John, it’s Sean. The concession story is very much regional. So what I would tell you is the markets that I indicated in my prepared remarks that are either a little bit stronger or a little bit weaker than what we anticipated. That’s where you’re going to see the concession activity. So our concessions up in Boston and Seattle and L.A. year-over-year, yes. Are they down meaningfully? Yes. In Northern California, New York Metro area? Yes. So it really depends on the market. And you can go into submarkets where — in Denver, it’s very rough in certain particularly urban submarkets, and you’ll see 2.5 to 3 months free. And then you go out to suburbs, it might be 6 weeks. You come here to parts of the Mid-Atlantic, and there are some places that it’s down to no concessions and there are some places where it’s a month.

So it’s hard to generalize overall, I would say, it really is a function of the various regions in terms of the specific data points that you’re looking for. And as I said earlier, on a net effective basis for rate, things are pretty much tracking in line with what we expected. It’s modestly ahead, but not a lot.

Operator: And we have reached the end of the question-and-answer session. I would like to turn the floor back over to President and CEO, Ben Schall, for closing remarks.

Benjamin Schall: Great. Well, thanks for your question today. Thanks for joining us, and we look forward to visiting with you soon.

Operator: Thank you. And this concludes today’s conference. You may disconnect your lines at this time. We thank you for your participation.

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