AvalonBay Communities, Inc. AVB, a leading real estate investment trust (“REIT”) specializing in the development, acquisition and management of multifamily properties, is set to announce its second-quarter 2026 results after the closing bell on July 22.
In the last reported quarter, this residential REIT delivered a positive surprise of 1.07% in terms of core funds from operations (“FFO”) per share. Results reflected higher same-store occupancy at 96.1%, underscoring steady demand heading into the peak leasing season. However, higher interest expenses undermined the performance to an extent.
Over the past four quarters, AvalonBay’s earnings surpassed the Zacks Consensus Estimate on three occasions and missed on the other. The graph below depicts the surprise history of the company:
AvalonBay Communities, Inc. Price and EPS Surprise
AvalonBay Communities, Inc. price-eps-surprise | AvalonBay Communities, Inc. Quote
As we approach the release of AvalonBay's second-quarter 2026 earnings report, it is important to examine how this residential REIT is likely to have performed amid the current market conditions.
U.S. Apartment Market in Q2
The U.S. multifamily market entered the second half of 2026 with a clearer recovery taking shape, as strong renter demand and a rapidly shrinking supply pipeline began translating into lower vacancy and improving rent growth.
According to a Cushman & Wakefield report, net absorption reached roughly 124,600 units, up from 83,500 units in the first quarter and 8% above the prior year, making it the fifth-strongest quarter in nearly 25 years. The supply picture also became more favorable. Approximately 88,000 units were delivered during the quarter, down 27% year over year. Around 475,000 units remained under construction at quarter-end, equal to just 3.5% of existing inventory.
Improving demand and slowing supply pushed the national vacancy rate down 35 basis points quarter over quarter to 8.9%, its first move below 9% since 2024. On a trailing four-quarter basis, absorption of approximately 362,000 units exceeded deliveries of about 358,000 units for the first time since early 2022, indicating vacancy is likely to have passed its cyclical peak. The recovery was particularly pronounced in previously overbuilt markets: Austin, Charleston, Savannah, Huntsville, Salt Lake City and Colorado Springs recorded some of the largest quarterly vacancy declines.
Rent growth remains modest but is beginning to improve. National asking rents reached approximately $1,945 per month, up 1.5% year over year, compared with 1.1% growth in the first quarter. The Bay Area led the recovery, with San Francisco rents rising 13%, San Jose 7% and the East Bay 4.8%. Norfolk, Toledo, Reno and Boise also posted strong gains.
High-supply markets remained softer, with rents still declining in Austin and Sarasota, although the pace of those declines moderated as excess supply was absorbed. Overall, the market appears to be shifting from stabilization into an occupancy-led recovery, with broader rent growth likely as the construction pipeline continues to shrink.
Factors to Consider Ahead of AVB's Q2 Results
Against this improving industry backdrop, AvalonBay is expected to benefit from healthy occupancy, resilient demand and stronger pricing power in its predominantly coastal markets.
The company reported same-store residential occupancy of 96.1% in the first quarter, and occupancy remained above 96% entering the peak leasing season. Asking rents have increased in the high-4% range since the beginning of the year, supported by low resident turnover and a limited number of available units. Leasing trends also strengthened through the quarter, with April blended rent growth approaching 2% and renewal offers during May and June ranging between 5% and 5.5%.
A favorable supply environment should remain a key tailwind. New apartment deliveries across AvalonBay's core markets are projected to have remained near historically low levels, while elevated homeownership costs continue to keep many households in the rental market, limiting move-outs and supporting occupancy. In addition, recently completed development communities are expected to have contributed meaningfully to property-level earnings as leasing activity accelerates.
However, elevated borrowing costs remain a headwind. Higher interest expenses are likely to have partially offset operating gains, with our estimate calling for an 8.9% year-over-year increase in interest expense during the second quarter of 2026.
Projections for AVB
We expect second-quarter same-store revenues to increase 1.7% year over year, while same-store net operating income is estimated to have grown marginally. Physical occupancy is expected at 96.2%.
The Zacks Consensus Estimate of $778.72 million for second-quarter revenues indicates a 2.44% year-over-year increase. For the second quarter of 2026, the company projected core FFO per share in the range of $2.72-$2.82.
Before the second-quarter earnings release, the company’s activities were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly core FFO per share has remained unchanged at $2.80 over the past two months. It implies a year-over-year marginal decline.
Here Is What Our Quantitative Model Predicts for AVB:
Our proven model does not conclusively predict a beat in terms of FFO per share for AvalonBay this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
AvalonBay currently carries a Zacks Rank of 4 (Sell) and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the broader REIT sector — SL Green Realty SLG and Cousins Properties CUZ — you may want to consider, as our model shows that these have the right combination of elements to report an FFO beat this quarter.
SL Green is slated to report quarterly numbers on July 22. SLG has an Earnings ESP of +7.20% and a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cousins is slated to report quarterly numbers on July 30. CUZ has an Earnings ESP of +0.45% and a Zacks Rank of 3 at present.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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This article originally published on Zacks Investment Research (zacks.com).