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How Geography Affected AvalonBay’s 2Q17 Results

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Wide geographical diversity

AvalonBay Communities (AVB) has its assets well placed in high-demand Class A cities. These cities have soaring job growth, a high barrier to entry for competitors, and proximity to premium infrastructure.

REIT peers UDR (UDR), Equity Residential (EQR), and Essex Property Trust (ESS) are repositioning their properties to Class A cities and expanding with new leased activities to maintain rent growth. These REITs occupy 13% of the SPDR Dow Jones REIT ETF (RWR), which has a net asset value of $93.17 per share.

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Regional performance in 2Q17

Communities that performed strongly above expectations include Avalon West Hollywood in Los Angeles and AVA NoMa in DC. Both communities reported effective rental rates of around $300 per month.

The Pacific Northwest region reported a maximum average rental rate growth of 5.1% during the quarter. It was followed by Southern California with 3.9% growth, New England with 2.7% growth, the Mid-Atlantic region with 2.4% growth, and the New York metropolitan area with 2.2% growth. Northern California reported the lowest average rental growth of 0.9%.

Most of the regions reported a decline in occupancy, with the Mid-Atlantic reporting the largest decline of 0.7%. Northern California reported the highest occupancy growth of 0.5%.

The Pacific Northwest reported NOI (net operating income) growth of 5.9% during the quarter. It was followed by Southern California with a growth of 4.2%. The Mid-Atlantic region’s NOI growth was flat.

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