About Angela Kleiman
Angela Kleiman, President, CEO, and Director of Essex Property Trust, discussed the state of the apartment market in a June 2024 CNBC interview. She stated that despite recent overbuilding in apartment construction, occupancy remains steady at 94%, which she attributed to an "acute housing shortage." Kleiman noted that on the West Coast, new supply is about half a percent of total stock, and that "what we're building right now is barely keeping up with the demand that's necessary." She also said that "it is much cheaper to rent than to own," leading consumers to choose renting as the more affordable option.
Kleiman commented on several market dynamics. Regarding interest rates, she said the Federal Reserve's delay in lowering rates was due to a strong economy and continued inflationary pressure, but that a decrease "has to occur" at some point. She noted that there is "a large amount of capital interested in apartments," particularly for completed projects. On office-to-apartment conversions, she described them as "really expensive" and physically prohibitive due to building layouts, and said Essex does not expect such conversions to occur "at the volume people have anticipated." She also addressed competition from single-family built-for-rent communities, stating that in Essex's West Coast markets, acquiring large tracts of land is "so difficult" that such competition is limited.
Source: AI-verified profile updated from Angela Kleiman's recent appearances.
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Transcript (12 segments)
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Interviewer0:13
Since taking the helm last year, you heard the stats. We know that apartment construction was overbuilt in the last two years, and yet we're seeing occupancy holding steady at 94%. Give us the fundamentals you are seeing in the market right now.
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Angela Kleiman0:27
Sure. I'm so glad to be here, and thank you for having me. It's an interesting dynamic, because you would think that with supply where it is right now, the multifamily fundamentals are very strong. And it's really for two primary reasons. Even though there has been building, there is still an acute housing shortage. And in certain markets, the supply has ramped up. But for the most part, especially on the West Coast where we are, the supply is about half a percent of total stock. People are still choosing the more affordable option.
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Interviewer1:14
And that's, of course, because we have interest on mortgages at near record highs, near the cyclical highs around 7.5%, driving people to rent. If we see the Fed start to lower rates and mortgage rates come down and more people get into homeownership, is that going to hit the rents?
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Angela Kleiman1:33
I do think that in certain pockets where there's already significant supply, it will be more vulnerable to mortgage pricing. For example, on the West Coast, because there's such a shortage of housing, and on the flip side, what we're seeing is strong demand. What is happening with our markets in certain parts of the U.S., you have growing industries. So for example, artificial intelligence is an AI play, because all the employees being hired... So what we're building right now is barely keeping up with the demand that's necessary.
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Kelly2:16
Kelly has a question. My question is, are you cheering for interest rates to go up or come down?
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Angela Kleiman2:33
Boy, that's a really tough question. What we have expected is that the Fed has announced they were going to lower interest rates at some point and kept pushing it back. It's not a bad reason, because the market is strong, the economy is strong. And so for those reasons, it would be tough to see an interest rate decrease at this point, especially with the supply dynamics.
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Interviewer3:10
Is there money on the sidelines looking to get into more apartments?
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Angela Kleiman3:13
Well, there's a large amount of capital interested in apartments. However, the focus is really more on completed projects. So what we're seeing is that transaction volume across the U.S. has been quite low historically. So when an apartment becomes available for sale, there's a significant number of buyers, ranging from economic and international large institutional owners. And so for those reasons, we're just going to see the dynamic continue.
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Interviewer3:49
And there's a lot of talk here at the REIT conference. We were just talking to the CEO of VFT about office conversions to apartments. They're starting to get more creative in changing that supply.
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Angela Kleiman4:13
That's a great question. What we're seeing is that in certain cases, specialized cases, that could work. It's so hard to do, though, because the office place, the physical building makes it prohibitive. Because where the elevators are, you need to have a certain distance to the wall. So large office buildings by nature, you can't convert them. And it's really expensive. You have seen one or two on the West Coast, but certainly not at the volume that people have anticipated. So we just don't expect that to occur.
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Interviewer4:46
We're seeing big jumps, in fact, a 20% jump in single-family built for rent only. Companies like American Homes for Rent, Invitation Homes and others, building entire single-family rental communities. Where does that fit in?
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Angela Kleiman5:10
In certain markets, where supply is leading to rental pricing disruption. But in our markets, it is so difficult to even just get a large tract of land. And so on the West Coast and downtown Seattle and those markets, it's virtually impossible to do that.
