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Investing.com -- Raymond (NSE:RYMD) James has revised its ratings across the residential REIT sector, upgrading Essex Property Trust (NYSE:ESS) to Outperform from Market Perform, while downgrading Mid-America Apartment Communities (NYSE:MAA) to Market Perform from Outperform.
The broker cited continued deceleration in rent growth trends and relative valuations as key drivers for the changes.
Essex stands out for its strong positioning in tech-centric West Coast markets, which have been leading national rent growth.
“San Francisco, San Jose, and Seattle remain some of the best performing multifamily markets in 2025, with asking rents growing +4.2%, +4.2% and +2.5% year-to-date through mid-June,” analysts wrote.
They believe Essex is well-insulated from supply-side pressure that has weighed on Sun Belt peers and sees room for potential upside to its “relatively conservative guidance.”
The rating upgrade on Essex is accompanied by a new price target of $315, which aligns with its updated net asset value (NAV) estimate of $314.91.
The firm highlighted improvements in cash delinquencies and a possible inflection in Oakland’s rent growth trends, adding that Essex’s “cost of capital advantage may prove to be a key differentiator” in the second half of 2025 (2H25), in case that “more accretive acquisition/investment opportunities begin to emerge.”
In contrast, the downgrade of MAA reflects a diminished valuation gap versus peers and rising macro uncertainty.
The stock is now trading at 18.8x 2026E adjusted funds from operations (AFFO), close to large-cap averages, leaving “less room for further near-term multiple expansion.”
While demand in Sun Belt markets remains robust, Raymond James flagged concerns about “pockets of elevated apartment supply still delivering in 1H25” and the possible impact of a shifting economy.
The firm adjusted its AFFO/share estimates for MAA to $7.73 for 2025 and $8.00 for 2026, lowering its previous forecast.
The updated NAV estimate is $166.89, with MAA trading at a 10% discount to that figure as of June 23.
More broadly, Raymond James maintains a neutral-to-cautious view across most of the multifamily REIT universe, citing unusual seasonal softness in leasing and wide geographic dispersion of slowing rent growth as limiting near-term visibility.
The broker’s top pick in its residential REIT coverage remains Strong Buy-rated Centerspace (NYSE:CSR) as the company “continues to trade at deep valuation discounts on both NAV and FFO multiples” despite risks related to its Midwest/Mountain West portfolio.