Mizuho bullish on Mid-America as Sunbelt rental growth outpaces coastal market

Investing.com -- Mizuho upgraded Mid-America Apartment Communities to Outperform and downgraded AvalonBay Communities to Neutral, saying slowing rent growth in coastal cities contrasts with improving conditions in Sunbelt markets.

The bank said second-quarter results for apartment real estate investment trusts largely met expectations, with market rents rising from the first quarter but at a slower rate than in 2024.

Many companies trimmed full-year rent forecasts after weaker-than-expected spring leasing.

Mizuho sees MAA benefiting from falling supply in its core Sunbelt markets, which it said should support rent improvement through late 2025 and accelerate revenue and funds-from-operations growth in 2026.

It also cited MAA’s low leverage and valuation discounts to peers and historical averages in raising its price target to $150.

AvalonBay, by contrast, faces slowing growth due to weakness in its Los Angeles portfolio and added pressure in Washington, Boston and Seattle. Mizuho said the company’s suburban properties are struggling against tougher year-on-year comparisons and lingering drag from return-to-office trends.

Lease-up delays and higher construction costs could also weigh on returns from its development pipeline. The price target was cut to $199 from prior estimates.

Apartment REITs have underperformed the broader real estate sector this year, lagging the RMZ index by about 9.3 percentage points year-to-date.

Mizuho expects Sunbelt and San Francisco markets to outperform into year-end as new supply eases and comparisons to last year’s rents become more favorable.

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