Equity Residential has a differentiated growth strategy compared to most of its multifamily peers. While many of them place a heavy emphasis on developing new properties, Equity Residential's main growth driver is improving the NOI of its existing portfolio. This internal growth comes from rental increases and cost savings initiatives.
Because it operates in supply-constrained markets and focuses on higher-earning tenants, Equity Residential can raise rents more readily than other multifamily owners. It also leverages technology, which helps drive down costs. It has been a leader in deploying and investing in property technology solutions such as online leasing, which has helped increase its income. It expects to produce $5 million in incremental same-store NOI this year and $15 million by 2021 as it implements its current operating cost-savings initiatives.
Equity Residential's other main growth driver is active portfolio management, which comes in many forms. While it doesn't have an extensive development pipeline, the company currently has $603 million of properties under construction and can start another $500 million to $650 million of projects depending on market conditions. The company also invests some capital on redevelopment projects. Larger ones focus on increasing the densification of existing properties by selectively adding more units when possible. Meanwhile, it spends about $50 million per year across its portfolio on kitchen and bath renovations. Finally, Equity Residential is an active buyer and seller of multifamily units in its core markets. It typically sells older properties and uses the proceeds to purchase newer ones that have more income upside.