Angela L. Kleiman
President and Chief Executive Officer at Essex Property Trust
Good morning and thank you for joining Essex's fourth quarter earnings call. Barb Pak will follow with preparing remarks. Rylan Burns and Jessica Anderson are here for Q&A. I will start with the key highlights of our 2023 performance, then discuss our expectations for 2024, followed by comments on the transaction market and our investment strategy.
Overall, 2023 was a solid year for Essex. We achieved a 4.4% same-property revenue growth for the full year, which is in line with our revised guidance and 40 basis points higher than the original midpoint. Furthermore, we made substantial progress in reducing delinquency as percentage of rent from over 2% in the first quarter, down to 1.4% by year end. These are the results of the well-coordinated efforts of our hard-working operations and support teams across the company. Great job team and thank you. Lastly, we continue to drive results to the bottom line, delivering a 3.6% year-over-year increase in core FFO per share, exceeding the high end of our original guidance range by $0.06.
Turning to the fourth quarter. We deployed an occupancy-focused strategy as market rents moderated, generally consistent with typical seasonal pattern. In addition, we recovered a significant number of delinquent units starting in October. As expected, the subsequent backfilling of non-paying units during a seasonally slow period created a temporary headwind to net effective new lease rates, which averaged negative 1.7% for the quarter.
On the renewal front, the positive trend continues with strong retention among our residents, generating an increase in renewal rates of 4.9% for the quarter, resulting in blender rates of positive 2.6%. As we start 2024, leasing activities in our markets is steady. In January, new lease net effect rates improved by 150 basis points and concession usage decreased by half since the fourth quarter and our financial occupancy sits in a solid position of 96.2%.
Moving on to our outlook for the West Coast in 2024 as outlined in our earnings package. We expect the U.S. economy and job growth to normalize in 2024, consistent with economists' outlook of a soft landing. We forecast job growth on the West Coast to perform in line with the national average on the Essex markets to produce market rent growth of 1.25% on average.
The consensus macroeconomic U.S. assumptions and the quality of jobs are key considerations to our modest outlook. In 2023, the employment growth was largely concentrated in the service sectors, which did not yield meaningful rent growth. We expect this dynamic to continue and we currently assume hiring of highly skilled workers to remain muted as companies continue to evaluate their labor needs and priorities.
While our base case scenario for 2024 reflects tempered growth, there are several factors that could support a more positive outcome. First, inflation could continue to move in the right direction, increasing the likelihood that the Fed will pivot from tightening to easing. Accordingly, the economy could gain momentum and the hiring of highly skilled workers reaccelerate as cost of capital becomes more attractive.
Second, the large technology companies implemented significant business and labor retrenchments at the end of 2022 through the early part of last year. Therefore, these companies are better equipped today to lead advancements and stimulate growth. To this point, recent layoff announcements have been much smaller in scale, with companies citing larger strategic plans to redirect talent and investments toward artificial intelligence projects, which we view as a long-term benefit for the West Coast. With low levels of housing supply in our markets, a modest increase in demand could accelerate rent growth.
Despite uncertainties in the overall economy, we are confident in our market's ability to navigate near-term volatility and to outperform in the long term. Our conviction is based on two fundamental factors, low housing supply and favorable affordability. Over the next two years, we expect less than 1% of total supply growth per annum, which enables us to generate positive rent growth in most environments. Also, renting in the Essex markets is considerably more affordable than owning a home, and favorable rent-to-income ratios support a long runway for rent growth, especially in our northern regions. As such, we expect the economic incentive to rent to persist and drive demand for multifamily housing.
Lastly, on the investment market and our strategy. 2023 was a year of historically low transaction volume, primarily due to significant volatility in the capital markets. Although we've seen interest rates decline throughout the fourth quarter, yield spread between buyers and sellers remained wide, ranging from approximately 25 basis points to 50 basis points in our markets. And thus, we are not anticipating a significant increase in deal volume in the near term.
Lenders have generally been accommodating to sponsors, extending debt maturities when feasible, and there are very few forced sellers in our markets currently. Given the dearth of data points, there is less certainty in the transaction market. It is during periods of uncertainty that Essex has historically created significant value for our shareholders through external growth. As such, our investment team is proactively looking for acquisition opportunities to generate the best risk-adjusted returns. We expect Essex's disciplined approach to capital allocation, strong balance sheet and deep market expertise will be key differentiators in creating long-term value.
With that, I'll turn the call over to Barb.
