Angela Kleiman
President and Chief Executive Officer at Essex Property Trust
Good morning. Thank you for joining Essex's third quarter earnings call. Barb Pak will follow with prepared remarks and Rylan Burns is here for Q&A.
We are pleased to report our third guidance raise this year as a result of another healthy quarter with Core FFO per share exceeding the midpoint of our guidance range. Today, my comments will focus on our performance year-to-date, preliminary considerations for 2025, and an update on the investment market.
Starting with highlights to date. Notable milestones this year include record low turnover, excellent progress resolving delinquencies, and positive inflection points in several key demand drivers. These factors combined with muted level of new housing supply have enabled Essex to deliver results exceeding the high end of our original 2024 expectations. Year-to-date, we've achieved solid results with market rents generally trending consistent with historical patterns as shown in the chart on page S13.2.
In the third quarter, rents peaked in July and remained resilient through August before moderating in September. As we expected, the blended rate growth of 2.5% for the quarter was tempered by the combination of seasonal moderation and rents which started in September and difficult year-over-year comparison. Especially since last year, our rents did not moderate until late October. As we enter the fourth quarter, our market remains stable. We've shifted our operating strategy to focus on occupancy as we've done in prior years in anticipation of slower demand characteristic of normal seasonality.
Moving to regional highlights. Seattle has been our top performer this year, delivering a strong 3.8% blended rate growth in the third quarter. The east side where we approximately 70% of our portfolio was our strongest markets with 4.7% blended growth. For the rest of the year, we anticipate a heavier supply delivery and thus more concessions usage in this region.
Northern California has performed well, achieving 2.3% blended rate growth in the third quarter led by Santa Clara County with 3.6%. The overall supply for this region remains very low, so we anticipate most of the deliveries for San Jose this year to occur in the fourth quarter. Therefore, we plan for higher concessions to address this short-term impact. On to Southern California, which achieved 2.1% blended lease rate growth in the third quarter. Lease rates in this region were tempered by headwinds related to delinquency recovery in Los Angeles
Excluding LA, this region produced 3.5% blended rate growth for the third quarter. While the exact timing is difficult to pinpoint, we are cautiously optimistic that new lease rates will begin to recover next year in LA as volume of delinquent units continue to subside. Heading into year-end, we are well positioned in 96.1% financial occupancy for October with year-over-year comps easing in November and December.
Turning to our expectations for 2025, we've provided high-level revenue drivers on page S16.2 of the supplemental. We expect our earnings for next year to surpass what was achieved in 2024, ranging from 80 basis points to 100 basis points. Additionally, we anticipate a 40 basis points to 60 basis points tailwind from delinquency improvements.
Combined, these two components should generate approximately 120 basis pointsto 160 basis points of same property revenue growth in 2025. As for market rent growth, supply and demand will ultimately be the key building blocks. The fundamental backdrop remains stable and continues to gradually improve.
On the supply side, detailed on page S16 of the supplemental, we expect total supply growth of only 50 basis points in 2025. This is consistent with the low-level supply in 2024 and well below our long-term average of 1% for our markets. On the demand side, we've seen positive inflection points in several major demand drivers this year.
Job hostings at the top 20 technology companies have been steadily recovering, demonstrating a sentiment shift from retrenchment in 2023 to positioning for future growth. Additionally, these same companies continue to increase their return-to-office requirements, which has resulted in increased demand to San Jose and Seattle regions. Related to this is migration back to our markets, which has steadily improved and is rebalancing toward historical patterns. Given the low supply environment in the Essex markets, we are well positioned to achieve new lease rate growth with incremental demand.
Lastly, on the transaction market, strong investor interest for multifamily properties on the West Coast has resulted in cap rates trading consistently in the mid 4% range with numerous transaction in the low 4%. Within this competitive landscape, our investment team has done a terrific job, originating several opportunities at better than market yields, acquiring over 1,700 units to date, tolling over $700 million at our per annum share.
We continue to execute transactions with attractive returns relative to our cost of capital, and we are confident in our ability to generate opportunities to drive NAD and SFO per share accretion for our shareholders. Finally, I'll conclude with a brief comment on California Proposition 33. It is no surprise to anyone that excessive regulations dramatically restrict housing production in California, leading to high cost of housing. As such, we have joined Governor Newsom in endorsing a no vote on Proposition 33. We all know that building more housing is the only solution to the state's housing shortage.
With that, I'll turn the call over to Barb.