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Essex Property Trust Inc  (NYSE:ESS)
Q3 2018 Earnings Conference Call
Oct. 29, 2018, 3:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Essex Property Trust Third Quarter 2018 Earnings Call. As a reminder, today's conference call is being recorded.

Statements made on this conference call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties. Forward-looking statements are made based on current expectations, assumptions and beliefs as well as information available to the company at this time. A number of factors could cause actual results to differ materially from those anticipated. Further information about these risks can be found on the company's filings with the SEC. (Operator Instructions)

It is now my pleasure to introduce your host, Mr. Michael Schall, President and Chief Executive Officer for Essex Property Trust. Thank you. Mr. Schall, you may begin.

Michael Schall -- President and Chief Executive Officer

Thank you, Dana. I'd like to welcome everyone to our third quarter earnings conference call. John Burkart and Angela Kleiman will follow me with comments, and John Eudy is here for Q&A. I will discuss three topics on the call today. Our third quarter results and preliminary 2019 market outlook, investment market conditions and an update on the apartment industries campaign to oppose California Prop 10.

First topic. Our third quarter results will mostly as expected reflecting a solid economy and severe shortages of housing on the West Coast. We continued to experience strong demand for multifamily housing across the West Coast metros with periodic disruptions to pricing when multiple apartment lease-ups occur within a submarket often leading to large leasing concessions and often impacting pricing at nearby stabilized communities. Job growth has continued to outperform our initial 2018 expectations across the Essex portfolio. Job growth is slightly lagging in Southern California and strong in the tech markets as demonstrated by greater than 3% job growth in both Seattle and San Jose. With tight labor market conditions, income growth continues to outpace rent growth, which is improving rental affordability. Per capita, personal income growth in the Essex metros is expected to average 5.7% in 2018, up almost 1% from a year ago, and compared to 4% for the nation.

As John Burkart will discuss in a moment, we have experienced normal seasonal patterns in 2018, which is significantly different from 2017. Same-store revenue growth for 2018 troughed in the third quarter, mostly due to revenue strategy and year-over-year seasonal variations. Overall, market conditions are much better now as compared to a year ago and our portfolio remains well positioned. Consistent with the strong job growth reported in the tech markets, job openings for the top 10 public tech companies, all of which are headquartered in California and Washington, increased 26% year-over-year to nearly 22,000 open positions as of September. With a dearth of skilled workers, employers continued to face shortages of qualified personnel, pushing wages upward to attract employees from other areas.

Turning to our market outlook for 2019. Today, we have a much better visibility into the year ahead compared to last year, and thus we have included our preliminary outlook for 2019 on page F-16 of the supplemental. We also provide the primary supply and demand drivers that shape our rent growth expectation. F-16 is intended to be a scenario, based on the strength of the US economy. We began with US GDP and job growth estimates from third-party sources and based on these key assumptions, we estimate job growth and housing demand in the Essex metros. As to housing supply, we drive each market to gain insight on apartment delivery timing to create quarterly estimates. Using historical relationships between housing, supply, demand and rent growth, we established our 2019 market rent growth expectations.

For 2019, the US economy is expected to continue growing at a healthy pace with US GDP and job growth of 2.5% and 1.3% respectively. Unemployment rates for the Essex markets declined 50 basis points in the past year to 3.5%. Over the past several years, following unemployment has contributed to job growth, although this positive impact will likely diminish going forward. We expect the West Coast economies to outperform the nation as to job growth, which we estimate at 1.8% for the Essex metros in 2019. This is about 30 basis points below the September actual job growth of 2.1% again reflecting the impact of tight labor market conditions. For 2019, we expect 3.1% market rent growth in the Essex markets with California slightly outperforming Washington and the best results in San Jose and San Diego. Oakland is expected to lag due to increasing apartment deliveries. Reflecting the importance of economic growth in our 2019 assumptions, we produced a new graphic on page F-16.1 of the supplemental to demonstrate the outperformance of the Essex metros, in terms of cumulative, nominal GDP growth. Bottom line, the Essex metros had outperformed the US average and other major metros in the past five years and are well positioned for continued leadership going forward.

Turning to supply in 2019, our preliminary forecast assumes that multifamily supply will be relatively flat in 2019 versus 2018 in the Essex markets with significant variances in some markets. Most notably, we expect a substantial increase in apartment supply in Los Angeles and Oakland and significant reductions in Orange County, San Diego and San Francisco.

Construction labor shortages, continued to be a major factor affecting apartment delivery timing and this issue continues unabated. Thus in 2019 we made a notable change to our supply methodology on page F-16 of the supplemental by factoring delays into the estimated delivery timing of newly constructed apartments. Thus, our multifamily supply shown on F-16 as the supplemental has pushed roughly 8% of apartment units or around 3,000 units from 2018 into 2019 and from 2019 into 2020. For the next couple of years, we see little change in the number of apartments being built and the overall construction labor force and therefore there is no reason to believe that the delays will abate. With housing demand continuing to exceed supply, we believe the housing shortages on the West Coast will continue.

Now turning to my second topic, investment market conditions. 2019 is likely to be another year where escalating construction costs driven by labor shortages and entitlement costs increased at a faster pace compared to rental revenue and net operating income. Therefore, developer yields have been compressed, creating a significant headwind to apartment construction starts. Through the challenging scenario for our direct development activities and therefore we have not materially added to our development pipeline. Instead, we're focused primarily on providing preferred equity to third party of public developers in the Essex markets. At the start of 2018, we had a strong preferred equity pipeline and hope to significantly exceed our $100 million target as it stands now, we will struggle to hit our target in 2018. Angela will comment on our guidance in a moment.

As it relates to acquisitions, we continue to see plenty of capital looking to buy apartments leaving cap rates relatively flat. Recent increases in interest rates have erased most of the positive leverage tailwind that we have enjoyed since 2007 as long-term apartment financing rates are now comparable to cap rates. A property and locations continue to trade around 4% to 4.25% cap rate, and sometimes sub 4% for exceptional property with B quality property and locations generally trading 25 basis points to 50 basis points higher. We'll continue to monitor the transaction market closely.

And now on to my third topic, an update on California Prop 10. As we've highlighted on prior calls, we're part of a broad coalition to close California Prop 10 which seeks to repeal the Costa-Hawkins Rental Housing Act on November 6. We are joined by other apartment companies, trade organizations, unions, veterans and a variety of pro business groups. I think it's appropriate to recognize the extraordinary effort of those involved in the No on 10 Campaign especially its Executive Committee and co-sharers John Eudy and Barry Altshuler, they have successfully united the industry around a worthy cause.

We believe that passing Prop 10 will intensify housing shortages, making a bad problem worse. It will likely lead to the expansion of price controls for all types of housing, which will result in less housing being built. Price controls produce longer tenant fees, which in turn reduce the number of available rental units for those seeking housing, and those with limited needs will be at an increasing disadvantage competing for housing amid greater scarcity.

Finally, apartment condo and single-family owners will have a strong economic incentive to convert rentals subject to price controls to owner-occupied housing thereby shrinking the rental stock.

It's important to note that Prop 10 contains no funding for affordable housing and no requirements that additional housing be built. The State of California directs a process called the regional housing needs assessment to plan for sufficient housing supply. However many cities don't want to create housing because of the related cost of services including schools, police et cetera. Gavin Newsom, a leading Gubernatorial candidate captured this issue on his website with the following comment "Cities have a perverse incentive not to build housing because retail generates more lucrative sales tax revenue. The bigger the box, the better, because cities can use the use sales tax for core public services."

As a better approach, the state has recently passed many laws to support the regional housing needs assessment, which we believe are critical to increase housing production, the only viable solution to the crisis today. We also believe that more funding is needed targeted to do affordable housing and thus we support California Prop 1.

That concludes my comments, and I'll now turn the call over to John Burkart.

John Burkart -- Senior Executive Vice President

Thank you, Mike. Q3 was a good quarter. It played out as we expected following historical seasonal pattern with the rental market peaking in July and our operating team shifting our strategy from a focus of maximizing occupancy to locking in the seasonally high rental rates. The result was that we allowed the occupancy in our portfolio to move down 30 basis points, while we achieved rents on new rentals up 3.5% above the prior year's quarter.

The 2018 from a same-store revenue growth perspective, Q3 is the low point for the year due to the lower occupancy and the one-time payment in the third quarter of 2017 related to the delinquency collection from a corporate housing operator, which created an irregular call. Adjusted for both occupancy and the one-time item, same-store revenue growth would have been 2.6% for the third quarter of 2018 or 40 basis points higher than our reported results.

Overall, our concessions in Q3 2018 were down approximately 20% from the prior year for the same-store portfolio. Our renewals in the third quarter grew approximately 4.2% and they are being sent out at approximately 4.5% for the fourth quarter. In September, our loss to lease was 1.7% versus 20 basis points in September of 2017 due to the stronger rental market, we experienced this year, which positions us well for 2019. We expect the same-store portfolio revenue growth in the fourth quarter will be approximately 2.9%. Although we're not providing guidance at this time, we look to 2019 -- as we look to 2019, we see the markets slightly stronger than in 2018 and our portfolio was well positioned with 1.7% loss to lease in September. From a revenue perspective, we will have headwinds related to higher occupancy comps in 2018 and we continue to face wage pressure in our markets, which is consistent with the past several years.

Now moving on to an update on our markets. The Seattle market continues to be supported by strong job growth, posting year-over-year job gains of 3.7% for the third quarter of 2018, the highest job growth in the Seattle MD in any quarter for over 17 years. Looking at Amazon, job openings for the company in the market has more than doubled as of the third quarter of 2018 to little over 7,000 open positions since the end of last year. Tech continues to be a major driver for the market during the period. Amazon, Google and T-Mobile leased over 0.5 million square feet of office space in Bellevue, while Facebook has approximately 150 open jobs listed in Redmond for their virtual reality headset division and is rumored to be in the process of signing several expansion leases in the East side.

With the light-rail expansion into the East side, scheduled to begin service in 2023. We will expect to see an increase in office leasing activity in the sub market. Same-store concessions increased in the Seattle region from 80,000 in the third quarter of 2017 to 197,000 this quarter. The concessions were spread across many assets in each sub-market and were largely used as closings will open. Revenue growth in our East side and CL CBD submarkets was relatively flat at 1.6% and 40 basis points respectively, while the north and south submarkets grew at 2% and 3.5% respectively for the third quarter of 2018. Our loss to lease at the end of the quarter was 1.2% for the entire market.

Moving down to Northern California, job growth in the San Francisco Bay Area in Q3 averaged 2.4% year-over-year with over 76,000 jobs added. San Jose job growth was robust for the period with 3.2% year-over-year job growth. Our Oakland and San Francisco were both up 1.8% for the period. Notable office leases this quarter include Amazon and PWC's combined 350,000 square foot expansion in Downtown San Francisco. On the Peninsula Facebook leased 800,000 square feet of under construction project in Burlingame. And in the South Bay Roku added an additional 250,000 square feet to their Bay Area footprint. While Splunk signed a 300,000 square foot lease at Santana Row with plans to hire 2,000 additional employees in the Bay Area.

Total office leasing activity is over 11 million square feet for 2018. This is greater than the combined total leasing activity in this market for the past two years. VC funding for San Francisco and Silicon Valley combined for the trailing four quarters through Q3, is at a new peak of $41.6 billion. Same-store concessions decreased over 50% in the third quarter of 2018 from the prior year's period. Concessions were spread across many assets in each sub-market and were largely used as closing tools. Our year-over-year same-store revenue growth for the third quarter of 2018 was led by the San Mateo submarket at 3.4%, followed by our Oakland and San Jose submarkets which each grew at 2.4% and our Fremont submarket at 1.8%. While San Francisco, continued to remain flat for the period. Rents in our Bay Area markets were up approximately 3.3% and loss to lease was 1.1% in September. Continuing to Southern California. Job growth in Los Angeles in the third quarter of 2018 averaged 1.3% year-over-year.

Netflix continues to solidify their presence in the market, pre-leasing at an additional 330,000 square feet in Hollywood. Likewise, Coworking companies Spaces and WeWork expanded their combined footprint by almost 200,000 square feet during the period. Year-over-year revenue growth for the third quarter of 2018 was led by our Long Beach and Woodland Hills submarkets with 5.4% and 4% growth respectively, trailed by the West LA submarket with 2.8% growth and the Tri-Cities submarket with 2.4% growth. September loss to lease in LA County was 2.4%.

In Orange County, just in the third quarter grew 60 basis points for the year-over-year. This situation is similar to 2017 when the BLS showed 30 basis points and job growth for the third quarter, which was increased to 2.2% when the revisions were completed. We will continue to monitor job growth in this market. Orange County loss to lease was 1.7% at September. Finally, in San Diego year-over-year job growth remained at 1.7% for the third quarter of 2018.

Amazon expanded their San Diego Tech hub by 85,000 square feet with plans to add 300 tech workers. It's worthy to note that high paying industries have accounted for more than 50% of the job growth in the San Diego market.

Year-over-year revenue growth in the third quarter of 2018 was 3.4% for our Northern San Diego submarkets while Chula Vista grew at 4.1%. Loss to lease in the market was 2.2% in September. Overall, same-store concessions are down in the Southern California region, about 30% from the prior year's period. 65% of the concessions in the third quarter related to Downtown LA and assets impacted by the supply in South Orange County. Currently, our portfolio was at 96.5% occupancy and our availability 30 days out is 5.1%.

Thank you. And I will now turn the call over to our CFO, Angela Kleiman.

Angela Kleiman -- Chief Financial Officer

Thank you, John. I will start with a brief review of our third quarter results, then discuss the full-year guidance and conclude with an update on capital markets and the balance sheet. In the third quarter, core FFO grew 5.7%, exceeding the midpoint of guidance by $0.03 per share. Details of the reconciliation to our original guidance are included on page 4 of the earnings release. Our favorable third quarter results enabled us to raise our core FFO per share guidance by $0.03 at the midpoint, to $12.56 for the full year. This represents a 5.4% year-over-year growth, which is 90 basis points higher than our original guidance of 4.5%.

Turning to our third quarter investments and funding plan. We closed a $104 million acquisitions in the Wesco V joint venture and originated an $18.6 million preferred equity investments, which brings our total structured finance commitments to approximately $385 million. We plan to fund the new investments with two dispositions that are on track to close at the end of fourth quarter.

As for guidance and investment activities for the full year. On acquisitions, we expect to achieve the low end of our range. On our $100 million preferred equity target, we currently have $45 million close through October and believe that the majority of the remaining balance could close by early 2019 with funding up to six months thereafter. This is consistent with Mike's earlier comments on the headwinds regarding apartment construction start. On dispositions, we have several properties in various stages of the sale process in anticipation of funding needs for 2019. Depending on the timing of the sale, some properties can transact by year-end. Therefore, we are increasing the high end of our dispositions range from $300 million to $400 million. Use of proceeds may include potential buyout of joint venture partner interest, development funding, stock buybacks and debt repayment, depending on market conditions.

As we have done in the past, we will seek to redeploy the proceeds into the most attractive investments in order to maximize the total return. Consistent with our original guidance this year, we do not start any new developments as it relates to our existing $940 million development pipeline. Our share of unfunded obligation is $384 million, most of which will be funded in 2019, which means over 85% of our development pipeline will be completed and in lease-up by next year. Keep in mind that lease-ups are FFO dilutive until we've approached stabilization. Consequently, our preliminary forecast anticipate a potential FFO per share impact of up to $0.10 for the next year.

Lastly, on capital markets and the balance sheet. Our capital needs for 2018 remains anonymous. We look to 2019, as we plan to repay approximately $590 million of secured debt, which was assumed from BRE transaction and has an effective rate of 3.4%, but the cash rate is 5.6%. Therefore, this refinancing will be an economic benefit to the company, but will create an FFO as headwind of between $0.05 to $0.10 per share depending on timing and market conditions. As the current rates on a 10-year unsecured bond offering will be in the mid 4% range. However, we have a good amount of flexibility with access to multiple refinancing alternatives and our balance sheet remains strong at 25% leverage with 5.5 times debt to EBITDA and virtually full availability on our $1.2 billion on our line of credit.

That concludes my comments, and I will turn the call back to the operator for Q&A.

Questions and Answers:

Operator

Thank you. At this time we will be conducting a question-and-answer session. (Operator Instructions) Our first question comes from the line of Juan Sanabria from Bank of America. Please proceed with your question.

Juan Sanabria -- Bank of America Merrill Lynch -- Analyst

Hi. Good afternoon. Just wanted to follow up on the supply data where you mentioned you'd changed up your methodology. Could you just give us a little bit more details around that? What would the numbers have been had you not assume delivery delays, which have been pretty consistent like you said, from '18 into '19 and '19 into '20, just to get a sense of comparing that to third-party providers?

Michael Schall -- President and Chief Executive Officer

Hey, Juan, it's Mike. Thanks for joining the call. Appreciate it. It's going to be difficult for me to reconcile these exactly because the supply estimates from the vendors have changed a lot. And I think there is some procedural issues. What we are trying to do is take a longer look at supplies that we have gone back to 2017 and projected forward to 2020. And what we found in that analysis is that the total number of units produced in the Essex metros have ranged from 34,000 to 36,000 per year in all of our -- again, all of our metros.

And essentially what we conclude from that is that construction labor is the main constraint. And even though construction labor can vary by submarket to submarket, in other words, can be transit some construction workers can go from LA to some other metro. What we think is happening is basically there is a cap on the amount of construction that can get done. And so we're seeing pretty consistent total apartment units being delivered in each of those years. And that caused us to essentially take our best estimate at trying to guess or estimate how much was going to lead from one year to the next. And as I said in the prepared remarks, we think it's around 3,000 units from 2018 into 2019 and 2019 into 2020. And again within the context of that leads to about 36,000 units plus or minus in each of the last four years or the four years preceding 2020.

Juan Sanabria -- Bank of America Merrill Lynch -- Analyst

Okay, great. Thank you. And then I was just hoping you could talk a little bit about the expense side, I don't know if this question is, who's best to answer, but Angela gave some data points on kind of how to think about some FFO impacts from occupancy -- sorry from developments in some of the debt stuff you're trying to do. But any color you can give on the expense side, particularly around some of the bigger ticket items like real estate taxes as we think about '19?

Angela Kleiman -- Chief Financial Officer

Sure. On the real estate taxes, I think with California that piece is pretty straightforward. Seattle continues to be more of a wildcard. So for example, we had expected 2018 Seattle taxes coming around say between 10% to 13%. It came in at 16%. And so next year, we're going through that process right now. Still working through it, but it's probably going to be consistent and that it will be high and there will be more than 10%, but probably below say 16%, if you will. So that's our current thinking. We expect utility cost to continue to decline at around 4%, 5% range. And I think those were some of the largest non-controllable items.

Juan Sanabria -- Bank of America Merrill Lynch -- Analyst

Thank you.

Operator

Our next question comes from the line of Austin Wurschmidt from KeyBanc. Please proceed with your question.

Austin Wurschmidt -- KeyBanc -- Analyst

Hi, good afternoon. Mike, you talked about cap rates haven't moved, but you mentioned that positive leverage has started to be eliminated. Historically, you've mentioned that is being kind of one of the supportive metrics of sustaining low cap rates. So just curious, when you look back historically, what is your research tell you about the lag between perhaps when cap rates could begin to move higher as a result of eliminating the positive leverage?

Michael Schall -- President and Chief Executive Officer

Sure, Austin. I think in our experience, cap rates are pretty sticky, they don't change quickly overnight, buyers and sellers need time to adjust to a new environment. I think that there is a enormous amount of money out there looking for investments and looking for yield specifically. And I think that that is a, one of the forces that is keeping cap rates at relatively low levels. So I wouldn't expect any significant change in cap rates in the near term. I think what happens is you will see buyers and sellers, not a green and that will essentially cause a freeze in the transaction markets for some period of time before cap rates would change. So again, we haven't seen that now because there's so much money in the market chasing deals and it will -- we'll see what happens going forward. I'd guess it's going to take several quarters for this to play out.

Austin Wurschmidt -- KeyBanc -- Analyst

Right. Appreciate the thoughts there. And then can you just give us a sense how 2019 supply deliveries stack up? Is it more heavily weighted in the first half of the year or back half of the year?

Michael Schall -- President and Chief Executive Officer

Sure. Overall, we think 2019 is again as I said in the prepared remarks, roughly the same as 2018. There are some regional variances supply for example, pretty significantly, let's say in LA and Oakland and then down in some other places that are essentially offsetting those numbers. In terms of quarter-to-quarter, I think it's been so challenging to get the timing right that going into that level of details probably too far into the weeds. What we have right now for 2019 is the third and fourth quarters are a little bit higher. Actually, you know what they're pretty consistent throughout. The third and fourth quarters are heavier in Northern California but lighter in Seattle and Southern California. So we have pretty even supply quarter to quarter throughout 2019.

Austin Wurschmidt -- KeyBanc -- Analyst

Great. Thank you.

Operator

Our next question comes from the line of Nick Joseph from Citigroup. Please proceed with your question.

Nick Joseph -- Citigroup -- Analyst

Thanks. How do you think about capital allocation and non-organic growth given the current stock price? You've been active in the past, either issuing equity through the ATM to fund growth or repurchasing shares when you're trading at large discount but right now you're somewhat in between those two scenarios. So how do you think about adding value in today's environment?

Michael Schall -- President and Chief Executive Officer

This is Mike. And that's a very good question. And we think it's pretty darn difficult to do that to add value in this market. So obviously, we have tried to focus on preferred equity investments. And I think that will continue to be something that we focus on going forward. We also at this point in time in prior cycles have leaned more toward joint venture, or co-investment type transactions. However with interest rates up, they're becoming more challenging to make work as well. And then finally on the development side, Mr. Eudy is here, he can comment on this or follow-up on my comments. We are seeing a lot of low to mid for cap rate measured today untrended, so measured on rents in place today throughout our portfolio and we just don't think that's the high enough cap rate to get, get us excited about development. John, do you have anything to add to that?

John Eudy -- Executive Vice President-Development, Co-Chief Investment Officer

Only that we're keeping our powder dry for when the time comes at that we'll change. Yeah, it will be interesting.

Michael Schall -- President and Chief Executive Officer

And so, I would conclude by saying, I've learned in this business that don't try to make some work that's just fundamentally doesn't work. And so essentially focusing on the balance sheet, state you're making sure it's interesting shape and being ready for opportunities when they arise. We don't know when or where they're going to be, but when that happens, we want to be ready. So I think that's our focus now.

Nick Joseph -- Citigroup -- Analyst

Thanks. And then you mentioned that rent too and compression market development yields, do you think that will have an impact on rent concessions during lease-ups for the product that is under way now?

Michael Schall -- President and Chief Executive Officer

I think that we're expecting pretty consistent concessionary activity going forward. John, do you want to handle that one, concessions going forward given development?

John Burkart -- Senior Executive Vice President

Yeah. Absolutely. In Q4, we see a little bit more supply coming at us for the year. And so there would be the normal Q4 softer market and I'm sure we're going to have some more concessions. But overall, our expectations, our concessions are in check across each of the markets. Again as Mike had mentioned, LA -- downtown LA is going to have more product and so it will be isolated cases with more concessions, but overall as a company our concessions are down on the same-store portfolio and we see things generally in pretty good order, 4 to 6 weeks limited situations where there's 8 weeks, and oftentimes concessions are going back even back down to 3 weeks.

Nick Joseph -- Citigroup -- Analyst

Thanks.

Michael Schall -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of John Kim from BMO Capital Markets. Please proceed with your question.

John Kim -- BMO Capital Markets -- Analyst

Good morning. On Proposition 10, some of the polls seem to be working in your favor as far as that not passing. I'm just wondering how confident you feel about this vote going in your favor versus a few months ago? And is there a particular poll that you pay attention to more than the others?

John Eudy -- Executive Vice President-Development, Co-Chief Investment Officer

I'll try to hammer at. This is John Eudy. We are cautiously optimistic that we're in a pretty good spot and where we thought we were going to be at this point in time, but you never know, always we've been wrong in the past. The messaging, I think you're referring to is the PPIC public poll that came a week ago that has it at a 60% no, 25% yes, and the balance undecided. We see that in our internal polling as well. But the last 8 days can change. But right now we believe that we're in a pretty good spot to win -- to push back on to the deal.

Michael Schall -- President and Chief Executive Officer

I'm going to add one thing to that. And that is Mr. Eudy does not give up and he is very focused on really pushing hard right through Election Day to make sure that the campaign is very focused on the ultimate result. And again I've watched John do this for the last couple of months, and he's been incredibly focused and incredibly effective.

John Kim -- BMO Capital Markets -- Analyst

Best of luck. On your repairs and maintenance, the costs were down 1% year-over-year. And I'm wondering how much of this is due to low turnover versus capitalizing more or maybe some other factors?

John Burkart -- Senior Executive Vice President

Yeah, this is John. It's not really capitalizing more, it's -- the turnover is a factor for sure. It's -- there's also some timing issues there as well. I think it will pickup in Q4, but all according to the original plan for the year. So we are finding opportunities to create efficiencies and lower our cost to offset some of the wage pressures that we face and are coming in, again, that's another good year as it relates to our controllables.

John Kim -- BMO Capital Markets -- Analyst

Right. Thank you.

Operator

Our next question comes from the line of John Guinee from Stifel. Please proceed with your question.

John Guinee -- Stifel -- Analyst

Hello. Great, wonderful quarter, very impressive. Angela, I've just noticing in your guidance and this may be old news, but just clarify for me. Insurance reimbursements legal settlements, et cetera, you've recognized the negative $2 million year-to-date, but you've got a budget or you have 6.2 for the year, negative. Is there a one-time charge, you're expecting to get in the fourth quarter?

Angela Kleiman -- Chief Financial Officer

Yeah, that's all related to our Prop 10 campaigning efforts. And so that is a one-time charge. And it will occur in the fourth quarter.

John Guinee -- Stifel -- Analyst

Okay. So $4.2 million hit to FFO in the fourth quarter?

Angela Kleiman -- Chief Financial Officer

Correct.

John Guinee -- Stifel -- Analyst

And that's in your guidance or not?

Angela Kleiman -- Chief Financial Officer

It is in our guidance.

John Guinee -- Stifel -- Analyst

Right. Okay.

Angela Kleiman -- Chief Financial Officer

It's on -- yeah.

John Guinee -- Stifel -- Analyst

Perfect. Thank you.

Angela Kleiman -- Chief Financial Officer

Sure.

Michael Schall -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Drew Babin from Robert W. Baird. Please proceed with your question.

Drew Babin -- Robert W. Baird -- Analyst

Hi, good afternoon. Quick question on occupancy, I was hoping you could clarify how much -- I think it was mentioned before just where occupancy was at the end of the third quarter, kind of where it is today, and should we necessarily expect that on things get back on par year-over-year during the fourth quarter as you kind of move into a less favorable season with maybe some more supply coming in at some unfavorable times? Just curious how to model that.

John Burkart -- Senior Executive Vice President

Sure. Our occupancy at this point is 96.5. And last year we were a little bit higher, we were about 30 basis points higher at this point in time, exactly. I think this year we will again be -- we'll continue to be a little bit under last year. If you are going back for the year, we started well above in occupancy and then as the market shifted, we shifted our strategy to favor achieving market rent over occupancy. And so we do have that headwind that we're facing Q3, as I mentioned, Q4 we'll continue, we'll actually continue it into the first half of '19. So my expectations is our occupancy it's a little tough to tell. We're obviously finding it out in the marketplace. And as I mentioned, we have more supply that's going to hit Q4 during their low demand period. But I expect we'll probably stay close to where we are right now, maybe up 10 basis points or something like that.

Drew Babin -- Robert W. Baird -- Analyst

Okay. That helps. And then quickly on Seattle, kind of the characteristics of supply for next year. It looks like you're expecting less multifamily supply growth in Seattle next year versus this year. Is that construction delay impact noticeable there? And I guess as you go on the next year, is the supply, just this kind of downtown concentrated as it was this year or is it a little more spread out?

Michael Schall -- President and Chief Executive Officer

Hey, Drew, it's Mike. We think it will decline a little bit maybe around 10%, Seattle will still have plenty of supply in 2019 relative to 2018. But yes, to your second question which is, it will be more spread out and the more spread out, it is the less we see that phenomena of multiple lease-ups competing against one another and offering very large concession. So the fact that it's spreading out should help us in 2019 relative to 2018.

Drew Babin -- Robert W. Baird -- Analyst

Okay. And then one more for Angela. The -- you mentioned of nickel to about a dime dilution potentially from paying down debt maturities next year. Does that include just the 2019 secured maturities? Or is there some component of '20 maturities that might be prepaid as well on the contributes to that number you provided?

Angela Kleiman -- Chief Financial Officer

That's a very good question. And so, yes, it does include a component. So that $590 million of the debt assumed from the BRE acquisition $300 million is due this year, I mean, I'm sorry, in 2019 and $290 million is due in 2020, because we can't prepay it without any penalty, that's the right economic thing to do, and that's why. So in total, we actually can and are planning to pay about $900 million of debt, of which $290 million is optional.

Drew Babin -- Robert W. Baird -- Analyst

Okay, very helpful. That's all from me. Thank you.

Operator

Our next question comes from the line of Trent Trujillo from Scotiabank. Please proceed with your question.

Trent Trujillo -- Scotiabank -- Analyst

Hi, good afternoon. Thanks for taking the time and all the questions. I appreciate the commentary in your prepared remarks about this, but what are your latest thoughts on voter support for Prop 10 and how it is or has been impacting the transaction market? You mentioned cap rates are broadly unchanged, there's still healthy liquidity and capital chasing multifamily product. But what kind of depth in buyer pools you've seen, we've heard debt has been less institutional interest in California multi-family recently.

Michael Schall -- President and Chief Executive Officer

Yeah, this is Mike. That's another good question, I'm not sure I have a perfect answer for it. I think that the greatest sensitivities are the transactions are hitting the market in some of the cities with the most extreme forms of rent control. I know that there was a transaction for example in Berkeley, that had their extreme forms of rent control. And I think that the market is reacting to those by pushing the heads for them past November 6, and so you'll know the answer before people commit to it. So I think there's been somewhat of a chilling effect in the marketplace, as people wait for Prop 10's ultimate outcome. But I don't get the sense that it's had an overall impact, in other words, some parts of the market areas that have less severe forms of rent control, I think it has a smaller impact on the market.

Trent Trujillo -- Scotiabank -- Analyst

Okay, appreciate that. And you alluded to having a handful of assets on the market as a source of funds. Can you perhaps speak to the type of product you're looking to recycle and if these are perhaps in those submarkets that are being subject to the most extreme versions rent control potentially?

Michael Schall -- President and Chief Executive Officer

No, not necessarily. Again, this is Mike. We follow the same basic methodology with respect to both sides of our portfolio. We try to rank our submarkets by longer term job growth. I'm sorry, longer term, rent growth and that's a function of job growth and supply growth and then we try to identify the areas that were or the weakest level of that and try to call the portfolio as a result of that. The domain disposition earlier this year is a good example of that.

Also, it seems like we're getting more unsolicited offers and what we get unsolicited offers, we will take them on a case-by-case basis and sometimes we will act on them if we get the right price value. So I'd say those are the two driving forces of our dispo program.

Trent Trujillo -- Scotiabank -- Analyst

All right. Thank you very much for the detail. Appreciate it.

Michael Schall -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Rich Hightower from Evercore ISI. Please proceed with your question.

Rich Hightower -- Evercore ISI -- Analyst

Hey, good afternoon everybody.

Michael Schall -- President and Chief Executive Officer

Hey, Rich.

Rich Hightower -- Evercore ISI -- Analyst

So, most of my questions have been answered already, but quickly with respect to fourth quarter expenses. I think the guidance implies maybe high 3s upwards of 4% of same-store growth in the fourth quarter. Is that driven by the uptick in repairs and maintenance? And I think John referenced to that is there something else going on there that we should be aware of?

Angela Kleiman -- Chief Financial Officer

No, I think it's what you are anticipating. And so on the expense side, we are expecting to land for the full year at 2.6% and it's not atypical for us to run high in expenses in the fourth quarter and so there's definitely a timing element with that in conjunction with what John Burkart said earlier as it relates to the repairs and maintenance.

Rich Hightower -- Evercore ISI -- Analyst

Okay, thanks, Angela. That's helpful. And then just backing up to the occupancy headwind, third quarter, fourth quarter and then into next year. Can you help us understand, I guess, the word for it would be the cadence of the headwind as we kind of progress through 2019. Is it the impact is more impactful in the first half of the year and then kind of getting to a normal seasonal occupancy in the third quarter and fourth quarter next year? Just so we kind of understand the quarterly sequential element there as we model it.

John Burkart -- Senior Executive Vice President

Yeah, you hit it exactly. The greatest impact is in Q1 and Q2, where we were running at significantly higher occupancy. Our Q1, we are looking at the numbers January 97.1, 97.2 and 97.2 very high occupancy Q1. And I don't expect to match that as we move forward into through Q3, it's flat and then we get into -- I'm sorry, Q2 it's flat. As we get into Q3, we're probably right on point and our Q4 will probably be right on point. So the headwind is really largely related to Q1 and Q2 occupancy and that's at this point we're still at our -- in our budget planning process but I'm just giving you big picture is to the extent we see opportunities or reasons to be more aggressive we certainly will be. But at this point those are the most obvious headwinds. Does that help?

Rich Hightower -- Evercore ISI -- Analyst

That is perfect. Thanks, John.

Operator

Our next question comes from the line of Rob Stevenson from Janney Montgomery Scott. Please proceed with your question.

Rob Stevenson -- Janney Montgomery Scott -- Analyst

Good afternoon, guys. How significant is your current redevelopment opportunity across the portfolio? And how comfortable are you that you can achieve targeted returns for new projects at this point of cycle, given market supply conditions?

John Burkart -- Senior Executive Vice President

Sure. So big picture, we're renovating somewhere in the neighborhood of 2,500 units a year and that implies a lifecycle of over 20 years, considering the size of our portfolio. So we're pretty comfortable with that process can continue, it moves around a little bit depending upon, of course, the rental market strength. And we constantly are looking to making sure we are achieving our expectations, but there is no reason to believe that our unit turn program would slow down in the coming years. As it relates to larger projects, we have several going that are listed, that are doing well. And again there is probably what four properties that are specifically outlined and that pipeline should continue as well. So the assets age, we look for opportunities to do more robust upgrades to the assets, systems, et cetera and create value. So I don't see our renovation program changing materially over the next couple of years.

Rob Stevenson -- Janney Montgomery Scott -- Analyst

Okay. And then what's the current expected stabilized yield on the fixed properties in your development pipeline?

John Burkart -- Senior Executive Vice President

In the mid-5 range.

Rob Stevenson -- Janney Montgomery Scott -- Analyst

Okay. Thanks guys. Appreciate it.

Michael Schall -- President and Chief Executive Officer

Thank you.

John Burkart -- Senior Executive Vice President

Thank you.

Operator

Our next question comes from the line of Alexander Goldfarb from Sandler O'Neill. Please proceed with your question.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Hey, and good afternoon. Thanks for taking. So two questions here. First, Angela, if we think about the comments that you guys spoke about on the outlook for next year, there's $0.10 of lease-up drag potentially from the deliveries. There is another $0.05 to $0.10 of drag from refinancing. But you guys are always, you are pretty good on growing earnings. But in total, it sounds like there's upwards of $0.20 of drag for next year, is that the correct way to think about it? Or am I not looking at that -- did I not hear correctly?

Angela Kleiman -- Chief Financial Officer

I think you are thinking of it correctly. That's flows where you're thinking of it the same way I'm thinking of it. And so, although to the teams coming, the operating fundamentals are coming in as we expect. There are other factors impacting FFO in financing and dilution as it relates to timing of the development and lease-up are two important factors.

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Okay. And then Mike, on the supplemental page where you provide 2019 outlook, I don't know if that's markets in general or you're specifically providing Essex revenue or rent projections? But suffice to say, if you're looking at 3, call it 3% rent growth for next year on that page and this year rents are up 2.3%, revenues up 2.8%, it sounds like the environment for next year, is it going to be too dissimilar revenue wise to this year, given that occupancy sounds like on the whole it will be flat? Is that a fair way to think about it that revenue next year is really that 3% level or could we see occupancy improve that you might exceed that 3% level?

Michael Schall -- President and Chief Executive Officer

Alex, this is Mike. And we're not going to morph into a guidance conversation here. But let me just clarify what we mean in our market forecast. So F-16, our economic rent growth represents in these sub-markets, not for Essex but for the broader submarket what we think market rents will do in each of these areas. So our portfolio can vary from that by some amount and depending upon where it is, depending upon its competitive position within the marketplace et cetera. And so our actual revenue result can be different. And again, this is for the entire year. So how it breaks down the rent growth curve, it's not a flat line straight up during the year. It tends to be strong in the earlier part of the year and weaker in the end of the year. And so there can be variations in these numbers. And so again leave it at that, we'll be giving guidance at some point in time in late January, early February, and we'll talk about it in much more detail at that time.

John Burkart -- Senior Executive Vice President

And I would just add Alex I think, you said that occupancy would be flat. That's not what I'm saying. I'm saying occupancy will be a headwind. So the greatest headwind will be Q1, Q2 with Q3 and Q4 basically flat, but for the year it will be a headwind overall. Does it makes sense?

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Okay. That's helpful. Yeah, thank you John and Mike. Thank you for clarifying F-16. That's helpful on your comments.

Michael Schall -- President and Chief Executive Officer

Thanks, Alex.

Operator

Our next question comes from the line of Rich Hill from Morgan Stanley. Please proceed with your question.

Rich Hill -- Morgan Stanley -- Analyst

Hi everyone, just a quick one from me. Recognizing that you want to stay away from giving guidance, but if you could think about -- if you could consider the impacts of higher anticipated supply or slower than anticipated job growth as maybe the biggest risks to your market forecasts for economic rent growth, which one is that, both maybe to the upside and the downside?

Michael Schall -- President and Chief Executive Officer

Yes, it's Mike. And that's a very good question. I think we have the supply pretty well locked down, now we'll be -- which we run from quarter to quarter. Like everyone, and I know everyone has been frustrated with the supply forecast over the past couple of years, but I think that now we're looking at it over a broader period of time and it seems to make reasonable sense to us. So I would say the greater risk is on the job side and I would say, again, this is our forecast on F-16 is a scenario. It begins with what's going on in the US and then we have a lot of history with respect to the US does 2.5% GDP and 1.3% job growth. This is what will typically happen in the Essex markets. So we try to make the jump from what the US does into what our markets do. But as you know, given all the geopolitical issues and a variety, interest rates rising and other things, the US assumptions can change pretty significantly over time and they can change at any time, really. So it's intended to be a scenario that begins with the strength of the US economy and it rolls down into what that means for the Essex metros. Does that make sense?

Rich Hill -- Morgan Stanley -- Analyst

Yeah, it does. That's helpful. And are there any markets where you think you might have greater variability than another either to the upside or the downside?

Michael Schall -- President and Chief Executive Officer

Well, I think that Seattle is always been challenging. I think that we have beat up Seattle historically over the last several years, much greater so outperformed what our expectations have been. But it is more challenging just because if you look at the amount of supply that it produces, 1.8% versus about 1% in Northern California and 0.7% in Southern California, there is a greater degree of variability there. And so we could be wrong. The higher the supply number typically the more wrong you can be. So I'd point to Seattle.

Rich Hill -- Morgan Stanley -- Analyst

Great. Thank you guys. That's helpful.

Michael Schall -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Hardik Goel from Zelman & Associates. Please proceed with your question.

Hardik Goel -- Zelman & Associates -- Analyst

Hey guys, thanks for taking my question. Your supply outlook you guys noted that you're adjusting for delays this time. Could you give us some insight into your process just bottoms up what it was before and how it's changed and how you're actually accounting for those delays in supply?

John Burkart -- Senior Executive Vice President

Sure. This is John. So on a process from process perspective, we drive every single site and we benchmark where it's at, what we think is going to happen. We do this on a regular basis and we're obviously looking at all the other information that's out there. And so we feel we have a great database of the various sites and where they're at. What's been a challenge is really trying to understand where they're at, when they're going to actually finish, complete -- when they're going to come to completion. And part of that issue relates to the fact that if you look in the building for the outside, you can't tell exactly where things are, how far along the building is. And so we're reliant some extent on conversations we have with developers or other people to try to gather information to really focusing in on that side.

What we've done in the sense of our adjustments is we looked at how often we're right. And where the -- how long with the delays actually have been on an asset-by-asset basis and came up with the track record. And if that track record that we then apply to all these deals. And so we looked and said if on average we're missing it by several months, which is really the case, we made those adjustments. And so that's what's going on. So it's based on our track record as we drive all the sites and then looking back and saying how accurate have we've been on the timing, what's the normal delay then and we applied it equally across the Board. Does that make sense?

Hardik Goel -- Zelman & Associates -- Analyst

That makes a lot of sense.

Michael Schall -- President and Chief Executive Officer

Let me add one more thing to that. And I think that what is typically happens and we've seen out there and some of the data providers is when some doesn't get delivered in Q1, it gets pushed to Q2 and Q2 to Q3 and you end up with this lump of supply that it's going to ultimately get done in Q4. And then of course that doesn't happen, it gets pushed to the next year. So that's been sort of the process that started what John just talked about in that you end up -- it ends up being very confusing because you have a very large number in Q4, which doesn't get delivered which then makes to next year start out with a very large number and it confuses the entire picture. So we're trying to cut through all that and create something that is hopefully more sustainable and more accurate.

Hardik Goel -- Zelman & Associates -- Analyst

That's really helpful. We can certainly appreciate the challenges. Just one follow-up to that. What is your radius like? I hope, John, you're not having to drive around all of Southern California and Northern California. How do you decide this asset is within our comparability stat?

John Burkart -- Senior Executive Vice President

Yes, although I do a lot of driving, there's a whole team of people in the research department, they do the specifics and they have a -- actually a mobile database that they log into to check things out. So what they're doing is they're actually driving the entire MD so they're looking at everything out in that area to understand exactly what's going on. Again, we don't look at it and say here's an asset that we're going to go within three miles and different people have different ways of doing it. We look at the whole supply demand picture and we make an assessment according to that.

So we're looking at all assets that are 50 units and up driving those assets in the MD, seeing where they're at, and factoring that in. Obviously from an operational perspective we have individual operational asset reports that the research department creates that enables us to better understand what supply is going to impact what assets and therefore adjust pricing strategies. But from a big picture from the economic perspective, we're looking at the whole MD, each of the MDs, it seems there's a lot of work in this area.

Hardik Goel -- Zelman & Associates -- Analyst

Got it. That's sounds great. You should sell that data. That's all from me.

John Burkart -- Senior Executive Vice President

We've talked about it. We've talked about it. You're looking at it right now for free on our F-16. So we might so selling it.

Hardik Goel -- Zelman & Associates -- Analyst

Thank you. Much appreciate it.

John Burkart -- Senior Executive Vice President

Yeah, thanks.

Operator

Our next question comes from the line of Rich Anderson from Mizuho Securities. Please proceed with your question.

Rich Anderson -- Mizuho Securities -- Analyst

Thanks, good afternoon. Hey Mike, have you given any thought to a plan B, say, Costa-Hawkins gets repealed or are you're not even going there right now? In other words, what are you doing -- what are you still thinking?

Michael Schall -- President and Chief Executive Officer

We always have a plan B, but keep in mind that we operate in 70 different cities in California. So we're more diversified than you might think. And as you know, probably the greatest risks are in the more urban type locations and we are a mix of urban and suburban, I think somewhere around 10% of our properties actually are in the urban core. So we think that there's just an inherent sort of safety in the portfolio. And I've commented previously about your concentration, there's only four cities where we have more than 2,000 units. And so again we're pretty diverse and so we're not hugely impacted under any scenario, although we do look at, we do have a contingency plan that might target a few cities that we're most concerned about. So I wouldn't say we wouldn't do anything, but I would say that our feeling is we're pretty well positioned overall.

Rich Anderson -- Mizuho Securities -- Analyst

No home properties in your future, I'm gathering, use that as an example.

Michael Schall -- President and Chief Executive Officer

Probably not. I mean we do track other metros, because we want to make sure that the West Coast is competitive with some of the Eastern metros, for sure, and it looks like in job growth in certain of the Eastern metros are pretty appealing of late. And -- but it's really trying to confirm whether our existing property profile is appropriate given the broader US landscape. So it's sort of confirmatory. And based on that looking at supply and demand dynamics, we feel good about the West Coast.

Rich Anderson -- Mizuho Securities -- Analyst

Okay. And then -- just related, what percentage of your portfolio is condo mapped just as a reminder. And is it concentrated in some of those urban areas where perhaps should Costa-Hawkins get repealed that certain municipalities, would be inclined to follow the rent control sort of mentality? Can you comment on how and where they're mapped?

Michael Schall -- President and Chief Executive Officer

I can. Roughly 8,600 units in California are condo mapped and then condo mapping in Seattle is easier than it is in California. And California, if you don't have a condo map coming out of the gate, you're unlikely to get one unless may take you many years in order to get one. And so 8,600 of our California portfolio would be the condo mapped -- 15%, 16%. Yes, they tend to be in more of the urban core.

Rich Anderson -- Mizuho Securities -- Analyst

Okay. That's the question. Okay, great. That's all I got.

Michael Schall -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Wes Golladay from RBC Capital Markets. Please proceed with your question.

Wes Golladay -- RBC Capital Markets -- Analyst

Hi, everyone. I'm just looking for an update in San Jose more in particular that large lease-up Santa Clara Square. Has that impacted the market? And how do you model that delivering throughout the next few years?

John Eudy -- Executive Vice President-Development, Co-Chief Investment Officer

This is John Eudy. We opened that right after the first of the years you'd probably aware and it's a pretty deep market, a lot of the Sunnyvale product that burned off on the inventory this year and we think it's well positioned to have a pretty good start come late Q1.

Wes Golladay -- RBC Capital Markets -- Analyst

Okay. And then going back to that condo mapping question, would you looked at and convert the condos this more of a defense for potential repeal of Prop 10?

John Eudy -- Executive Vice President-Development, Co-Chief Investment Officer

We have mapped on like Mike said roughly a 8,600 units, most of which are the urban core units that have been developed in the last 15 years. And we're always looking at the metrics between NAV value condo conversion versus as an apartment, so that optionality is there and we'll make the right decisions at the right time.

Wes Golladay -- RBC Capital Markets -- Analyst

Exactly. Okay, thanks a lot.

Michael Schall -- President and Chief Executive Officer

Thanks, Wes.

Operator

Our next question comes from the line of John (sic) Pawlowski from Green Street Advisors. Please proceed with your question.

John Pawlowski -- Green Street Advisors -- Analyst

Thanks. Mike, I understand your comments about the transaction market only seen a slowdown in volume, no impact on pricing in high-risk cities of rent control. There is a very real chance this comes on Costa-Hawkins on a 2020 ballot as well. So any conversations you and John are having that suggests that the transaction market slowdown could be more a multi-year in nature and not exactly everything continues unfettered after November 6?

Michael Schall -- President and Chief Executive Officer

Hey, John. Yeah, it's Mike. It's a good question, and honestly we don't know the answer. As you guys actually pointed out, there is a lot of money in private hands looking for yield and it's there, it's not going away probably anytime soon. So, how much will trend back, given the amount of money that searching for quality apartment deals, obviously remains to be seen. I guess I'm -- I wouldn't be as maybe dire as you are suggesting as it relates to the transaction market, I mean conditions can go on a lot longer than we might think before pricing or you see that phrase. So it would be a guess and I'd be speculating, so I think I'll probably just leave it at that. I think that there's no reason to believe that things will change overnight, it generally take significant amount of time to change and I would guess that it would be at the very earliest sometime a year from now or something like that.

John Pawlowski -- Green Street Advisors -- Analyst

Okay. On Seattle and I know this is a market rent forecast, the acceleration you're calling for in terms of economic rent growth from 2% to 2.9%. Are you seeing any leading indicators in your portfolio in Seattle that suggests market rent growth is stabilizing because the pace of deceleration we're seeing in Seattle across you and your peers, reports have been pretty consistent deceleration. So wondering what really causes the conviction the 100 bps acceleration in market rent growth next year?

John Burkart -- Senior Executive Vice President

Sure, this is John. And what we're seeing to start with, on the supply side is we see the fourth quarter has been pretty heavy with supply. So that will be a tough fourth quarter for us now. And then Q1 and Q2 also significant, little bit less and then likely not quite a bit in Q3, Q4 in Seattle. We also when we're looking at where we were for -- we're talking the acceleration we have in the rent growth this year in F-16 which is projected into '19. We're sitting right now on job growth that as I mentioned earlier, is about 3.7%, very high job growth this year for the third quarter. Compare that to last year, last year was a low point, last year we were down about 50 basis points -- sorry '17, we were down about 50 basis points in job growth and that impacted our '18 numbers. At this point being up in job growth in '18 and doing very -- being very strong, that will actually benefit the '19 rental market. There's a little bit of delay between job growth and the rental market. So it's really that combination of a better employment picture with declining supply that will get us to our rent growth numbers. Does that makes sense?

John Pawlowski -- Green Street Advisors -- Analyst

It does. Thanks, John.

John Burkart -- Senior Executive Vice President

It will be a little bit tough in the middle though, the fourth quarter is going to be challenged. I'm sure it will be noteworthy.

Operator

Our next question comes from the line of Tayo Okusanya from Jefferies. Please proceed with your question.

Michael Schall -- President and Chief Executive Officer

We may have lost Tayo.

Operator

Tayo, your line is now live. Our last question comes from the line of Karin Ford from MUFG Securities. Please proceed with your question.

Karin Ford -- MUFG Securities -- Analyst

Hey, good afternoon. I know we focused a lot on the occupancy comps for next year, but I just want to make sure I understand the rent growth that's earned in from this -- from the past leasing season. You said new leases were up 3.5% and renewals were up 4.2%, I think in the third quarter. Is that correct? And if so -- so we're looking at a high 3 I guess kind of level of earned in rent growth from the peak leasing season heading into '19, is that correct?

John Burkart -- Senior Executive Vice President

Well, Q3 was strong and that's what I was trying to articulate that and part of that relates to the curves changing. 2018 was a normal seasonal pattern and comparing that to 2017 gave us kind of a big pop in Q3. As we go to Q4 we'll face more pressure and our loss to lease will largely dry up. And so when you look at '18 obviously '19 we're not giving guidance, but we are not in those in the high numbers that you've talked about. We'll have the headwinds from the occupancy with a solid rental market and we'll give guidance later on.

Karin Ford -- MUFG Securities -- Analyst

And can you just remind us what percentage of your leases you sign in 3Q?

John Burkart -- Senior Executive Vice President

Yeah, I think we had roughly 14% turnover. If my memory is right, 6,500 leases, it's something like that overall. It's the bigger percentage, it's meaningful, but it's not -- we still sign quite a few in Q1 and Q4.

Karin Ford -- MUFG Securities -- Analyst

Got it. Thank you very much.

Operator

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Michael Schall for closing remarks.

Michael Schall -- President and Chief Executive Officer

Thank you, Dana. Thank you for your participation on the call today. We look forward to seeing many of you next week in San Francisco at the NAREIT Convention. Have a good day. Thanks for joining the call.

Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Duration: 70 minutes

Call participants:

Michael Schall -- President and Chief Executive Officer

John Burkart -- Senior Executive Vice President

Angela Kleiman -- Chief Financial Officer

Juan Sanabria -- Bank of America Merrill Lynch -- Analyst

Austin Wurschmidt -- KeyBanc -- Analyst

Nick Joseph -- Citigroup -- Analyst

John Eudy -- Executive Vice President-Development, Co-Chief Investment Officer

John Kim -- BMO Capital Markets -- Analyst

John Guinee -- Stifel -- Analyst

Drew Babin -- Robert W. Baird -- Analyst

Trent Trujillo -- Scotiabank -- Analyst

Rich Hightower -- Evercore ISI -- Analyst

Rob Stevenson -- Janney Montgomery Scott -- Analyst

Alexander Goldfarb -- Sandler O'Neill -- Analyst

Rich Hill -- Morgan Stanley -- Analyst

Hardik Goel -- Zelman & Associates -- Analyst

Rich Anderson -- Mizuho Securities -- Analyst

Wes Golladay -- RBC Capital Markets -- Analyst

John Pawlowski -- Green Street Advisors -- Analyst

Karin Ford -- MUFG Securities -- Analyst

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