Image source: The Motley Fool.
AvalonBay Communities Inc (AVB)
Q3Â 2020 Earnings Call
Oct 29, 2020, 1:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, good morning and welcome to AvalonBay Communities' Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following remarks by the Company, we will conduct a question-and-answer session. [Operator Instructions]
Your host for today's conference call is Mr. Jason Reilley, Vice President of Investor Relations. Mr. Reilley, you may begin your conference.
Jason Reilley -- Vice President, Investor Relations
Thank you Abby and welcome to AvalonBay Communities' third quarter 2020 earnings conference call. Before we begin, please note that forward-looking statements may be made during this discussion. There are variety of risks and uncertainties associated with forward-looking statements and actual results may differ materially. There is a discussion of these risks and uncertainties in yesterday afternoon's press release as well as in the Company's Form 10-K and Form 10-Q filed with the SEC.
As usual, this press release does include an attachment with definitions and reconciliations of non-GAAP financial measures and other terms, which may be used in today's discussion. The attachment is also available on our website at www.avalonbay.com/earnings and we encourage you to refer to this information during the review of our operating results and financial performance.
With that, I'll turn the call over to Tim Naughton, Chairman and CEO of AvalonBay Communities for his remarks. Tim?
Timothy Naughton -- Chairman and Chief Executive Officer
Yes, thanks, Jason. With me today are Kevin O'Shea, Sean Breslin and Matt Birenbaum. Sean, Matt, and I will provide comments on the slides that we posted last night. And all of us will be available for Q&A afterwards. Our comments will focus on providing a summary Q3 results, an update on operations add some perspective on the transaction market and our financial position. Maybe just a few comments before turning to the deck. Several of trends are unique to this downturn and pandemic that we discussed last quarter played out in our performance in Q3. The appeal of urban living is for the time being diminished due to health concerns of living in dense environments, the shutdowns effect on retail, entertainment and cultural venues that have long been the draw for urban centers and the civil unrest that occurred in many of our cities over the summer and early fall. Work-from-home flexibility has been extended through year-end by many, if not most employers, particularly those heavily weighted to knowledge base jobs like many businesses in our coastal markets.
We've experienced a significant reduction in student and corporate demand, as remote learning modalities are being deployed at many urban universities and business travel has dropped off substantially. And finally, historically low interest rates are stimulating demand for existing and new-home purchases, particularly for young age cohorts where homeownership rates have begun to climb. All these factors have resulted in an unprecedented reduction of apartment demand particularly in urban centers beyond what we typically experience in an economic downturn.
And while we believe the reduction in demand is mostly temporary in nature, we also believe that it won't be restored until we've substantially resolved the public health crisis from the pandemic. A meaningful recovery in our business will not occur until employers believe that they could safely bring their workers back to the workplace. Until then, business leaders are likely to err on the side of caution before reopening their workplaces, which is ultimately what will need to happen before many of their employees return to apartment living. I suppose, if there is any silver lining in any of those, it's our nation's struggle to respond effectively to the pandemic, so it ultimately lead to improvements in our response to the future public health crisis, much like we saw in the aftermath of 9/11 and the great financial crisis when our national response led to building a more resilient system to address the threat of terrorism and financial market dislocation, respectively.
We hope then that in the future our nation and our cities will be better prepared to deal with a public health crisis in a more resilient and less disruptive way. But for now, we need to play the hand we've been dealt and we'll endeavor to provide as much transparency in disclosure as to the actions that we're taking in response and their ultimate impact on the business. So with that, let's turn to the results for the quarter, starting on Slide 4. Q3 certainly proved to be a challenging quarter. Our core FFO growth was down by 12%, driven by same-store revenue decline of just over 6%. On a sequential basis from Q2, same-store revenue was down 2.2% or about half the sequential decline we saw in Q2 as bad debt in Q3 leveled off relative to Q2 after the big increase we saw in Q2 during the early months of the pandemic.
In terms of capital allocation for the year, through the end of Q3, we've raised $1.7 billion through new debt issuance and dispositions and repurchase about 140 million of shares. We started only one development so far this year and that was through a joint venture, in opportunity zone in the Arts District of L.A., where we're just 25% of the venture.
Importantly, our liquidity, balance sheet and credit metrics remain in great shape as we manage through the current downturn. Turning to Slide 5, like we saw in the Q2, the decline in year-over-year same-store revenue in Q3 was primarily attributable to a loss of occupancy and uncollectible lease revenue or bad debt. These two factors drove about 80% of the drop in same-store revenue in Q3.
Over the next two to three quarters, we expect to see continued declines in same-store revenue, but increasingly the decline will be driven by pressure on rental rates as we saw effective rental rates fall by almost 6% this past quarter.
These declines will have a more pronounced impact on revenue over the next few quarters as those leases begin to roll through the portfolio. And Sean, will share in his remarks, the decline in effect rental rates have been greatest in high-cost in urban markets like San Francisco, New York and San Jose.
And with that, I'll turn it over to Sean, who will discuss operations and portfolio performance in more detail. Sean?
Sean Breslin -- Chief Operating Officer
All right. Thanks, Tim. Turning to Slide 6, we experienced a year-over-year increase in prospect visits to our community each month of the quarter. In total, leasing volume is up about 20% year-over-year during Q3, split there roughly 10% increase in net volume. As you can see from Chart 2 on Slide 6, the most significant increase in net lease volume occurred in September, which is up about 35% year-over-year. And as of yesterday traffic and leasing volume for October was up probably 25% and 20%, respectively.
Moving to Slide 7. For the first time in more than four years resident notices to vacate our communities increased by a meaningful amount on a year-over-year basis. During Q3, notices increased by roughly 17%, primarily as a result of a spike in lease terminations in urban submarkets, which is depicted by the hash bars on Chart 1, of Slide 7 and a topic, I'll touch on in a minute.
Our leasing volume exceeded the pace of notices, however, starting in August and has continued through October. As a result, if you turn to Slide 8, you can see the beginning in September, move-ins exceeded move-outs and physical occupancy has increased in the low point at 93.1% in September to 93.5% for October and stands at 93.9% today.
Moving to Slide 9, our Suburban portfolio continues to perform substantially better than our urban assets. Charts 1 and 2 at the top of Slide 9 reflects notice to vacate our communities and lease terminations by Submarket type. Notices to vacate our urban communities increased by roughly 40% during the quarter, driven by an approximately 70% increase in lease terminations, and led to a 340 basis point decline in physical occupancy from Q2 to 90.2% and double-digit decline in rent change. For our Suburban portfolio, the increase in notices to vacate was more modest supporting better physical occupancy and rent change.
The performance of our Urban portfolio has been impacted by a variety of factors, including those mentioned by Tim in his prepared remarks. I'd highlight the combination of extended work-from-home policies and the civil unrest that occurred during the summer months, which impacted the quality of urban environments. The key factors driving residents to break leases during Q3 and leave urban centers for housing options in other geographies.
Shifting to Slide 10, to address regional performance. Increased turnover in Northern California to mid-Atlantic and New York to New Jersey impacted physical occupancy more than in other regions. In New York, New Jersey region, the increase in turnover was primarily a function of elevated turnover in New York City, which is 87% on an annualized basis during the quarter. For the Mid-Atlantic, we experienced increased turnover in the District of Columbia and other urban or quasi-urban submarkets like the Ballston and Tysons Corner submarket in Northern Virginia.
In Northern California, annualized turnover during Q3 was 85% driven by elevated turnover across all three markets, San Francisco, San Jose and the East Bay but was most pronounced in San Francisco and in Mountain View where Google is headquartered. On a positive note, turnover was relatively flat in New England, which is a testament to our primarily suburban Boston portfolio and was down about the Pacific Northwest and Southern California. Physical occupancy in all three regions exceeded the portfolio average.
And moving lastly to Slide 11, same-store like term lease rent change was down 3.3% and effective rent change was down 5.8%. Metro New York, New Jersey and Northern California, are two of the regions I identified on the last slide with elevated turnover and therefore available inventory to lease produced the weakest rent change during the quarter. Rent change in New England held up the best again supported by our suburban Boston portfolio, which in many cases offers differentiated products including larger unit sizes to those departing urban environments.
With that, I'll turn it over to Matt to address our development portfolio.
Matt Birenbaum -- Chief Investment Officer
All right, great. Thanks, Sean. Turning to Slide 12. We are starting to see a remarkable recovery in the transaction market. Ultra low interest rates have started to bring buyers back into the investment sales market for properties that can support reasonable levels of debt service, primarily suburban assets where operating results have been less impacted by the pandemic. To take advantage of this shift in buyer sentiment, we increased our disposition plan over the summer and brought several communities to market in the past few months. As of today, six of these communities are currently under contract or letters of intent at very attractive pricing with CapEx averaging 4.4%. This compares to four communities that we saw earlier in the year at an average CapEx of 4.7%, putting us on track to complete nearly $700 million in dispositions for the year.
Turning to our development portfolio. Slide 13, shows the rents we're achieving at the nine communities currently in lease-up. For the past several years, we have shifted our development focus to more suburban locations and we are starting to see some of the benefits of this strategy now as our lease-up rents are only about $45 per month below our initial underwriting, allowing for continued value creation on these assets as they are completed and stabilized.
We have highlighted three of our lower density Northeastern communities on the slide which feature rental town homes and which are showing a nice increase in rents compared to pro forma. This product, which features larger floor plans, private garages and direct entry with no common corridors is particularly appealing in the current environment and serves as a good substitute for single-family rentals, which are enjoying very strong fundamentals.
On Slide 14, we show the future earnings potential of our development portfolio. At current projected rent in yield, we expect to generate nearly $140 million in annual stabilized NOI with only $14 million of that reflected in our Q3 results, and with more than 90% of the capital needed to complete those assets already funded, these developments should contribute significant incremental cash flow over the next several years.
And with that, I'll turn it back to Tim for some closing remarks.
Timothy Naughton -- Chairman and Chief Executive Officer
Well, thanks, Matt. Turning to the last slide, Slide 15; it was another challenging quarter driven by the suddenness and continued strength of the pandemic. Weak same-store performance is being driven mostly by our urban portfolio -- mention, particularly in San Francisco and New York. Suburban communities with larger units have performed much better, while pricing pressure continues to impact rental rates, occupancy has begun to modestly improve and stabilize in the 93% to 94% range. The transaction market as Matt mentioned has picked up dramatically after having been frozen earlier in the year. For those assets being taken to market, values are generally holding up at levels close to pre-COVID valuations.
We continue to be cautious in deploying new capital, particularly for new development, where economics are challenging and construction cost has not abated in any material way. And lastly, the balance sheet is very well positioned, is much stronger than prior downturns, which would give us plenty of financial flexibility to address the challenges posed by the current downturn.
And so with that, Abby, we'd be -- we'd like to open the call for questions.
Questions and Answers:
Operator
Thank you. [Operator Instructions] We will take our first question from Nick Joseph with Citi.
Nick Joseph -- Citi -- Analyst
Thanks. Maybe just on the transaction market, you mentioned kind of the difference of urban versus suburban but that kind of blended transaction just values are pretty similar to pre-COVID, but can you bifurcate that between the two, both in terms of buyer interest, as well as values for urban versus suburban and what you're seeing today.
Matt Birenbaum -- Chief Investment Officer
Hey, Nick, this is Matt. I wish that I could. But the reality of it is that there's very, very little kind of urban high rise assets that are in the market right now and kind of that makes sense, when you think about where the occupancies are, where the rent changes on those assets, as Sean laid out in his remarks. So the assets that are trading, both that we're trading and that we're seeing other trade in the market, tend to be more assets that can support strong debt service coverage, wherever the buyers can take advantage of the rates, they're incredibly great, and those tend to be more of the suburban assets more maybe $100 million or less in general asset size although not universally. As you mentioned on those assets, what we're seeing is the values are pretty consistent with where they were pre-COVID, in some cases the cap rates are down, the NOIs are down a little, but the value is pretty much -- some are a little higher, some are a little lower and the bid on those has been incredibly strong. There's a lot of capital that was raised, if you went to NMHC in January this year, there were a lot more people saying they were going to be buyers than sellers, so there is a lot of money on the sidelines and that money was frustrated in the first half of the year with very little transactions to shoot at. So, you're seeing a little bit of a pent-up demand there, but again let's all focus really on the assets that are being brought to market. And I'm not aware of hardly any kind of downtown urban core market assets being brought to market in this environment. So the value on those assets is really anybody's guess.
Nick Joseph -- Citi -- Analyst
Thanks. And then just in terms of your own appetite for sales beyond the $440 million that you cite here kind of what's behind that, and then if you could tie that to the share repurchase program and expectations going forward?
Kevin O'Shea -- Chief Financial Officer
Well, Nick, this is Kevin and I'll begin with the share repurchase. There's obviously a lot of number of uses that we fund with asset or proceeds as we always do, including development spend under way. But in terms of the share buyback as you saw, we were active in that program in the second quarter, really the fundamental thesis behind the share repurchase program hasn't changed. We expect to be active on it in the third quarter, we believe there's an attractive opportunity to take advantage of the disconnect between private and public market values for investors like ourselves who can see things through to the side of the pandemic. We have the balance sheet strength and liquidity to pursue the modest share buyback, but that's cued in a measured way which we believe we did in the second quarter, and we intend to do so going forward, and want to funded with, primarily with asset sales and size to manage in a manner that preserves our strong credit profile. So, all those things were true last quarter, they remain true this quarter. And so looking ahead, we would continue to plan on a measured buyback funded primarily with asset sales with an eye on preserving our financial strength and flexibility. So we have plenty of capacity to sell assets over time, and don't feel -- we don't believe that's going to be a constraint for us. Tim, do you want anything? No.
Operator
We will take our next question from Rich Hightower with Evercore.
Rich Hightower -- Evercore -- Analyst
Hey, good afternoon everybody. In terms of the move-outs that took place during the third quarter and predominantly within the urban portfolio, can you give us a sense to tract this sort of thing, where they are moving to in terms of forwarding addresses because we've heard commentary on inter-city move, let's say where it's more bargain hunting than anything. But are you seeing a structural shift outside the city from your urban, previously urban inhabitants going elsewhere?
Sean Breslin -- Chief Operating Officer
Yes. Rich, this is Sean, very good question, and we do track that just based on forwarding addresses, I'd say there's probably two or three things I'd highlight as it relates to, when you look at the data, what sort of stands out, and it -- really, it's a three points. First is, we classify a big move for our resident is that they're moving more than 150 miles somewhere and in that category New York City, this percentage of move-outs, Q3 of '19 that was about 17% of the population that increased to about 30% of the population in Q3. In San Francisco Q3 last year was about 23%, it moved up to about 27% this year. And then two other categories that highlight a regional move, which we define is between 50 miles and 150 miles away from your departing location. New York City, that moved from 6% of move-outs out up to about 20%, and in San Francisco from 7% to 10% and then probably the last one I'd highlighted, what we consider a market move, which is between 10 but less than 50 miles and the one that really stood out this meaningful increase was Boston, primarily urban Boston, where it increased from 10% to 20%, so about double.
One thing you have to keep in mind in some of these things where a local move is obviously less than 10 miles, they didn't go through it, but 10 miles can be -- when you think about some of these urban environments, 10 miles to us, it feels like a long way. So, someone leaving San Francisco, 10 miles could be going down into the Peninsula or places like that, but in terms of sort of the larger move, that's the data that stood out in Q3.
Rich Hightower -- Evercore -- Analyst
Okay, those are helpful stats. And then just maybe a quick housekeeping question but for the -- on the asset sale side of the properties that are in the market or under contract you expect those to close by year end, or what's the timing there? Thanks.
Matt Birenbaum -- Chief Investment Officer
Hi, this is Matt. I think most of them will close by year-end. It's possible one or two might slip into January. But we would expect most of those proceeds to come in by the end of the year.
Rich Hightower -- Evercore -- Analyst
Okay, perfect. Thank you.
Operator
We'll take our next question from Alua Askarbek with Bank of America.
Alua Askarbek
Alua Askarbek -- Bank of America -- Analyst
Hi, everyone, thanks for taking the question. Just going back to move-outs and focusing specifically on the Bay area which are highest in Northern California. But kind of where do things stand today and are you trying to see the move out moderating as we had into the winter months. And do you work with residence offering like suburban market options to keep them within network?
Matt Birenbaum -- Chief Investment Officer
Yes, Alua. Your question broke up a little bit in terms of residents to party in San Francisco, I think you said, and whether we're seeing that accelerate or decelerate, was that first part of your question?
Alua Askarbek -- Bank of America -- Analyst
Yes, I was just wondering if like move-outs are starting to moderate as we head into the winter months.
Matt Birenbaum -- Chief Investment Officer
Yes, I mean, as you can see on the chart regarding the move-in and move-outs that we posted up there. We're starting to see volume ease as we move into the fourth quarter in October specifically, that is relatively typical in terms of seasonal patterns. But in terms of whether that's sustainable or not will depend on a lot of different factors. And many of which Tim mentioned in his prepared remarks. So it's probably too early to conclude that it's a definitive downtrend other than seasonally that would normally be the case. And then I think the second part of your question was around transfers and whether we help facilitate that for residents and we do and it relates to transfer activity, transfers were up about roughly a third year-over-year. So we are seeing increased activity, both within the same community and to another community that might within be -- within a reasonable distance of the communities that are departing. So definitely the increase in activity there, but it's not a meaningful percentage of a total move-outs, just want to think about it that way.
Alua Askarbek -- Bank of America -- Analyst
Got it. And then just one other question. So some peers have start to get creative in the urban markets by transforming empty apartments into work-from-home spaces or building in desk into various mix in the apartment themselves to track renters. Have you guys done anything different to track renters in your urban market, have renters are asking for different amenities like this?
Sean Breslin -- Chief Operating Officer
Yes. No, good question. We're exploring a lot of different things that we've done a fair bit as it relates to some people who are looking for in this environment, a short-term stay in a different geography. It may not just be in the urban environment. It could be a suburban environment where they have left the urban environment, but they're not sure when they may have to return to work in that urban environments and therefore it's like rent a furnished apartment in a suburban location that's not their sort of normal home locations.
So we're doing a little bit of that and then certainly as it relates to amenities, we're trying to facilitate through delivery and things of that sort, as best as we can give the obvious constraints, near the building in from of a physical standpoint, we're trying to facilitate that as best we can. So for that our customers that are home in urban environment trying to make sure that they have access to the amenities that they would normally enjoy just in a different way.
Alua Askarbek -- Bank of America -- Analyst
Great, thank you.
Operator
We will take our next question from Rich Hill with Morgan Stanley.
Richard Hill -- Morgan Stanley -- Analyst
Hey, good afternoon guys. I want to come back to some of the October updates that you had put in your presentation, you discussed in your prepared remarks, it looked like there were some pretty healthy improvement in occupancy. So the question I'm trying to maybe understand a little bit better is, do you think rents have come down enough in your markets whereby demand is starting to come back up and you're going to start to see less bad, call it leasing spreads going forward. So it's really a question of velocity here going forward and do you think that you're starting to see some stabilization in that demand?
Sean Breslin -- Chief Operating Officer
Yes, Rich good question. Yes, a few thoughts and then others can join in. And may I say, obviously recent trends, particularly September and October were favorable in terms of demand absorbing some of the inventory we had, obviously we had more available inventory given the turnover and the lease rates that I mentioned, particularly in the urban environments, which did put some additional pressure on pricing, but it really is sort of a macro question as it relates to, particularly in the urban environment people coming back into this environment because they feel comfortable about it. They need to go to school, they have to be back in the office, all those macro factors really drive that ultimate decision as to whether to return to that environment and price is more just -- what I'm going to choose within that environment, and as long as your competitive you should get your fair share of the market overall, but I think the macro factors is really the things that will tilted to either kind of stabilize and be more positive going forward or deteriorate, those are really key drivers here and I think that's yet to be told the full story until we move into it a little bit further here toward year-end.
Timothy Naughton -- Chairman and Chief Executive Officer
Yes, so I mean, I'd just add to that a little bit. I think what we're seeing a little bit is what we would normally see in a downturn, which is sort of the housing market is dynamic and kind of resetting its level if you will, so we lost about 300 basis points to occupancy. We've had to reach down a little bit, if you will into the rental pool. And as part of that, you got to adjust pricing in order to sort of attract your sort of fair share, if you will, of the pool of renters. I think ultimately in terms of whether it stabilizes, it's just -- it's going to be a question I think at the macro environment as Sean mentioned, but also just what's happening on the public health front, I mean, as we said it's really impacting urban centers in particular in a very unique way to the extent we get a vaccine or a therapeutic that starts to give employers confidence enough to bring employees back into the workplace. They're going to start coming back into the -- into these urban centers in terms of their living arrangement and that's going to create some net new demand for us and help stay, to an extend this thing can easily get protracted to vaccine system don't get approved or don't appear to be as effective as we hope or don't have the penetration, then this will obviously continue to be a bit more contracted. But I think that could really help sort of, stabilize, if not improve, the outlook for -- particularly for the urban centers.
Richard Hill -- Morgan Stanley -- Analyst
Yes, just so I understand, are you -- is it -- are you suggesting that the improvement in October that was noted is more seasonal or would you -- or are there other factors that are driving that?
Timothy Naughton -- Chairman and Chief Executive Officer
I think a lot of it is just price driven, honestly. Rents have continue to come down sequentially and we've gotten to the point, which we've been able to attract sort of our fair share of the market in the 93% to 94% range in terms of occupancy. So I think that's what's driving it initially as to whether it stabilizes, I think there are -- it's a function of some of the things that Sean mentioned and I mentioned.
Richard Hill -- Morgan Stanley -- Analyst
Got it. Helpful. I think that's it from me guys. Thank you very much.
Operator
We will take our next question from Rick Skidmore with Goldman Sachs.
Richard Skidmore -- Goldman Sachs -- Analyst
Thank you. Good afternoon. Just thinking about the development pipeline, the future development pipeline, both of, new starts. How are you thinking about that as I know you talked about not doing any new starts yet other than the one JV, but how are you thinking about it as you look forward and then also as you think about mix, both from a geographic mix and I guess, urban, suburban?
Matt Birenbaum -- Chief Investment Officer
Yes, hi, this is Matt. I guess I can take that and then Tim may be you want to add some as well. Yes, it's really a combination of I'd say both bottom up in terms of the deals still pencil in terms of the value creation and are we seeing an attractive cost basis as well as top down just what are our other options for our capital availability as Kevin was talking about. So, we might start a deal or two this quarter. The deals that are more likely to start sooner are going to be some of these suburban Northeastern deals where even from my prepared remarks, you saw some of those lease ups are actually beating their pro forma is pretty significantly.
So, some of those locations are benefiting from some of the out migration from some of the urban submarkets, and those are markets that just tend to be much lower beta in the first place, they tend to be less volatile in terms of rent, they haven't seen the same run up in hard cost over the last 10 years, or five years certainly. So, maybe there is a little bit less give back on hard costs in some of those markets. So that's probably where we're more likely in the short term to start.
We are still looking to grow in our expansion markets. So that's another place that we don't have anything, we're going to start there in the next quarter, but at some point next year we may have some deal to start there and then the other piece of it is just what's going to happen with hard cost and we have not seen hard cost come down, they've maybe flattened out in some of our markets, number's still sky high although it's starting to come down some and whether the reaction to this downturn, if you go back two cycles ago the recession there after the great financial crisis, hard cost did come down quite a bit but prior cycles it was more just stay kind of flat line for a while and inflation surpass them and so they kind of fell on a real basis, but not a nominal basis and I don't know that we're still waiting to see how that plays out in each of our regional markets.
Timothy Naughton -- Chairman and Chief Executive Officer
Yes Matt, I agree with all that. Maybe just to kind of step back a little bit, in terms of volume, we are probably running at about $1.4 billion, kind of mid-cycle, last year we already sort of downsized it to the $800 million, $900 million over the last three years or so call it '17 to '19, we could start anywhere between $0 and probably $1.5 billion next year, depending upon the factors that Matt mentioned, just the visibility around the world market and construction markets. And then certainly as it relates to the capital markets as well and other options that we might have with our capital, including repurchase of share. So it's a mix of all those factors and it's ultimately our views on those are going to form ultimately how we -- how much capital we decide to deploy somewhere between $0 and $1.5 billion, it start probably over the next 12 to 15 months.
Richard Skidmore -- Goldman Sachs -- Analyst
Thank you.
Operator
We will take our next question from John Pawlowski with Green Street.
John Pawlowski -- Green Street Advisors -- Analyst
Thanks a lot. Sean, just one question from me. Could you share economic occupancy in October for Northern California and Washington Metro just curious those two markets, how pricing power is trending, how it could trend into the winter?
Sean Breslin -- Chief Operating Officer
Yes, John, you're broke a little bit, you said occupancy in Northern California in October?
Timothy Naughton -- Chairman and Chief Executive Officer
Economics.
Matt Birenbaum -- Chief Investment Officer
Economic.
Sean Breslin -- Chief Operating Officer
Yes, physical...
John Pawlowski -- Green Street Advisors -- Analyst
Eco...
Sean Breslin -- Chief Operating Officer
Yes, physical occupancy I can tell you. Sorry say it again?
John Pawlowski -- Green Street Advisors -- Analyst
I'll take it.
Sean Breslin -- Chief Operating Officer
Sorry, say that again?
John Pawlowski -- Green Street Advisors -- Analyst
Yes, physical occupancy is fine, If that's all you had in Northern California and Washington DC.
Sean Breslin -- Chief Operating Officer
Yes. So in Northern California overall, I believe we're running today -- I believe today, we're running around 92% which is pulled down by the, really the lower occupancy that we're experiencing in the 90%-91% range in San Francisco and in pockets of San Jose, how we define San Jose, which is primarily Mountain View and Central San Jose pulling down those numbers. So those are two areas where physical occupancy is weaker so it's -- and as it relates to Washington D.C. district itself, the occupancy I believe is around 91% today. Physical, again.
John Pawlowski -- Green Street Advisors -- Analyst
Okay. And based on current trends today, do you expect stabilization or improvement in those markets or continued slide?
Matt Birenbaum -- Chief Investment Officer
No, actually based on recent trends I would say they stabilized a little bit in terms of occupancy and have started to trend up consistent with the same-store portfolio pattern that I described earlier in my prepared remarks. Now, how quickly they come back is just a function of the velocity that we've seen in terms of notices which is primarily a function of lease price recently. And then on the demand side in terms of the velocity at least it will come through, but as you look forward over the next six weeks or so based on availability and such. I would expect both of those the drift off some.
John Pawlowski -- Green Street Advisors -- Analyst
All right, thank you.
Matt Birenbaum -- Chief Investment Officer
Yes.
Operator
We will take our next question from Nick Yulico with Scotiabank.
Sumit Sharma -- Scotiabank -- Analyst
Hi guys, this is Sumit Sharma here in for Nick. So maybe if you could give us a quick update...
Sean Breslin -- Chief Operating Officer
We can't hear you, if you could try to speak up a little bit. Warned that you -- we can't hear you. Nick?
Sumit Sharma -- Scotiabank -- Analyst
So sorry, this is Sumit, in for Nick. Speaker phone problem. So maybe if you could give us a quick update on the sales pipeline at Park Loggia. I think you guys have sold about 59 out of the 172 condos, on understanding -- interest in understanding, if you're seeing any uptick in the NYC sales market or the rental market weakness is sort of filtering in there as well?
Matt Birenbaum -- Chief Investment Officer
Sure. This is Matt. I can give you an update. So as of today we have 65 units that have closed, again, there's 172 units total in the building, we closed 65, that's $207 million in sales price, we are about $3.2 million per unit. We also have nine units under contract today and we have another seven contract out for signature. So we have another 16 -- 15, 16 deals that are pending, many of which would close in the fourth quarter. I guess I would say, in the last couple of months, traffic's been pretty good, interest has been pretty steady, we're running about three new deals a month, which would put us at probably the top are among the top two or three performing condo buildings in all of Manhattan. So there is a lot more supply than there was kind of when we open the building for sales, but we're still continuing to get well more than our fair share. So, I'd say the sales activity has been pretty steady since kind of the initial lockdowns were lifted in mid-summer and we're continuing to get pretty good traction.
Sumit Sharma -- Scotiabank -- Analyst
Great. Thank you so much. And just more longer-term question, I guess with the pandemic and everything, and how is it sort of changed your development plans in terms of -- but outside of the pipeline today, what should we be thinking off when we think about your development plans when you shift toward suburban to urban or even the unit mix, does that shift toward two or three bedrooms or more in line with your classical kind of the unit mix?
Timothy Naughton -- Chairman and Chief Executive Officer
Yes, I'll try to speak to that. Again, you're breaking up a little bit, but in terms of long-term, in terms of development it's an important capability and it's a distinguishing competitive advantage that we've had in the public markets. As markets stabilize and start to strengthen, we think the development will be economic. Again -- and I think we've said many times in the past that we're relatively agnostic between urban and suburban, we're trying to go where we think fundamentals are best at any point in time and where it's greater value. Having said that for all the reasons we've been discussing we pivoted -- we had already started pivoting maybe three or four years ago to suburban in part because there was just better value and we start to see the suburbs start to grow as the leading edge of the millennials, we're approaching sort of the time there lies where -- maybe buying homes are starting to move -- double back to suburbs, so we'll just seeing more economic activity, that's only been obviously exacerbated by the pandemic, so I suspect suburban demand will continue to outpace urban for a little bit. We did talk about sort of product mix on the last call, I do think there is, in particular with the work from home flexibility that -- it is going to translate into some unit mix and program changes, an extra bedrooms that can double as office providing dedicated work spaces within the unit and our survey data suggest that yes majority of the residents still sort of worked within the unit, but they also -- about 20% to 25% are very interested in a co-working space as well, pretty much everything we've touch either redevelopment or new development in the last two or three years and has a significant co-working space but the types of spaces are likely to -- likely continue to change more sort of dedicated versus just kind of open table format but giving people an opportunity to either lead or have more sort of safer spaces or confined spaces. I think, we expect we'll see that, so those are some of the changes we think are likely to come as a result of the work-from-home flexibility that we think is a real -- is already a trend, it's only going to be greater kind of going forward and our portfolio really needs to respond to that.
Sumit Sharma -- Scotiabank -- Analyst
Thank you very much.
Operator
We will take our next question from Juan Sanabria with BMO Capital Markets.
Juan Sanabria -- BMO Capital Markets -- Analyst
Hi, thanks. I'm here with John Kim. Just had a couple of questions, first just on the pricing that you noted in October, was there a change strategically, either drop in the rent or increase in concessions in October versus the previous months in the third quarter just to stimulate that improvement in the occupancy?
Sean Breslin -- Chief Operating Officer
Yes, Juan this is Sean. Yes, fair point. As I noted in my prepared remarks, obviously we had additional inventory become available, as a result of the increase in turnover that occurred during the quarter, particularly in July and August in those urban environments I mentioned and you could see that -- I think it was on the second slide we showed notice to vacate and lease breaks. And obviously they've put additional pressure on pricing so that, for example, in kind of on all leases signed in the third quarter. If you look at July and August, as an example, in urban environments across all leases the average concession was between half a months, three-quarters of the month. As we moved into September and then in October, getting beyond Q3 that increased just about a month on all leases signed. So, certainly price response as it relates to the additional availability that came through. Could be at least some of that faster, probably, yes, if we have been even substantially more progressive as it relates to price, but we have that kind of inventory delivered to you quickly because of their lease breaks as opposed to having 30 days to 60 days in advance notice. You would have had that discount price pretty heavily, just trying to absorb the incremental inventory that we receive more quickly. So, our strategy was absorbed the inventory at a reasonable pace, but not put out a fire sale so to speak to sort, a very, very fast if that makes sense.
Juan Sanabria -- BMO Capital Markets -- Analyst
Yes, it does. Thank you. And then I was just curious on the relative pricing between some of your urban core and sort of that trend it close to suburban assets and kind of, are we getting closer to parity to maybe where you could see a foot block between some of the people in the suburban markets, switching back to the urban given the relative pricing and proximity to work in safe entire commuting for whenever they do return to the offices.
Sean Breslin -- Chief Operating Officer
Yes, I mean, good question. I'm happy to comment on that and others can jump in. But if you think about the markets we're talking about, New York City as an example, think about the rental in New York City as opposed to kind of moving into the West Chester or Long Island or Northern and Central Jersey, it's a pretty big trade, even though rents have come down quite a bit in New York City, it's still a big trade. So I think it's really more a function of the macro factors that we were talking about earlier in terms of people's -- is their desire or need to be in those urban environments as it relates to either being in the office, because they were required to be in the office you need to be in the office, returning to school, some of these urban universities or just feeling comfortable with those environments that we move into a place where they feel better about retail establishments, restaurants, et cetera. And part of that will be driven by the healthcare situation, whether that crisis is resolved in a meaningful way. So, I think those are the bigger issues as opposed to just purely price.
Timothy Naughton -- Chairman and Chief Executive Officer
I'll just add, I mean -- and today are -- just they're not having to commute. So obviously they've tried to take advantage of lowering their rent. I guess I would say, we do expect them to come back when they're forced to come back to work. I mean you sort of have to just ask yourself the question, was your life sort of better before COVID of after COVID. I mean, all the things that make urban living great, sort of, pre-COVID, once again, the other side is they're still going to be there. These are make -- great mixed-use in box -- in the markets that we're in, they are dynamic environments it's certainly more proximate to jobs. There has been a lot invested in infrastructure in these -- it's environmentally more sustainable to people that care about that I guess, but I think I'd say the one clarity of this, this work-from-home flexibility, I think at the margin will cause some people to maybe stay in the suburbs. But they only have to commute, call it two or three days a week versus five days a week, they may be able to tolerate that where they were in four or five. So, I'd say kind of that's the margin you may not expect to see urban demand as robust as it was pre-COVID but I think when you layer on the pricing, changes that we've seen there's going to be plenty of people coming back though to the urban centers.
Juan Sanabria -- BMO Capital Markets -- Analyst
Different from the New York MSA?
Timothy Naughton -- Chairman and Chief Executive Officer
I'm sorry, did you say including the New York MSA?
Juan Sanabria -- BMO Capital Markets -- Analyst
No, I'm just thinking is Northern California different from New York in terms of the relative rent differential and downtown San Francisco versus Oakland or the South there?
Matt Birenbaum -- Chief Investment Officer
Pretty big delta.
Sean Breslin -- Chief Operating Officer
Yes, those rent spreads just pretty big between the pockets of the East Bay even moving down into the Peninsula or lower Peninsula as compared to being in city in San Francisco. It's a pretty big spread and I think it really is more around the quality of the lifestyle and the reasons you want to be in the urban environment I mentioned, I just necessarily be -- will to say standing got be in their office.
Juan Sanabria -- BMO Capital Markets -- Analyst
Thank you.
Operator
We will take our next question from Rich Anderson with SMBC.
Richard Anderson -- SMBC -- Analyst
Hey, thanks. Good afternoon, everybody. So, when I was thinking initially about the environment, I thought AvalonBay would be in a better spot, then it's turned out to be because of the lion share of the portfolios in the suburbs, I didn't think people would move from New York in Nebraska, maybe as much as they had more New York to Edgewater, New Jersey, or something. But, I understand transfers are up a little bit, but I also understand that a relatively small piece of the turnover puzzle. How would you respond to the idea that when people -- when we do get some sort of resolution here that people would want to step back into this urban world and not maybe go all the way into a Manhattan, but someplace around it and thereby putting AvalonBay in an interesting spot to sort of tease people back into these urban centers without having to go full in. Do you have a sense about how permanent these moves away from you have happened and how much flexibility people have to come back as soon as they feel comfortable to do so?
Timothy Naughton -- Chairman and Chief Executive Officer
Yes, Rich. I think it's a really interesting question. I would say, giving all back before sort of, pre-COVID there was already -- I mean, we were already believer sort of in the infill kind of urban light, sort of mixed use lifestyle environments. We think sort of, post-COVID that's still a great opportunity, maybe it's even a stronger opportunity when you sort of add affordability in the mix when you can maybe be in a infill suburb for a couple of bucks also flip then being downtown. And then you couple of that with maybe decent transit and only have to hop on the train two or three days a week versus five days a week. So, I think kind of that infill suburb is really extremely well positioned. I think it had this anyway, but like many things as we've talked about COVID, it just seems to be accelerating kind of these trends that were already current before, but as I mentioned to the -- on the last question, it doesn't make -- urban living is still very attractive. But when you layer into demographics, affordability and work-from-home flexibility, that does make -- it does change your calculus a little bit for that marginal rental.
Richard Anderson -- SMBC -- Analyst
Okay. And second unrelated to the first, but you talked a little bit about how your future development activity might be informed by this environment and how it may change. How does that apply to your fledgling businesses in Denver and South Florida? Do you think those markets are performing perhaps better or feeling more resilient and maybe they be get it -- to become a bigger piece of the pie chart now in the aftermath because of all of this or does that not change, relatively speaking?
Matt Birenbaum -- Chief Investment Officer
Hey, Rich, it's Matt. So those markets right now are doing better than most of our legacy markets. I think some of that's a function of their lower cost markets, their market we're -- initially, anyway there was less of the shutdown, so that's probably part of it. And the assets we have in those markets happen to be more suburban as well, at least that's definitely true of our Denver portfolio. So, when we went into those markets, we said our goal was to get them to be about 5% each of our portfolio, which would be about $1.5 billion to $2 billion each we're only not even quite halfway there yet. So, we are looking to be aggressive there, we'll continue to look to be aggressive there over time. Could that migrate up to more than 5%? I mean it could, but I think again, like Tim was saying to the extent, what we're seeing is that the kind of COVID response is tolerating a lot of the trends that we saw pre-COVID and those were the same trends that had led us to those markets in the first place.
Timothy Naughton -- Chairman and Chief Executive Officer
Yes, Rich, maybe just to add to that. I agree with that with what Matt was saying. I think we've said on prior calls too it might lead us to go into new markets as well that are likely to have some of the spillover benefit from whether it's New York or California markets, but also are kind of heavily indexed knowledge based jobs as big tech and knowledge based industries completely kind of diversified their workforces across the map, we want to be kind of where their workers are and if they're going to be places like Denver and Southeast Florida, we think strategically, those are the places we need to be in, allocation need to respond to that.
Richard Anderson -- SMBC -- Analyst
Yes. Great. Thanks very much everyone.
Operator
We will take our next question from Austin Wurschmidt with KeyBanc.
Austin Wurschmidt -- KeyBanc -- Analyst
Hi, good afternoon everybody. I was wondering if you guys could walk through your effective rent growth month-to-month, in the third quarter as well as provide October and do you think now that you're through the peak leasing season you could see rates improve due to fewer expirations, are you more apt to keep rents closer to maybe September and October levels and continue to try and grow occupancy?
Sean Breslin -- Chief Operating Officer
Yes, Austin, this is Sean, good question. In terms of walking you through the rent change in the quarter, basically we move from sort of mid-3s up to mid-8s in terms of the reduction in rent change, you move through each month of the quarter and in October right now on a plan to basis is down about 10%, and in terms of the broader question, as it relates to stabilization. I mean, only thing I'd say is that, particularly in the suburban environment concessions have kind of leveled off in the past couple of months here. We've had good volume. So we haven't necessarily had to kind of dig deeper into the concession bag to generate that velocity and I'd say we're reasonably comfortable with the velocity we're seeing today, which is what I expressed in my prepared remarks and you saw on the slide. So to the extent that we continue to see good velocity in pricing, we wouldn't have to dig deeper into that concession bag to the extent things fell off and we have to reevaluate, but based on where we think for price today, we feel like we're in pretty good shape.
And again, I'd say on the suburban side, it was a little bit better than urban, but it will take a little while longer here to see how it plays out in these urban environments, but that's going to be the right kind of pricing level to continue to attract demand at the pace that we need it.
Austin Wurschmidt -- KeyBanc -- Analyst
Got it. No, that's very helpful. And then earlier to your comments going on where fundamentals are best as it relates to new investment activity, does any of the trends you've seen since you decided to enter into the expansion markets change your target allocation of those markets, either higher or lower, as you kind of look forward over the next several years?
Matt Birenbaum -- Chief Investment Officer
Yes, this is Matt. No, I mean I think as we plug in on, one of the prior questions, we like those markets, we're looking to grow in those markets, like I said, our objective is to get to about 5% in each, some of that is driven by just the size of those markets relative to the size of ours and as Tim mentioned there may be additional markets that we add in the next year, at some point, they would get that kind of total allocation to other markets like that above that 10% over time.
Austin Wurschmidt -- KeyBanc -- Analyst
Thanks guys.
Operator
We will take our next question from Alexander Goldfarb with Piper Sandler.
Alexander Goldfarb -- Piper Sandler -- Analyst
Hey, good afternoon and thank you. So, two questions, Tim, just going back to development, we had talked about this on the last call and you had said that you guys were adamant with your current development program and the team that you have in place, no changes, but in some of your answers, earlier on the call, you talked about starts -- obviously this year being much down next year could have a wide range $0 to $1 billion, I think you said, so as you think about where you would be on that front with development, what do you think the impact would be on the P&L, like would we start to see some of these capitalized costs end up as expenses on the P&L as you try to keep your team in place or do you think that there would be further changes afoot especially if you can't do the level of development in the suburban markets that would necessitate -- that would keep sort of the level constant where it is today?
Timothy Naughton -- Chairman and Chief Executive Officer
Yes Alex, I think sort of, simple answers is too early to know, to be honest. Yes, I think as mentioned on a prior call, we have actually cut back our development capacity over the last two or three years as we've gone from about $1.4 billion to about $800 million, let's say, the group is scale to do around $1 billion, $800 million to $1 billion a year, it can probably flex up or down a little bit from that, depending upon the needs. When you talked about expensing versus capitalizing, it start to get into a lot of other things that probably worth maybe another call, but if you look in the past downturns, we suspended development for four or five quarters, typically. So again, if this is a downturn in length. It would looks, somewhat like those -- I don't think we're talking about -- I don't think there's a concern about the thing you're talking about. The extent we're looking at a downturn where it just doesn't makes sense to start a new development for three years, we're going to have to right size the group or expand some of those costs. So -- but I think it's premature to kind of know, kind of where that's likely to fallout.
Alexander Goldfarb -- Piper Sandler -- Analyst
Okay. That-- the four to five quarter pause actually is a helpful reference so thank you on that. The next would be, so if you -- maybe for Kevin. Just thinking about the operational, whether it's the property level G&A, or on the balance sheet, where do you think are some cost saves or efficiencies that you guys could speak out that would help mitigate the revenue drops for -- as we look forward into next year?
Kevin O'Shea -- Chief Financial Officer
Well, I mean, maybe just to put some context Alex, this is Kevin. I think we experienced year-over-year NOI climb $38 million, $39 million this past quarter. If you add the quarterly property management costs, up over costs in G&A, they are about that number. So proportionately our overhead costs represent a small part of the puzzle and in terms of how we -- relative to the overall business and the revenue structure and so forth. So it's not a particularly acute, I would submit, in terms of how we can manage it, we manage it throughout the cycle.
There are potentially some opportunities -- one of the biggest opportunities simply is just fair bit of overhead costs or incentive costs and those are going to naturally correct here this year. So, there's a little bit of a self-correcting piece. And then in terms of kind of property management overhead, Sean do you want to add something?
Sean Breslin -- Chief Operating Officer
Yes, Alex, Sean. One thing I think that's fair to address is we were already on a path to create more operating efficiencies throughout the portfolio based on some of the things we talked about, I think it was on one of the calls last year, as it relates to automation, visualization various things like that. The great use data centralizing different things whether it's leasing renewals in a session, we're still on that path and if anything, I would say it's accelerated certainly as a result of what's happened through the pandemic, as it relates to the operating model and we were talking about somewhere on the order magnitude of approaching $20 million to $30 million of operational savings through those various initiatives and we're still planning forward on that and probably will be investing more in some those technology initiatives, over the next couple of years to help offset what we're seeing at least at the property level P&L.
Timothy Naughton -- Chairman and Chief Executive Officer
Alex, and just to add finally
Alexander Goldfarb -- Piper Sandler -- Analyst
Right...
Timothy Naughton -- Chairman and Chief Executive Officer
This is Tim, Alex. May be just to add finally in terms of G&A as Kevin was mentioning, it's a pretty efficient business model, we're talking about G&A costs and maybe 15 basis points to 20 basis points of total assets, if you compare that, I mean, so the business it's pretty G&A efficient and then compared to other business models to kind of on the private side it's efficient again. So they are just, there aren't a lot of opportunities on the G&A side, some of its self-correcting through the incentive system as Kevin mentioned, as performance weakens, incentive pay is less, but it's -- there's not a lot of extra buys to get to, and G&A is -- it's 85%, 90% body when you get down to it.
Alexander Goldfarb -- Piper Sandler -- Analyst
Yes, Tim, that's exactly the point I was after and I was think at the property level, the bulk of the expenses are insurance, real estate taxes and payroll those categories would seem like they'd only go up, so it seems like the expense savings are sort of on the margin, it doesn't sound like there is anything big picture. It sounds like it's on the margin, but a lot of the expenses came like our sort of set. Is that a better fair takeaway?
Timothy Naughton -- Chairman and Chief Executive Officer
Yes, I would say on the payroll side, on the property level, that's where the opportunity is. Those are some of the activities that we think we can automate or centralize, get the benefit of some scale and the benefit of some automation as well where there could be real savings in terms of number of bodies. Not as clear on the overhead side, G&A side when you may have a group of two people within a particular function that's it's working across a 300 unit -- a 300 community portfolios so.
Alexander Goldfarb -- Piper Sandler -- Analyst
Okay, thank you.
Timothy Naughton -- Chairman and Chief Executive Officer
Sure.
Operator
[Operator Instructions]. And we will take our next question from Zach Silverberg with Mizuho.
Zachary Silverberg -- Mizuho -- Analyst
Hi, thanks, guys. Just a couple of quick ones. Can you talk about the profile of the residents entering the portfolio today in some of your more challenged submarkets like New York and Boston where concessions appear more prevalent. I'm wondering if the income and credit profiles are any different and if there is any concern over future rent payments may be a year from now?
Sean Breslin -- Chief Operating Officer
Yes, Zach, good question. We haven't really changed our credit standards other than it to be probably even more diligence as it relates to detecting fraud, particularly in certain markets. I would say, like LA tends to be one that comes to mind. But we have not relaxed our credit standards as it relates to it and we are still qualifying people in a diligent manner so that as we look to the other side of this, at least rent started changing materially that we can really have customers that can afford renewal rent increases as you move into the timeframe you're comfortable with late 2021 or whatever it may be. So, is their risk -- there is always risk, but we just would not relax standards if anything they're a little more stringent as it relates to the fraud protection.
Zachary Silverberg -- Mizuho -- Analyst
Got you. And I guess piggybacking on an earlier question our COVID in the communities and with the flu season around the corner, are you guys taking any preventative --or preventive sanitary measures to combat spread within the communities, given the potential uptick with flu season around the corner.
Sean Breslin -- Chief Operating Officer
Yes. And we've done a lot as it relates to kind of promoting a healthy environment. If you look at our operating expense table, we noted that we've spent a couple of million bucks already this year as it relates to PPE and then beyond that for cleaning and disinfectants and various other things. We have a reservation system where people have to reserve amenity time within a gym or a chill space, whatever it may be. And so we're doing a fair bit to promote healthy environment. And for the most part, I think we're getting very good feedback through our net promoter score comment, from people appreciating our efforts to certainly some frustration that they can't just walk into the gym whenever they want, but very understanding as it relates to the need for a professional protocol to limit any impact that the community and so far not knock on the wood, we've been relatively lucky in terms of what we've seen at the community. So we feel good about what we're doing and continue to look for ways to promote that healthy environment.
Zachary Silverberg -- Mizuho -- Analyst
Got you. Thank you, guys.
Operator
I will take our next question from Dennis McGill with Zelman.
Dennis McGill -- Zelman -- Analyst
Hi, good everyone, guys. Thanks for taking the time. The question is on Slide 9 as we look at that split between suburban and urban. I think it's easy to understand the pressure on the urban environment and the change in living conditions and so forth. When you analyze your suburban portfolio that it looks like rents there down maybe 3%, 4% based on the chart, you are seeing move-outs up and vacate notices was up as well, where are those tenants going, if you were to sort of quantify or speculate the weakness in the suburban market? What do you think the leading factors are there and what are the causes of turnover that you're seeing on the weakness in pricing?
Matt Birenbaum -- Chief Investment Officer
Yes, good question. I mean on suburban side you did peg it right, rents are down, call it roughly 3% or so. I would say it's a variety of factors really depending on the market. I'll give you a couple of examples. So, we would consider various pockets of San Jose, as an example, including Mountain View, Central San Jose to some degree. We have Northeast San Jose that suburban but I can tell you just based on the current protocol for companies like Apple and Google and others, there is not a need for those residents to be in that location. As a result, we've seen pressure from turnover in some of those pockets where the demand has just fallen off, obviously not as much as what we've experienced in San Francisco. But because of those policies, there is pressure on demand there. And some of those pockets, particularly central San Jose, Mountain View, and a little bit in Northeast San Jose there is supply, so, we're seeing a compression there, in terms of, what -- we separate at the higher end of price Pyramid coming down to compete with other assets in the existing inventory of sort of A minus to B type assets which are representative of what we have in those markets. So that's the kind of pressure you see in that type of environment, that's similar to what you might see in certain pockets in Seattle, like in Redmond, and then there is other pockets in the Northeast. So, Boston is holding up relatively well, Long Island's holding up relatively well, but you still do have -- we are in the midst of a recession and people are making different choices to some degree as it relates to living environment, some people are moving into those environments from densely populated urban environments, but others are making different decisions as it relates to staying there or moving elsewhere. So demand, overall, we're seeing just household contraction. So that will impact suburban environments just not nearly as much as what we've seen in urban environments. So that's kind of the macro view and Tim.
Timothy Naughton -- Chairman and Chief Executive Officer
Den a part of that is you're seeing particularly younger age cohorts moving right now. So a number -- percentage of under 35 moving back, particularly under 25 historical highs. So you have, sort of the normal consolidation to get with any downturn, probably we haven't seen yet, it is doubling up, if anything, people are trying to get away from their roommates, if they are both trying to work from home in the same space. But we've definitely seen people do move back home and camping out of the basement we're just where they have more room to fill over. We have mentioned earlier sort of the parent's homes or are more fully occupied, self-storage is more fully occupied and apartments little less occupied. So that's usually some of the trends that we're seeing.
Dennis McGill -- Zelman -- Analyst
That's helpful perspective. I actually was going to -- be a second question, Tim, if may be continuing on that, you think about the demographics of those early terminations or vacate, is that skewing more to the younger cohort that can be more mobile versus the families. Where are you seeing it fairly distributed across your client base?
Timothy Naughton -- Chairman and Chief Executive Officer
Yes, No that's a fair point. I mean if you look at sort of occupancy and you know related lease spreads, is it definitely more pressure in the studio floor plans. Urban environment studios during Q3, I think the average occupancy was 87%, 88%, as an example. So, people left more stuff flexible moving on to mom and dad for sure.
Dennis McGill -- Zelman -- Analyst
All right. Okay, well. Thank you. Good luck, guys.
Timothy Naughton -- Chairman and Chief Executive Officer
Thank you.
Operator
And with no additional questions, I would like to turn the call back to Tim Naughton for any additional or closing remarks.
Timothy Naughton -- Chairman and Chief Executive Officer
Thank you, Abby. I know everyone's busy, lot of calls today, but thanks again for joining and we'll see you in the virtual world. I suppose maybe at NAREIT in November. Take care.
Operator
[Operator Closing Remarks]
Duration: 71 minutes
Call participants:
Jason Reilley -- Vice President, Investor Relations
Timothy Naughton -- Chairman and Chief Executive Officer
Sean Breslin -- Chief Operating Officer
Matt Birenbaum -- Chief Investment Officer
Kevin O'Shea -- Chief Financial Officer
Nick Joseph -- Citi -- Analyst
Rich Hightower -- Evercore -- Analyst
Alua Askarbek -- Bank of America -- Analyst
Richard Hill -- Morgan Stanley -- Analyst
Richard Skidmore -- Goldman Sachs -- Analyst
John Pawlowski -- Green Street Advisors -- Analyst
Sumit Sharma -- Scotiabank -- Analyst
Juan Sanabria -- BMO Capital Markets -- Analyst
Richard Anderson -- SMBC -- Analyst
Austin Wurschmidt -- KeyBanc -- Analyst
Alexander Goldfarb -- Piper Sandler -- Analyst
Zachary Silverberg -- Mizuho -- Analyst
Dennis McGill -- Zelman -- Analyst
