Essex Property Trust (ESS) Q4 2020 Earnings Call Transcript

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Essex Property Trust (ESS 0.57%)
Q4 2020 Earnings Call
Feb 5, 2021, 12:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Essex Property Trust Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions]

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.

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 J. Schall -- President and Chief Executive Officer

Welcome to our fourth quarter earnings conference call. I'm very pleased to acknowledge the promotions of Angela Kleiman and Barb Pak to their new roles at Essex, and greatly appreciate their contributions for many years of dedicated service. Both Angela and Barb, will follow me with prepared remarks; and Adam Berry, our Chief Investment Officer is here for Q&A.

At the end of last year, we announced John Burkart's retirement and we thank John for his tireless efforts and numerous contributions to the Company's success over nearly three decades.

As we reported last night, our fourth quarter and full-year 2020 results continue to be significantly impacted by the COVID-19 pandemic, resulting in lower same-property revenue and core FFO per share, for both the quarter and the full-year. Similar to the last few quarters, pandemic-related regulations have had two primary consequences. First, shelter-in-place and related orders have resulted in unprecedented job losses and; second, anti-eviction and related laws prevent us from maximizing property performance.

Government mandates are constantly changing and they intensified during the fourth quarter, given -- surge in COVID-19 cases. Navigating the pandemic involves extraordinary efforts and thank the Essex team for their tireless dedication amid these challenges.

Overall, our fourth quarter results reflect stability and sequential net effective rents beginning in October. And as discussed during our third quarter earnings call. Sequential revenues improved 30 basis points in the quarter, with market rents mostly flat in the cities and modestly positive in suburban locations. Therefore, we are cautiously optimistic that we have or will soon reach the bottom in market rent declines.

As of December 2000, preliminary three month trailing job losses in the Essex markets were -- 7.9% year-over-year, a 150 basis point improvement compared to minus 9.4% for September 2000, and outperforming the nation, which had a 100 basis point improvement from September to -- December. Even with the recovery of jobs in Q3 and Q4, the nation had 9.2 million fewer jobs year-over-year for the month of December, roughly equal to the number of jobs lost at the worst point of the financial crisis.

Our data analytics team prepared S-17 of the supplemental, which is our base case scenario underlying our expectation that net effective rents will declined 1.9% in 2021. The range of potential outcomes is extraordinarily wide for 2021, given many unknowns that relate to the pandemic, including the pace of vaccine deployment and changes in regulation. Our modeling further assumes 4% GDP growth, which should lead to positive momentum in the second half of 2021.

Apartment supply will continue to be a challenge, especially in the downtown locations of Los Angeles and Seattle. Our data and [Phonetic] analytics team expects approximately 34,000 apartment deliveries in 2021, a modest increase compared to last year. Also similar to 2020, we don't expect much for sale housing production going forward. It's our experience at affordable for sale housing competes directly with rentals, once brands rise to a level that approximates the monthly payment of an entry-level for sale home, and there is little risk about occurring in the Essex markets any time soon.

Page S-17.1 of the supplemental highlights 13 of recent multibillion dollar tech initial public offerings for companies headquartered in the Essex markets. Overall 2020 was a great year for IPOs, with a 147 tech sector offerings completed during the year, it's our view that the IPO market is essential to recharge the tech ecosystem, providing growth capital to early stage investors and to generate liquidity for reinvestment.

Page S-17.1 also illustrates reacceleration in job openings for the Top 10 tech companies, which has increased 38% since the August trough. Our analysis indicates that nearly 60% of the total job postings are located in California or Washington, with the next largest state Texas accounting for just 7%.

Page S-17.2 of the supplemental package demonstrates a venture capital investments continued on a record pace in 2020 with approximately $130 billion invested in the US, with the Essex markets continuing to receive the dominant share of these [Phonetic] investment. Success in the knowledge-based economy requires a critical mass of highly skilled workers, creating a network effect that draws companies to the Bay Area -- Seattle, while only a limited number of venture-backed companies will go public, some will experience extraordinarily -- extraordinary growth similar to Snowflake, DoorDash, Airbnb and resulting in thousands of high paying jobs.

The environment today has many similarities to the previous recessionary periods, including the financial crisis and the bursting of the.com bubble, in both cases migration out of California was often front page news.

In 2020, we experienced higher outmigration than normal, especially in our West Coast urban centers. In our experience, people make different housing choices during recessions and is not surprising to see many in the large baby boomer cohort, monetize the value of an expensive California home to move to less expensive areas, as part of a retirement plan. This recession is unique with respect to the extraordinary loss of jobs -- that involve lower-paid service workers, jobs that are concentrated in the city centers, and effective employees often had only two choices, move immediately to find work or stay in their home shielded by eviction forbearance laws.

As with previous recessions, we expect most of these trends to reverse. We expect that the demand for restaurant services and travel will recover swiftly, as vaccines are administered, bringing back related service jobs. Workers in the Essex markets earn more than in most parts of the country, and the draw of higher paying jobs combined with lower recent rent levels makes rental housing down the West Coast, the most affordable it has been since 2013.

A recent McKinsey study estimates that only 22% of the American workforce can work-from-home without any productivity loss. We have been tracking many companies that -- have adopted work-from-home models during the pandemic, and we remain confident that the vast majority of companies will ask employees to return to the office when it is safe to do so, likely with increased work-from-home flexibility going forward. Google, Netflix and Apple are among the largest companies to have expressed a desire to return to the office. Many others will follow.

Turning to the regulatory environment. A third-wave of COVID-19 cases beginning in November, and related concerns about hospital availability led to the imposition of severe stay-at-home orders in all of our California markets, some of these restrictions were eased last week, but all of the Essex markets remain in California's most restrictive category.

Recently with the passage of SB 91 last week, the State of California has extended COVID-19 related infection, protection from January 31 to June 30, 2021 including pushing back the requirement to pay at least 25% a pandemic -- related rent. In addition, the law established a State Rental Assistance Program to allocate $2.6 billion in federal stimulus funds using income levels to prioritize payments and accepting related to applications in March. As with similar laws, there are many related requirements and complexities, which we are evaluating.

Turning to the apartment investment markets. During 2020, we sold four properties with a total of 670 apartment homes for $343 million, all of which were placed under contract subsequent to the implementation of shelter-in-place orders in March. Given the wide discount in valuation for public REITs compared to the private real estate markets, property sales remain our preferred source of funds for investment. Since the onset of the pandemic, a relatively small number of apartment sales support our belief that property values have not changed materially since the onset of the pandemic.

However, extraordinary changes in rent, rent increasing in the case of both suburban markets and decreasing sharply in some urban locations, makes it difficult to draw conclusions about cap rates. In the suburbs, where rents are generally at or above pre-pandemic levels, property values have modestly increased and cap rates are somewhat lower compared to the pre-pandemic period. Given lower rents and significant concessions in hard hit cities, recent price talk around possible sales indicate about 5% reduction in value versus the pre-COVID period, resulting in cap rates for high quality properties below 4%.

As with previous recessions, Fannie Mae and Freddie Mac have continued to provide very attractive financing with seven-year fixed rate financing in the mid-2% range, potentially supporting lower cap rates. Vaccine distribution should remove uncertainty with respect to apartment operations and property values, as a result, we believe transaction volumes will begin to accelerate. As we've indicated before, improved cash flow from positive leverage in apartments has historically led to a robust transaction market.

With that, I'll turn the call over to Angela.

Angela L. Kleiman -- Senior Executive Vice President and Chief Operating Officer

Thank you, Mike. First, I would like to express my appreciation to the Essex operations team for their diligent efforts to serve our customers amid a challenging environment caused by the COVID pandemic. Thank you for all your hard work.

As for my comments, I will begin by discussing our 2020 results, followed by our outlook for 2021. Overall, our market performed, as we expected, despite the headwinds of new COVID-related closures and seasonal decline in demand. Currently the urban core, particularly in tech-centric markets continue to remain more impacted by COVID-19 related job losses and office [Technical Issues].

In addition, the change in quality of life, resulting from the closures of restaurants and public amenities has driven a temporary shift in consumer preferences. High-rise buildings or communities located in areas with high walk scores have been the most impacted by this shift in demand. Conversely, communities with private outdoor space or more affordable residences outside urban cores continue to experience greater demand, which benefited many of our properties in Ventura, San Diego, Orange County and East Bay in Northern California. This temporary shift in demand continued in the fourth quarter, where we experienced 7.6% and 9.9% year-over-year increase in quarterly turnover in CBD Seattle and San Francisco compared to the portfolio average turnover of only 1.3%. Furthermore, our CBD locations also had a greater concentration -- apartment supply deliveries, typically accompanied by very high concession levels.

During the fourth quarter, we continued our leasing strategy of leveraging concessions on stabilized communities and building occupancy. There has been encouraging indicators from a sequential perspective, in that, more than half of our same property portfolio grew revenue sequentially, driven in part by increases in occupancy and decreases in concessions. We have provided year-over-year net effective rent changes for our portfolio on Page S-17 of our supplemental.

New lease rates were down 8.9% in the fourth quarter, stable in January, and an improvement from the negative 12.2% achieved in the third quarter. Concessions on same property pool improved from approximately $18 million in the third quarter to $13 million fourth quarter. This reduction in concessions is noteworthy, considering the fourth quarter has seasonally lower demand and historically concessions increased during this period, rather than decrease.

Key highlights of the same-property performance of our major markets in the fourth quarter are as follows. In Seattle, 4.9% year-over-year revenue decline was primarily driven by Seattle CBD, which declined by 13%, while the remaining submarkets average [Indecipherable decline. Year-over-year job growth in Seattle, declined by 7.3% in the fourth quarter. In Northern California, the 10.4% year-over-year revenue decline was led by CVD, San Francisco and Oakland, averaging an 18% decline, contrast that with a 4.2% decline in Contra Costa County, while Santa Clara County performed in line with the regional average of a 10% decline. Year-over-year job growth in Northern California declined by 8%, but San Jose sale further at a 6.4% decline.

In Southern California, 7.2% year-over-year decline was primarily driven by LA, CBD and West LA submarkets, averaging a 17% decline, offset by an average decline of 2.4% in our suburban markets of Ventura Orange County, and San Diego. Fourth quarter year-over-year job growth in Southern California declined by 8%.

Moving on to our 2021 outlook. As indicated on S-17 of the supplemental, multifamily supply as a percentage of stock remain low at 0.9% for our portfolio. While we expect the percentage of the year-over-year growth to remain flat. New completions will once again be concentrated in the CBD's in urban submarkets, where supply is projected to increase by 2.1% compared to just 0.7% across the rest of the portfolio. The confluence of minimal supply and extraordinary job losses we [Technical Issues] a significant headwind in our urban markets.

In Seattle, we expect multifamily supply as percentage of stock to increase in 2021 by 1.6%, driven by 2.9% in the CBD, offset by a 1% increase in the suburbs where we have the majority of our units. We have also seen positive office activities by major tech companies as they continue to push forward on expansion projects. In Seattle Amazon received approval for a 1.1 million square foot project. In Bellevue Microsoft has continued with their campus expansion. And in Kirkland, Google acquired a 10-acre site for a large campus. In Northern California, we project overall multifamily supply as a percentage of stock in 2021 to decrease by 10 basis points although Oakland and San Jose CBD are expected to increase by 1.8% and 3% respectively. Despite the impact of COVID tech expansion plans have continued in the Bay Area. Amazon purchased a 6-acre site near downtown San Francisco. Facebook last month submitted an updated plan for its 1.25 million square foot campus expansion in Menlo Park and Google continue to work with the City of San Jose for its major new campus at Diridon Station. In addition, the biotech sector continue to be a strong source of office demand highlighted by the recently approved expansion of Genentech's headquarter in South San Francisco which would add up to 4.3 million square foot of new office space. In Southern California, we project overall multifamily supply as a percentage of stock to remain flat. The most notable increase is 4% LA CBD and deliveries in West LA will remain elevated once again this year.

While many uncertainties remain as to legislation and the timing of the vaccine based on current market conditions, we assumed our scheduled rent for the same property portfolio will trough in the second quarter of this year. Because leases are typically one year in duration, our year-over-year revenue growth will be negative in the first half and positive in the second half, leading to our same-store full year guidance of 2.5% of revenue decline at the midpoint.Lastly, our current same-store physical occupancy is 96.4%. Our availability 30 day out is 4.7%.

Thank you. And I will now turn the call to Barb Pak.

Barb M. Pak -- Executive Vice President and Chief Financial Officer

Thank you, Angela. I'll start with a few comments on our fourth quarter results followed by key assumptions in our 2021 guidance and finally an update on our recent capital markets activities and the balance sheet. As expected, the fourth quarter was a challenging period with core FFO declining 12.5% compared to one year ago. This was primarily driven by an 8% decline in same property revenues as a result of higher concessions and delinquencies. As we noted last quarter we report concessions on a cash basis in our same property results because we believe this is more indicative of true market conditions. However, we are required by GAAP to treat concessions on a straight-line basis in calculating consolidated revenue and FFO.

As Angelo mentioned during the fourth quarter, we provided 5 billion fewer concessions than the third quarter, which helped improve same property revenue sequentially. However, core FFO declined by 4% or $0.13 per share compared to the third quarter of which $0.16 is attributable to lower straight-line rent concessions. We expect this line item to continue to be a headwind to core FFO growth in 2021, which I will discuss in a minute. Please note on Page S8 of the supplemental we have detailed the quarterly impact of non-cash straight-line rents.

Turning to delinquencies. We continue to take a conservative approach to reserving against uncollected rents, especially given the surge in COVID-19 cases in the fourth quarter, which resulted in extended lockdowns in our markets throughout much of the quarter. As such we reserved against the entire net delinquency balance during the fourth quarter. Our receivable balance currently stands at approximately $7 million including joint ventures at pro rata share. Based on past collections we feel this receivable balance is consistent with our ongoing conservative approach. We will continue to assess our delinquency reserve and our net receivable balance each quarter based on collection history and market conditions.

Turning to our 2021 guidance. Key assumptions are available on Page 5 of the earnings release and S14 of the supplemental. We've provided a wider than normal range for same-property revenues and core FFO given the significant uncertainties that remain surrounding COVID and the recovery ahead, including vaccine distribution and eviction moratoriums that are outside our control but could swing guidance in a variety of ways. That said, we felt it was important to outline our key assumptions based on information we have today.

For the full year, we expect core FFO per diluted share to decline by 5.1% at the midpoint. The key drivers of the decrease are primarily related to the following two items. First, we expect same-property revenues and NOI to decline by 2.5% and 4.6% respectively at the midpoint. While our current operating fundamentals remain steady in our markets as compared to several months ago, we will continue to feel the negative effects of the 2020 rent declines throughout most of 2021. In addition, due to the eviction moratoriums and regulations that remain outside our control, we expect delinquencies will remain elevated in 2021 and will be a drag to core FFO by an estimated $0.45 per share at the midpoint. The Company has a long history of excellent rent collections and we expect that this temporary delinquency headwind to become a tailwind to FFO growth once the various COVID related restrictions are lifted.

Second, we also face significant headwinds from straight line concessions. We expect this noncash item will result in $0.41 to $0.56 per share decline in core FFO representing about a 4% reduction in growth on a year-over-year basis. As it relates to concessions, we expect they will remain high in the first half of the year before moderating in the second half of the year as the economic recovery takes hold. As such, we expect the impact from straight line rent concessions to be minimal in the first half of the year with most of the negative impact we forecasted to fall in the last two quarters of 2021.

Lastly, on to capital markets activities and the balance sheet. During the fourth quarter, we closed $206 million of new preferred equity investments and bought back $46 million of common stock at a significant discount to NAV. These investments are being funded with three asset sales totaling approximately $275 million that are under contract and expected to close in the first quarter. This is consistent with our guiding principles of match funding investments on a leverage neutral basis.

For the year, we were able to arbitrage the difference between public and private market pricing by selling $343 million of assets at prices generally consistent with pre-COVID levels and buying back $269 million of stock at an average price of $225 per share, all while maintaining our balance sheet strength and creating value for our shareholders. Our balance sheet remains strong with minimal near-term funding needs and sound financial metrics. While our net debt to EBITDA has increased this year this is primarily the result of the significant decline in EBITDA caused by the pandemic. As the economic recovery takes hold and the West Coast economies continue to reopen, we expect our net debt to EBITDA ratio will improve. With ample liquidity and a well covered dividend, our balance sheet remains a source of strength.

With that, I'll turn the call back to the operator for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Nick Joseph with Citigroup. Please proceed with your questions.

Nick Joseph -- Citigroup -- Analyst

Thanks. Appreciate the commentary on kind of the dynamic nature of your markets as well as the slides in the supplemental. But I'm just wondering, as you think about kind of post COVID, rightm if we're in a more flexible work environment putting aside any kind of migration trends outside of the state, if there is more flexibility and commuting times change, how does that think -- how does that change how you think about your exposure within your markets, urban, suburban or even further out and could there be opportunities that you're exploring today?

Michael J. Schall -- President and Chief Executive Officer

Hi, Nick. Thanks for the question. It's a good one and this is Mike. We think that there will be more work-from-home flexibility, but at the same time, we think that employees will be tethered at some level to the office. As I think about the three other very capable people here today knowing them and trusting them and all these things are a great team effort and teams are better when you really know the people and can trust the people. So I'd say that is a key factor that I think and as noted in the prepared remarks, we'll keep employees relatively close to their jobs. So having said that, I would think the winners in this scenario will ultimately be the high quality cities that are near the jobs, but also offer, you know, maybe a little bit more affordable housing and good schools, low crime rates, etc.. So I think that will play itself out. And I think those -- those areas, you know we have a lot of cities that are among the major metros that qualify for that. So, and some of them have been pretty hard hit. So I would, I guess, I would add to that, some of the cities that are high-quality cities, the rents have been highly impacted by COVID, certainly when I think about Northern California and the tech markets, the Peninsula, you know San Mateo, even suburban parts of San Jose would be major beneficiaries of that, because I -- we view that technology is going to continue to be a very strong economic driver, and the tech ecosystem in the Bay Area is incredibly unique. And therefore, we think it will do well.

Nick Joseph -- Citigroup -- Analyst

Thanks for that...

Michael J. Schall -- President and Chief Executive Officer

That answer the question?

Nick Joseph -- Citigroup -- Analyst

That's very helpful. And then just one quick follow-up -- one quick question, I guess on the rent relief programs. Is Essex helping residents who are behind, kind of fill out or navigate the ability to get rent relief. And is there any kind of rent relief from the government [Indecipherable] guidance?

Michael J. Schall -- President and Chief Executive Officer

Yeah. The -- noted on the call -- that last week, the State of California using federal stimulus dollars started a program or announced a program $2.6 billion potentially rent relief, and the way it would work is, the landlord would be required to forgive 20%. And so the reimbursement from these programs could be 80%, that will be predicated on -- you know percentages of median income, average median income. So it will provide the greatest benefit to those that are lower income levels. And it's hard to tell exactly what that means, but we just haven't had enough time to evaluate that program. So, I'm guessing that we will have a pretty significant positive impact from it. But again, it's too early to evaluate.

Nick Joseph -- Citigroup -- Analyst

Thank you.

Michael J. Schall -- President and Chief Executive Officer

Thanks, Nick.

Operator

Thank you. Our next question comes from the line of Jeff Spector with Bank of America. Please proceed with your questions.

Jeff Spector -- Bank of America Merrill Lynch -- Analyst

Great, thank you. First, I want to say congratulations to Angela and Barb, and we wish John a great retirement. Thanks for the time today. Mike, in your opening remarks, you know -- you commented that you have or soon will reach a bottom in market rents. And I know you're fairly conservative, and so I take that comment -- you know pretty serious. I guess, what gives you comfort to say that. Can you just talk about that a little bit more please?

Michael J. Schall -- President and Chief Executive Officer

Of course, Jeff, I think it's a good question, and it's -- I think probably, maybe the most important question out there. So if we look at net effective rents for the fourth quarter sequentially, they were down under 1%. So that's all of the markets. Now there's pretty significant variation between market to market, and part of that is -- you know, even though we have high occupancy overall, there are parts of our portfolio that have lower occupancy. For example, San Francisco is still at 92.5%, Seattle downtown is at about the same level. And so there are areas that were very -- very highly occupied, that are offsetting areas that are -- they don't have the same occupancy and actually below the average occupancy level. And most of that, as Angela alluded to, is related to the supply level. As you can imagine, if you've got negative job growth equivalent to right now, still as of December, equivalent to the worst part of the great financial crisis, it is not -- not a great time to be delivering apartment units, and therefore -- in this -- the cities are getting the bulk of the supply delivery. So you have this confluence Angelo spoke about, which is negative demand growth and lots of supply and the cities are understandably hit from that.

Offsetting that is we do have markets that are doing very well, you know, for example, Ventura where rents are up almost 10% year-over-year on a market basis. And so we're doing pretty well, a lot of these suburbs. Now that leads to this issue that talked about many times, which is rental income, and it's interesting that Ventura -- with its -- I think it's, well 8.5% to 10% rent increase is now about 17% above its long-term historical average of this ratio rental income, which is incredibly important to us. Whereas the Northern California were 7% below the long-term average rental income. So everyone looks at this like -- hey, the suburbs we're going to do a lot better, but when rents go up along ways, I would question that, and conversely when the rents are essentially hammered in the cities, it changes the consumer's view of where the opportunity is. And so our view is a -- long -- a little bit longer term, that you're going to see a very significant movement back toward the areas where -- rents are high-quality cities for rents are pretty affordable.

Jeff Spector -- Bank of America Merrill Lynch -- Analyst

Thank you. That's very helpful. And is that would ultimately lead to Essex providing the full-year guidance, which is very much appreciated?

Michael J. Schall -- President and Chief Executive Officer

Well, -- there is a number of things. We have a whole -- I kind of have a philosophy on guidance being ex-CFO. And if I weren't here, I'm not sure Barb and Angela wouldn't have come to a different decision to be perfectly candid. So, but yeah, I mean -- our preference is to always provide what we can and to be pretty open with the market. And then, you all can disagree with us, but presumably, we have better information that you have, and therefore it's up to us is sort of lead the way. So that's the philosophical position I took and it prevails.

Jeff Spector -- Bank of America Merrill Lynch -- Analyst

Thank you.

Operator

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

Rich Hill -- Morgan Stanley -- Analyst

Hey, good morning guys. Thanks for all the transparency provided in the release, and the prepared remarks. One of the things that struck us is that, you guys did a really good job early on valuing occupancy over rent. And I think that's one of the reasons that you really starting to see some sequential growth. And you've alluded to this a little bit, but I do want to -- maybe drill down a little bit more on the leases that are coming due and what's historically the peak leasing season. And how you think you're going to manage through that? I recognize that, you said 1Q is going to be tough, 2Q is going to be challenging, as well. But how do you think through that. How do you think your occupancy set you up to manage through the leases coming due when demand is still not going to be back to where it is?

Angela L. Kleiman -- Senior Executive Vice President and Chief Operating Officer

Yeah, hey, It's Angela here. That's a good question, and it's certainly something that we actively debate internally with -- the tactical strategy rates. Well, I don't think I want to go through our playbook, in detail, I would just say that -- that we focus on maximizing revenue, and we do so by optimizing occupancy whenever possible, would beat the market. And so given where we are, and you're right on the point that we did in the third quarter, focused on occupancy, which allowed us -- fourth quarter [Indecipherable] concessions. As we see the market stabilize. And so, as we continue to see the -- how the market performs, we will continue to use that strategy and the goal at this point is really to try to -- pull back on concessions whenever possible. And of course, keep in mind, that subject to of course supply, which I've mentioned in the CBD's will continue to be pretty heavy, and we are assuming a recovery in the back half of the year. So all those come into play.

Rich Hill -- Morgan Stanley -- Analyst

Okay. I think that -- I have appreciation for you, not wanting to give the playbook away, I would love for you to. But I appreciate why you might not want to. I wondered, on the other side of the equation, just the job growth, one of the things that believe it or not, I think is misunderstood about your portfolio is your Class A, B, mix in urban versus suburban. I'm not sure that's always appreciated by the investor base. So when you think about job growth, can you maybe break down those job growth views relative to white-collar, high class, high-paying jobs and urban markets versus maybe the type of renters that would rank Class B in the suburban markets?

Michael J. Schall -- President and Chief Executive Officer

Yeah, this is Mike. And there is a lot to that question. So I'll try to unpack it as best I can. Every recession is a little bit different and normally we view, Southern California, as our more typical of the US average and therefore it's less volatile. In this recession it has been incredibly volatile in certain sector and that is the motion picture sector. We didn't talk about it at this time, we have on prior calls, and it's [Technical Issues] shut down and this is like the big wealth generator in Southern California. And so Southern California is probably the biggest surprise relative to prior recessions. For example in the financial crisis, market rents went down in Southern California about 10% versus about 15% for the Essex portfolio in total. So this time Southern California looks a lot like Northern California and I think it's because of the two key parts of it. Again the filming and entertainment business plus all of these low jobs. When you look at the sectors of jobs that have been demolished, it's all the lower income segments of the job base, mainly it's hospitality and restaurants, and other services, those jobs are down.

On the metros somewhere in the 20% range which means in the cities, which are even higher concentrated they are even more impacted. So as Angela said you got more supply coming into the cities, you also have worst job growth. Again, when we give you the averages, these are averages, they're more concentrated in the cities.

And then when you go north into the tech markets, I think that you have two things that are happening. You have all those service jobs in Seattle and the Bay Area. But you also have, I would say, greater work-from-home flexibility that is -- that on the margin has allowed the areas that would generally be -- that are suburban in nature. Most of San Jose is suburban, has a very small downtown, up Peninsula through Mountain View where Facebook is located and Google right in outlook that area. Those areas have been greater -- much greater impacted. And I think a lot of that is the work-from-home phenomenon.

So I think that the -- so I think the recovery looks like a couple of things. There's nothing fundamentally wrong with any of these businesses. The motion picture business is still a high demand. The technology companies, as noted in the prepared remarks, a lot of venture capital money being invested, lots of investments being made by the big tech companies into locations and buildings. And so everything I think in terms of the broader economy looks fine. We need those companies to bring -- come back to the office to some extent.

We also need -- there always people that are retiring and again selling their expensive California home going somewhere else and then backfilling comes from college graduates coming to take high-paying jobs. So I think that there is a mismatch there. I think that the people that are leaving have left. The low income can't afford to stay. They either have left or are staying put given anti-eviction laws. And then -- but we haven't seen the backfill yet. And I think you're going to see the backfill starting in the next relatively soon. And I think that they will start to solidify because we're 90%-something occupied. It doesn't take that many jobs to sort of fill things up, tighten things up and then concession start abating pretty quickly.

So that's how we see it. Hopefully that helps.

Rich Hill -- Morgan Stanley -- Analyst

Yeah, that does help a lot. One final thing for me. It strikes a chord for me when you say you have more information than us. I think that's very true. I would encourage you if there was anything that you could provide on population migration trends that you're seeing in your specific markets in the coming months. I think that will be really well received. But thanks, guys, I really appreciate as always the dialog.

Michael J. Schall -- President and Chief Executive Officer

No, no. We're happy to give it. I can give you a little bit of migration information. And again, similar to prior recessions where everyone focused on the very short term, which is recessions happen about every 10 years, about every 10 years -- I was 50, now I am 60. I make a different decision when I'm 60 with when I am 50 about where I live and how hard I want to work on various things and -- so that's part of it. And so lots of people make changes in their life based on where -- what they're doing and how close they are to retirement in a variety of other things. So I would say a lot of what you're seeing is just the first leg of what always happens about every 10 years and typically around a recessionary period. But in terms of inflow outflows, it's a little bit different by market. We still -- the migration into our markets is still dominated by New York and Boston and even some other California metros. So there's quite a few people moving from San Francisco to Los Angeles, for example, maybe for better weather or whatever. In LA the outflow is really Las Vegas, Phoenix and other California cities and in San Francisco, it's Seattle, Austin, Sacramento. In Seattle, it is Phoenix, Boise, Austin in terms of outflow. And again, all three benefiting from highly skilled workers probably in a lot of the eastern metros and from some California cities. So hopefully that helps. That's LinkedIn data, but our experience is pretty consistent with that.

Rich Hill -- Morgan Stanley -- Analyst

Thanks, guys.

Operator

Thank you. Our next questions come from the line of Amanda Sweitzer with Baird. Please proceed with your question.

Amanda Sweitzer -- Robert W. Baird -- Analyst

Great. Thanks for taking the question. I want to dig in a little bit more than just the near-term demand you're seeing, kind of as you've had occupancy pick up, give a sense of where that demand is coming from? Are you taking share from other properties in the market or have you really seen lenders moving up in quality like you have last cycle?

Michael J. Schall -- President and Chief Executive Officer

Well, Angela I think put a happy face on it. And I'll let her comment in a minute, but it's a battle out there. So I wouldn't say we're taking it into from anyone. I'd say we're all competing fiercely to -- and we all have maybe a little bit different focus. And again, as we've said before, our focus is maintaining, high occupancy, protect the coupon rent, we will concessions when we have to, try to be aware of what time of year it is and what that battle is going to look like and plan ahead. So I think we do a good job of that. But I don't think -- I don't think there's any winners in this current situation. So we are trying to turn the battleship toward a better day. But it's not quite here yet. Obviously apartments -- we look ugly when it's getting better and if we lag, one of your leases cause us to lag. and the all-time high in terms of our achieved leases will hit in Q1 and Q2, which is why the year-over-year will look so ugly. And -- but things are definitely slowly getting better and I think we'll see that down the road as Angela said in the second half.

Amanda Sweitzer -- Robert W. Baird -- Analyst

Okay, that makes sense. And then turning to the disposition you have lined up, can you just provide more color on kind of a profile of those assets either in terms of age or location? And then as well as the buyer pool and if that buyer pool has changed at all from pre COVID?

Adam W. Berry -- Executive Vice President and Chief Information Officer

Sure. Yeah. This is Adam. Happy to answer. So for those three, they're situated throughout our portfolio. And so from -- there is really no kind of a general overview of the type of asset they are. In all three cases, these were actually three exchange buyers. And -- so to say there is one in the Bay Area, just to use as an example. It's in a heavily concessioned Bay Area market and the way we're underwriting it as you would imagine, it's kind of tough to peg cap rates given where current net effective rents are.

So we're underwriting it based a couple of different ways. One is on kind of pre-COVID in-place rents. And then looking at current net effective today. On current net effective that deal, again this is a heavily concession Bay Area market. It's in the low 3s, so call it 3.2, something like that. And on pre-COVID numbers that's about a 3.8 or so. And so that's the spread. That was underwritten in the fourth quarter. So concessions have has varied before that and sense, but that's the ballpark, and there still is -- there is enough of a transaction market out there where market has been set -- the buyers are a little different than -- during your typical cycle. But there continue to be deals that they go down.

Analyst

Appreciate all that detail. Thanks.

Operator

Thank you. Our next question comes from the line of Rich Anderson with SMBC. Please proceed with your question.

Rich Anderson -- SMBC -- Analyst

Hey, thanks, good morning and congrats everyone. And congrats to John, too, if you're listening. On the topic of eviction moratorium, I'm saying, if that could be messy time when they start to expire. I wonder, if you agree? I mean, some people just start paying again, but then perhaps a [Indecipherable] I've got to leave now because they're making pay. Is there a risk that you could see some volatility in the occupancy when those things start to burn off. And we kind of try to get back to some sort of normalcy?

Michael J. Schall -- President and Chief Executive Officer

Hey, Richard, it's Mike. And maybe, Angela want to comment, as well. But I think messy was -- way to describe because I think we're looking -- we evaluate very much the same way. The back-end when AB 3088, which again was supplemented by -- this has been 91, 3088 was passed in August, and required residents to pay COVID-affected residents to pay at least 25% of the rent. And by January 31, and then SB 91 rule that January 31 date to June. So the 25% is getting larger and it definitely will add pressure to that whole situation and yield. I definitely not smart enough to figure out how that's all going to play out, we're all hoping that this federal stimulus money, we have a mostly a B type of portfolio. And so, we don't have any quantification of it whatsoever, but that would certainly help a lot, because that would potentially pay 80% of the unpaid rent, and we would have to walk away from the other 20%. But that's a whole lot better than what we've assumed in terms of our delinquencies. So yeah, I think we're covered in terms of the normal to kind of probably slightly conservative case scenario and maybe there is a little bit of upside here given SB 91. So that's how I'd answer. But you're absolutely right, I don't know -- I don't for sure know the answer to it.

Rich Anderson -- SMBC -- Analyst

Okay. And then, you kind of talked about your portfolio sort of characterization -- quality. I guess, I'm a little surprised that the portfolio didn't do a little bit better, disruption going on in the urban core, you think said that your portfolio being -- once removed from those environments might have captured a bit more in terms of flow of residents. And it's easy for me to say, obviously is a lot going on, your markets. But perhaps maybe it's that -- they characteristic of your portfolio again sort of be quality that necessarily downtown locations that gives you the feeling to say something like cautious optimism. I'm wondering, if that's a driving factor to some of the optimism that you're kind of trying to say today?

Michael J. Schall -- President and Chief Executive Officer

You know, I mean optimism is -- I'm not sure where -- if optimistic is yeah will looks like we've hit bottom after get it being pummeled. And yeah, I guess that's optimistic, but I wouldn't -- I wouldn't say that. I mean, I think that -- as I said in the opening script, and the reason why I put it in there is -- hey -- this -- we're still at a point where the nation losses many jobs as it lost in the financial crisis. And in the financial crisis, our average market rents were down 15%. Seattle was a little worse, about 20% and Southern California did a little better. So I think we are kind of where we are -- where we would expect to be given the extraordinary number of jobs lost. Now It's not the same, as the financial crisis in that, you've losses low end service jobs and they are mostly in the city servicing at various levels, very wealthy clientele with -- lots of money. So it's a different, but mostly the same. I would say, I'm not surprised about where rents have gone in general and I hope for a robust recovery with vaccine distribution and all that's, because it seems like a lot of this is -- really focused on COVID direct outcome. [Indecipherable] losing service jobs is because of COVID, because of service jumped to start there, the shut down by the government. So I think will they'll come back pretty quickly, because I think people do want to go out to eat dinner and that type of stuff. And so it's going to come back and I hope obviously.

Rich Anderson -- SMBC -- Analyst

Okay. And just real quick on the delinquency, kind of just take a reserve against all of the 45% hit to this year. And then, we will look at, what's your experience in terms of then -- actually not deserving a bad debt tag and they actually become collectible. Is it 50% in past cycles or the hard to say because this one is so different?

Barb M. Pak -- Executive Vice President and Chief Financial Officer

Yeah, this is Barb, -- this cycle is very different than any other cycle, even during the financial crisis, our delinquency was only 50 basis points to 60 basis points of scheduled rent. So being at 2.7%, which is where we've been the last couple of quarters. Obviously a lot higher. I think in the fourth quarter, we did take, we reserved against all of it, and that was really due to the environment, we were in a severe lockdown down state for most of the quarter and into January, not really knowing -- any of that was going to lift. We decided to take a pause and won't reassess in Q1. and see where things are at, as that goes. And then the $0.45 that I alluded to in my script, that's really compared to our historical run rate. So for the foreseeable future, we do expect delinquency to remain elevated -- eviction, protection moratorium has been one goes till June, and then we don't know what's going to happen after that. So we have assumed that we don't make a lot of progress on the delinquency, it's not because we can collect. It's a combination of both. People who are not paying and collections kind of are getting us to that mid 2% range of scheduled rent.

Operator

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

Rich Hightower -- Evercore ISI -- Analyst

Hey, good morning out there. Guys. Just a quick one from me, we've covered a lot of ground. But, so just on this disconnect between reported same-store and FFO given the cash concession accounting treatment versus GAAP, with respect to revenue and FFO. So if we sort of assume the concessions, heavy concession shutdown on June 30, let's say, which I think is sort of implied in the outlook. And help us understand the cadence thereafter, when you would sort of stopped seeing that disconnect between the two series, just as we think about modeling that into 2022, it sounds like?

Barb M. Pak -- Executive Vice President and Chief Financial Officer

Yeah, well, I don't have 22 guidance at this point. But in the back half of the year, we do expect concessions to moderate, not -- completely, but to moderate,, and that's where you'll see -- it will benefit same-store revenue growth. But the offset will be on core FFO growth, given that we'll have to amortize the straight-lining of concessions. And so that will mute our core FFO growth relative to the same property growth that you'll see. And we expect that's happened in the last two quarters of this year. And then 2022 is not something I can give at this time.

Rich Hightower -- Evercore ISI -- Analyst

Yeah, right. Thanks, Barb. I guess that part of it for -- while the concessions are still [Indecipherable] But I mean, is there a way to walk through the timing, assuming a 12 month lease or something like that -- that would say, OK by this point in 2022, you would see same-store and FFO converge or correlate more in -- where they have historically -- to frame that out or is it just sort of reaching too far at this point.

Michael J. Schall -- President and Chief Executive Officer

Yeah, Rich, this is Mike. Let me add something here, and Angela is in the middle of this, so she can comment too. But it's more like a battle, everyday, because we are constantly increasing or pulling back concessions, change in rent levels, trying to find the optimum for net effective rents. And so, it's impossible to model that. And so I'd say, trust us to do a good job of trying to figure that out. We have people that are spending very -- I'd say senior people that are spending a lot of time in the trenches pricing units every [Technical Issues] a little bit different as you can imagine. Supply and demand changes on a daily basis. We just can't tell you what's going to happen. We can tell you -- our guidance is based on something. But the reality is we can't tell you that that exactly is going to happen and the mix of concession and rent differential, it could change. And this is -- you know I've been here for a really long time, many of you probably say too long, but it's unlike any other period I've seen. And as a result, it's very difficult to be too granular with respect to answering these questions.

Operator

Thank you. Our next question comes from the line of Alexander Goldfarb with Piper Sandler. Please proceed with your question.

Alexander Goldfarb -- Piper Sandler -- Analyst

Hey. Good morning. Good morning out there. First, we will continue the congrats. So, Angela and Barb [indecipherable] as we say here in New York on your new roles. That's wonderful. But, Mike, to the point of CEO succession planning, I mean obviously we saw AvalonBay do it. You guys did it a number of years ago. When Keith handed the reins over the year. It did seem from the outside that John was being groomed, maybe that wasn't the case. But again on the outside, that's what it looked like. So can you just talk a little bit about CEO succession? Does this impact anything, does it not? And just any other impact that may come of this or maybe this open up -- this opens up spots in the senior ranks to allow you to groom more people to raise more senior roles at Essex.

Michael J. Schall -- President and Chief Executive Officer

Yeah, Alex. Thanks for the question. It's a good one, really important. We take succession planning super seriously. I am really pleased that I have three very, very capable executives around me and I think as I look even beyond them we have a pretty deep bench. And you're right, I was somewhat surprised when John contacted me late third quarter, early fourth quarter about sort of a change of plans involving him. And I asked him to reconsider and we all need to live our lives and make decisions. And so we decided on the course and it probably took too long to come to agreement about what his role was going to be going forward. We ended up with the press release after Christmas, it could have been -- it could have been much earlier, just took time to finalize what that was going to look like. So apologize for the optics of it.

Having said that, John is always in our minds and our hearts and he is forever a part of the Company and certainly we wish him well. He has done a tremendous amount of good for the Company. So as we think about succession planning the basic philosophy is the doors to or the paths to the CEO job are always open and the historical path has been mostly through finance. I came through finance and then ran ops and that up. But we want other paths to be open too, including maybe through operations or through investments. So wherever we see talented people, it's one of my primary jobs to keep those paths open and don't let them be blocked by people that are -- that don't have interest in being CEO. That's kind of the key to the whole thing. And then backing off of that down looking at the people below and making sure that they have diverse experiences and a root around the organization. And in the case of Barb, Angela, John all of them wore a variety of hats on their way to up the organization. So we expect to continue to do that. And I think that's the way it has to be in order to have a proper succession process.

Alexander Goldfarb -- Piper Sandler -- Analyst

Okay. And then the second question is one of the hallmarks of Essex has been investing when there is abnormalities in the market. And Mike, you mentioned something interesting that in the suburbs the rent affordability index was at perhaps the all-time high or definitely elevated whereas the urban areas are below the average, more affordable. However, you guys have sold out of the urban areas and been more suburban. So does this make you want to switch and now sell more suburban and get back into the urban or are there other dynamic at work where with this pricing affordability imbalance you wouldn't do what maybe you would have historically done prior to the pandemic? Maybe I'll have Adam comment on that and then I'll fill in when he is done because he looks at the stuff in a lot of detail. And I give him a lot of credit because he is out there transacting when no one else is. And some of the transactions he has done, we are so close to the pre-period and I think it's pretty exceptional what we've been able to accomplish. So, Adam, do we going to comment on that?

Adam W. Berry -- Executive Vice President and Chief Information Officer

Sure. Yeah. And, Alex, hopefully this is the gist of what you're looking for. We're always -- we're looking at all of our markets at all times. And so during this recent kind of -- recent -- during COVID period we've been primarily sellers. And most of those we sold in the CBDs. And we've done that for a variety of reasons and that dates back to we sold 8th and Hope in Downtown LA, sold Mosso in San Francisco prior to COVID and those -- pricing on those deals was significantly above what our in-place NAV was at the time. And so we felt at the time the right decision to make from an arbitrage standpoint was sell those and reinvest in either our existing portfolio, buy back stock or in other assets in suburban locations.

The really heavily impacted CBD locations, quality of life especially say in downtown LA and San Francisco has been challenging and will likely continue to be challenging here for the foreseeable future. Many of the -- what we consider or what we call suburbs are very densely populated suburbs and that's where we see opportunity and that's where we see much of the market coming back sooner rather than later. So like I said -- we're constantly assessing where we are. And if there are opportunities in CBD where we can buy at a good basis and we see significant rent growth, we'll do that. But, yeah, I mean like I said, we've been net sellers here and we've sold -- all the deals that we sold last year and then into this year have been within 2% of our pre-COVID NAV, some above, some slightly below. So that's been the right philosophy and the right strategy and we'll assess as we go on.

Mike?

Michael J. Schall -- President and Chief Executive Officer

Alex, maybe I'll add one more thing, just real briefly, the walk score issue is pretty interesting to me, because the areas with the best rent growth have the worst walk score. And then the CBDs and some of the places that have the best walk score have been hammered in terms of rent. So everyone needs to ask themselves a question. Will walk score ever matter again? And my view is it will and it'll be nuanced and it may not be the highest walk score gives you the best rents. But I just have a belief that having nice location, low crime, pleasant surroundings, lots of entertainment and food options etc. is going to continue to be important. And those are in sort of the high-quality suburbs that Adam just referred to.

Operator

Thank you. Our next question comes from the line of Zach Silverberg with Mizuho. Please proceed with your questions.

Zach Silverberg -- Mizuho -- Analyst

Hi. Good morning out there. Just a quick one for me. Just a follow-up on an earlier one. In the supplemental and your prepared remarks you talked about the BC investments and job postings and FX market. Maybe you can give a little historical context around that. Is there a specific correlation that you're looking for or bad time or how are you able to sort of quantify this momentum in terms of lease-up for lease rates?

Michael J. Schall -- President and Chief Executive Officer

This is Mike. I have the experience of living through the dot-com bubble and then burst. And I would say that what I see relative to that is not even close. During the dot-com bubble period, rent surged about 40% in two years. It set our all-time high in terms of rent to income level. So rent screen at very high percentage of income level. And contrast that to what I said earlier, which is -- rents appear very affordable, San Francisco real rents down somewhere around 20%. Northern California in general is about 7% below our long-term average of rent to income in terms of affordability. And if I compare, if I take a look at that number and compare it to the financial crisis, I think we got to about 90% of the long-term average. So, Northern California we're at 93%, so it's starting to feel pretty affordable. Again, these are areas of support high income, high jobs, high paying jobs, etc. And the rent levels are now at a point where I doubt that the tech companies are going to bear [Indecipherable] all that much at the cost of living because you know -- affordability has changed pretty dramatically overnight. I can change back, it doesn't take that many apartment, new apartment units at demand to come in and take 96% occupancy to 97%, and then it's a whole different game. But that's the way that we look at it, we've said the band between rental income -- the band between 90% and 110% is kind of the green zone that we do well in. And in the markets that have been the hardest hit, we are closer to the 90% of the long-term historical average. And again Ventura were above the 110%. So it's a -- it will change the choices that renters make, I believe.

Zach Silverberg -- Mizuho -- Analyst

Got you. I appreciate the color. I just have one quick follow-up, in your guidance, you're not really guiding for any development. Can you maybe just comment there -- is there any future opportunity that you guys are looking at anything that -- you guys just sort of having contemplated in guidance. Any color there?

Adam W. Berry -- Executive Vice President and Chief Information Officer

Yeah, Zach, this is Adam. We're constantly looking at different development opportunities. And we do get exposed to quite a few to work through our press pipeline, as well and they kind of -- can both feed off of each other. We have a couple of deals right now where we're looking at fairly seriously in pre-development stages where we're spending minimal pursue dollars. We actually did, we walked away from a pre-development deal last year. But there continues to be some potential there, as well. So, we're looking for unique opportunities, development yields right now, [Indecipherable], generally speaking. But these two or three that we're looking at -- ones a really well-located, high quality of life -- suburban location. One is, really good -- in a really good job center TOD. And then the other one is also very good job situation with some existing income. So looking at everything, and one or two might fit the bill.

Operator

Thank you. Our next question comes from the line of Nihal market with Capital One Securities. Please proceed with your question.

Neil Malkin -- Capital One Securities -- Analyst

Thank you. Good morning, everyone. Two questions. One, make one for Adam and also congratulations, Angela and Bard as as well. First, looking at the sort of recovery that you guys are sort of talking about. I mean, starting in the second half. I guess, I just wanted to kind of understand what you think that looks like in terms of the timeline to get back to like -- I guess "covered". I ask because you look at your main ethics markets about 1.1 million jobs have been lost in 2020 and you're assuming like 3.4% or around 400,000 jobs. So a little under three years of that kind of growth would be needed to get back to a level commensurate with pre-COVID. So just based on those things, Mike, how do you guys see that sort of "recovery". I understand the comps in the second half of this year going to be very easy. But after that, you know what you guys kind of think about we're at again -- like pre-COVID type pricing?

Adam W. Berry -- Executive Vice President and Chief Information Officer

Yeah, that is -- that's a great question. Well, for example, based on the job losses in San Francisco, we should be a lot lower occupied that we really are. And so, what happens during the recession is people move closer into the better areas, plenty of people will say, hey I would live in San Francisco. But the rents are too high. And so they live within the proximity around San Francisco and commute in. And then once this happens, they make a different choice and they say, hey, with those rents there is a backfilling approach. And so I would agree with you what happens -- the natural consequence of that is, and then obviously there's another way beyond that in and other way beyond that, and somewhere out there on the hinterland in the very periphery, -- the Bay Area, you have areas that are not 95% occupied. They might be 80% occupied, because people make different choices based on pricing. And again, this has been one of the absolutes in my career, and why we harp on this rental income ratio has been so important. So you know, the people, the number of people to move data San Francisco versus -- It has been backfilled. But largely by people that I have moved in from -- let's say, Oakland or further out. And want to live in the city. And then it gives us backfill and process is ongoing. So here we are at 96%, having lost all those jobs you just mentioned. And so the question is, when those jobs come back, how does this reverse itself, and some of these people will be happy to live in the city for a year and then maybe it will be priced out of the city, and will be moved into -- one of these secondary markets. So you're absolutely right. But, and again, we price it -- this is part of why we price things to keep occupancy high because if we keep occupancy high, will draw people out of the -- let's say, the less desirable suburbs, and wait for demand to come back, and that is our way of maximizing revenue during the recessionary periods.

Neil Malkin -- Capital One Securities -- Analyst

I totally appreciate that strategy. I mean, -- the right one. I guess, I'm just trying to get at -- like I told you, it's great that you have 90%, 96% above occupancy, but that doesn't -- the market rents are still terrible. So yeah, I guess, I mean, like 2022, I don't know, I'm just saying like -- do you -- like 2023 are you back. I'm just trying to kind of assess what that looks like for the -- portfolio. I don't know, if I can -- give that, that's hard. I apologize.

Michael J. Schall -- President and Chief Executive Officer

Great. You're spot on. I mean, but unfortunately, we won't be able to be all that specific about this. I would tell you that part of the reason why we do what we do is because concessions kind abate pretty quickly. And I can't tell you how quickly, and I can't tell you how many jobs is going to take in order for that to happen. But I can tell you that is typically what happens that concessions, as quickly as they came, they can go away. Just as quickly, we're going to have the overhang from the straight line rent issue, which is a different factor. But our hope is that we get enough demand -- those tech companies continue to hire people, we bring them, if they decide to live somewhere close to be major urban centers or most -- where most of the job locations are. And again, it just doesn't take that much. But how long will it take to get back to where we were? I mean it's a battleship and it's going to take a year or two, at least to get back there, is what do we guess. I mean the trajectory, as you point out, we lost a whole lot of jobs in the nation. And we've got some of them back, but we're still going to have a shortfall and we're delivering some apartment units. I would argue that the single-family component is so muted, and a lot of markets have a lot more single-family as a percentage of total stock, housing stock that we do, and [Indecipherable] around. I think it's a by 23% production level will help a lot. And so I think I would guess it is the restaurants open up. We're going to see a surge of people coming back into the cities in the service jobs and concessions are going to abate pretty quickly. That's what I think would happen. And there will be -- we'll updating as quarters go by, but it's hard to tell exactly when this is all going to happen.

Operator

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

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Thanks, guys. I appreciate you keeping this going. And also a lot of great detail in the release on job postings and some of the macro forecast despite all of this uncertainty. Your response to a question on migration patterns that some people left are coming back certainly seems to be the case. But how are you contemplating or does your guidance account for the portion of residents that didn't lose their jobs or even students that temporarily left your market or campuses in these markets?

Michael J. Schall -- President and Chief Executive Officer

It really doesn't. I mean, we assume that there is sort of a tailwind, a demographic tailwind in that people live longer and they retired about at the same time they used to retire, so they have longer retirements. People live longer, consume houses without consuming jobs. And so there's sort of a presumption that that is a demographic tailwind that's going to be with us as long as people live longer. In terms of being more granular than that we're really not. And we know those people are out there, there is lots of contract workers. And I don't have that data. It was something John used to focus on a lot. But a lot of contract workers that left and amid COVID and connected with both the entertainment industry and the tech industry, How many of those come back remains a question too. So I view it as when uncertainty unfolds everyone kind of pulls in. The companies become less aggressive in hiring. We saw that, we saw the drop-off of tech jobs by the top 10 employers there. And all the contract workers go home. If there is a little bit of a bright spot here the Trump administration was pretty negative on H1B visas. That will probably open up a bit and immigration might open up a bit here, which I think will help somewhat. But we don't try to get more granular other than to look at this supply demand ratio really represented by jobs. That's probably 80% of the total picture, something like that.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Okay. No, that's helpful. Appreciate the thoughts there. And then Barb, I think you mentioned kind of concessions run high in the first half of the year. But I was wondering if you could put a finer point on that. Do you expect the net effective pricing that you provided in the release this quarter, do you expect the pricing you achieved in 4Q and early part of the year that that reverses, because we don't see the demand come back until maybe later in the year or does it kind of hold around current levels and then improve in the back half of the year?

Barb M. Pak -- Executive Vice President and Chief Financial Officer

Are you referring to S16, the new and renewal when you talk about net effective pricing?

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Yes, correct. I think you already on gross before and provided some net effective data this quarter.

Barb M. Pak -- Executive Vice President and Chief Financial Officer

I think, Angela can talk about pricing, but yes, in the guidance we do assume concessions remain relatively consistent with Q4 for the first half of the year and then moderate in the second half of the year.

Angela L. Kleiman -- Senior Executive Vice President and Chief Operating Officer

Yeah. And that's a good question. Angela here. On the pricing I think the way we think of it is that Mike talked about market rents troughing kind of currently fourth quarter or December, January, and I talked about scheduled rent troughing, say, by the end of second quarter because I was looking at year-over-year. And so there's couple of different factors which may be a little confusing.

So as far as pricing is concerned, we currently do see what we reported in January to hold. Keep in mind, this is also toward the lower peaking season. So as we progress and as the economy continues to improve and reopen, we -- that's why we talked about second quarter -- I am sorry second half of the year being better. But it's hard to talk about it kind of month to month. I think right now we are in good position because we had employed the strategy of higher occupancy which allows us to reduce our concession until we're able to continue to do that. And that's what we're targeting for our guidance for the year.

Operator

Thank you. Our next questions come from the line of Nick Yulico with Scotiabank. Please proceed with your questions.

Sumit Malhotra -- Scotiabank -- Analyst

Hi guys. This is Sumit here in for Nick and I apologize, I know we all ask the same questions differently, but I just want to sort of understand how you guys look at this problem. 2020 wasn't a normal year for leasing. The cadence actually changed. Most of your occupancy gain happened in Q3. And in Q3 as I was looking at the month-to-month stuff, July was the peak sort of occupancy burst and then a little bit sort of 50%-50% split in August, September. You also offered more concessions in the Labor Day kind of time frame. So I guess if everything the concession aside, vaccine aside, everything is sort of -- if you look at it from a normal lease expiration schedule perspective things weighted toward Q3. How does that sort of reset to more normal kind of cadence of turnover in leasing unless you invite in shorter leases or I'm just inquisitive on that.

Angela L. Kleiman -- Senior Executive Vice President and Chief Operating Officer

This is Angela here. I think you're asking about the cadence of our leasing season. And if that's the case, if that is your question, we would expect that cadence itself for 2021 to be somewhat similar to prior years. And so we would expect depending on our markets for the most part they kind of -- they start peaking say around June and CL peaks later, say closer to July. And during those times we tend to have the least amount of concessions, but because our leases also -- more leases turn during that time, we may -- we would probably end up with slightly lower occupancy just by the way the numbers work.

So that kind of gives you the trajectory in terms of our business. But the reason we're talking about when things trough and the year-over-year comparables because that does impact what happens for the whole year and that behaves differently because of COVID last year, because second half of 2020 -- I'm sorry, first half was 2020 was much better than second half. And so you kind of have that flip in terms of year-over-year growth where first half of 2021 will be much harder and second half will be easier.

Sumit Malhotra -- Scotiabank -- Analyst

Got it. Okay. Yes, yes, a little more clarity on the cadence is what was -- what I wanted to hear. So, thank you. And in terms of like when we look at your macroeconomic forecast, kudos to Mr. Paul Morgan and team, I guess, it appears that Northern California has the highest job growth of 3.4% but the lowest rent growth at minus 3.6%. So there is a lag. I assume that the lag is related to the hypo concession activity we saw in 2021 and 2020 and so you're sort of building back from there. But I'm also wondering whether you guys have any sort of factors or discounts for jobs that are created by companies domiciled in California, but have offered the employees the flexibility to work from anywhere. So, is that factoring into your kind of negative 1.9% rent growth forecast, effective rent growth forecast?

Michael J. Schall -- President and Chief Executive Officer

Let me comment on the minus 1.9%. So what that represents is each month, year-over-year what the market -- the effective rent differential is year-over-year. So again, if you look at January of this year the prior-year rents were going up. And obviously, we've had a big decline in current rent. So you start with a large negative number in January year-over-year and then as you go through the year those lines are going to cross because we're going to end up with lot easier comps in the second half of the year. And so it really is the trajectory of rents, year-over-year. So it's going to start with a big negative in January and then it's going to go to a mid-single digit positive by the end of the year and averaging all that out, so January over January, February over February, projected market rents, average all that out to minus 1.9. So it's not intended to be because of concession. It's really -- it's really because we've had -- we start the year. Again, the prior year rents were all-time highs, rents have rolled down a lot. So we start in a whole. And for the first half of this year and then we start hitting much easier comps, as we get into July, August, September. And then our year-over-year would be positive. When you average all that together, month-by-month, you get 1 point, not minus 1.9%. Does that make sense?

Sumit Malhotra -- Scotiabank -- Analyst

Yeah. Got it. And then, as far as your job growth forecast, as being a driver of that model. Does that factor in any work-from-home flexibility versus let's say -- a model that you built in early 2020?

Michael J. Schall -- President and Chief Executive Officer

I didn't [Indecipherable] that question specifically. But he is a very thoughtful guy and he is well aware and very concerned as well -- about this work-from-home scenario. But again, our base case scenario is that people will have greater flexibility working-from-home. But again, as a CEO of a Company, being able to have this team dynamic, what we're trying to accomplish, there so many pieces to this organization, I'll have to act in unison, you got to know the people and so that's what really makes us believe that this hybrid model where greater flexibility. Our work-from-home. But people that are going to be in proximity, unlikely to be far -- far away from the office, because they're going to have to report from time-to-time, let's say, two, three times a week. We think that is probably what's going to happen for a lot of workers. Again, and I'm excluding all the workers that have to -- show up, which I think was estimated at about 60% including -- for example, all of our property teams, anyone that works at a restaurant, etc. there was lot of job [Indecipherable] there is no work from home flexible, there is no such thing. And I think that the -- if you read a lot of these reports and news clippings on the subject, that kind of forget about those people. And so, yeah, I think it's going to -- again -- we will have more work-from-home flexibility and that -- maybe The City Centers are a little bit less desirable, even though that's where the great restaurants are going to continue to be and that's where the tourism is go and all those other things. So, but maybe the several -- feel little bit better in that scenario.

Operator

Thank you. Our next question comes from the line of John Pawlowski with Green Street Advisors. Please proceed with your questions.

John Pawlowski -- Green Street Advisors -- Analyst

Right. Thanks for taking my question. And Joe, just a few questions for you on your Northern California portfolio. So I'm just curious, your thoughts on the quality of occupancy heading into spring and summer leasing, when a lot of leases are -- that were given one to two months free -- and expire. Are you assuming occupancy, meaningful occupancy slippage in the peak leasing season in Northern California?

Angela L. Kleiman -- Senior Executive Vice President and Chief Operating Officer

That's a good question. At this point, not likely because the occupancy slippage that we've seen last year had -- that were driven by state and consultants switch income or people who lost their job, they already lost their job, they're not going to -- we lose their job. And so, Northern California already is sitting at one of our lower occupancy levels. And so I don't -- we don't expect significant further deterioration from that. We have been able to build occupancy there. And so that's a good sign. And so I expect that we will continue to do that.

John Pawlowski -- Green Street Advisors -- Analyst

Yeah, that 96.5% is well north of market occupancy. And so, I mean, there's a lot of private competitors that have -- [Indecipherable] handle on occupancy. So as it remains concessionary, I know a lot of the pain is out of the system. But is there any kind of reset in occupancy in your portfolio coming?

Angela L. Kleiman -- Senior Executive Vice President and Chief Operating Officer

I don't see that. But keep in mind, with -- the some of the major pain points relate to CBD, where you have a lot more supply. And we don't have as much in the CBD's. And so, while it's still going to be competitive out there. It also -- I'm not dismissing the odd. I just don't see further meaningful occupancy deterioration for our portfolio.

John Pawlowski -- Green Street Advisors -- Analyst

Okay. And then on the rent side, could you share what you think gain the leases right now in Northern California portfolio, if you include concessions?

Michael J. Schall -- President and Chief Executive Officer

You're making me cry John.

Angela L. Kleiman -- Senior Executive Vice President and Chief Operating Officer

Not a pretty number, I can tell you that. So in -- January -- I don't have January number. So [Indecipherable] for Northern California as a whole is about 8%. But I do want to also give a little context, right, because while loss lease is an important metric. During seasonally low or slow periods, like in the first quarter or in the fourth quarter and market rent has much higher volatility. So it negatively impacts this metric. It's just not, as meaningful, it's not something we wouldn't want to happen, which is why we never -- if you ask us, we always point them -- because it's not too hard. So this number isn't great. But typically during this time December isn't great obviously, it's as larger magnitude. But there is a lot of volatility and small number of leases turn during this time, so that magnifies that volatility.

Michael J. Schall -- President and Chief Executive Officer

Let me add a little color, John. So overall, it's about 4.6 on the portfolio, and typically there is a gain to lease almost every December, more like in the 2% range. So again, you're picking the worst part -- bad boy for that. Pick your first part of the portfolio. And so I wanted to give you that broader context, so that -- it was taken with a little bit of a broader view of what that looks like.

Operator

Thank you. Our next question comes from the line of Dennis McGill with Zelman. Please proceed with your questions.

Alex Calmes -- Zelman and Associates -- Analyst

Hi, this is Alex Calmes on for Dennis. We talked a lot about migration, but curious if you guys are -- nowhere the tenants that have come where they're coming from -- previous living situation. So are there a lot of apartment to apartment moves or have you also seen some pickup in potentially younger adults living with parents that came back to apartment situations?

Michael J. Schall -- President and Chief Executive Officer

That's a very good question, and I don't -- I don't have the data, I wish I had on that. We noted, I think last quarter that the number of adults living at home was something like a 100 year hype. So there's obviously a lot of people out there that work-from-home, flexibility, etc.. And I'm pretty sure that will uncouple itself in due course. So most of us don't want to live with our parents forever. So, but I'm sure that's a piece of it. I don't have the sense that really hiring is picked up quite yet, but typically what happens is the New Year comes with new budgets and new business plans and things get going really after Super Bowl Sunday. And then we'll have a much better sense probably in a quarter about what's happening, and you see -- one of the key ones, how many adults are living at home with parent and recent college graduates, for example, that have worked from flexibility. And can work from home, save some money that's one piece. But there are other pieces, the contract employees coming back which -- big time part of the high-tech industry, H1B visas people that were forced to go home because of COVID and potentially can come back. So there are a number of possible piece of demand that are out there that we can see coming back. I just don't have a way to monitor or follow on.

Alex Calmes -- Zelman and Associates -- Analyst

Thank you for the color. And just hitting on that last point you mentioned on the H 1B visas. And forgive me, if you talked about this earlier, I've been overlapping calls today. But is the new administration's potentially more integration friendly policy, it -- do you see any benefit, have you seen any benefits so far and are you expecting any as job growth or movement from those change in policies?

Michael J. Schall -- President and Chief Executive Officer

Yeah, I do. I mean, I'd say the Trump administration was very tough on the foreign workers coming into the US. A lot of the technology jobs and a lot of, obviously the technology CEOs have indicated that they need to draw the best and brightest from around the world and that it's good for America for that to happen. Some of the policies that the Trump administration followed were not giving work visas to the spouses of foreign workers and just in general, not accommodating them, making the renewal process more challenging. They also to try to make actually the process more fair as well. So it's not all negative. But I would expect the Biden administration -- I think I saw something recently, I don't have anything that I pulled for the call, but I think I saw something recently that they will open up in addition to not building anymore walls etc. that they will open up the immigration process to foreign workers, which would mean a lot of workers went home because their spouse couldn't work or they didn't have another occupation. So it changed the dynamic of that program. So I do look for, I do think that that will be a positive. Whether it's a material positive remains to be seen.

Operator

Thank you. Our next questions come from the line of John Kim with BMO Capital Markets. Please proceed with your questions.

John Kim -- BMO Capital Markets

Thank you. Is it your understanding that tech companies are going to follow Google's lead and not require employees to return until September? I'm just wondering what's your assumption and guidance as far as the timing of workers returning to the office?

Michael J. Schall -- President and Chief Executive Officer

It's a good question. We don't -- we're not making any assumptions about that and that remains one of the unknowns. All the COVID related items I guess remain unknown. Again, our core belief is that most of these companies have announced that they do want their employees to come back to the office. There had been a whole series of pushing back to office states allowing workers being concerned about -- in the Google's case being concerned about making sure their workers have enough flexibility to plan their lives and leasing apartment for example somewhere else that they wanted to.

One of the big tech companies, don't remember which one told, ask all of their employees to come back into the current country, into the US. Well, that was a good positive start and a step toward normalization. But again -- there is no basic assumption that we've made with respect to that. We're just assuming that with virus -- with vaccine distribution that the world will become much more normal as we approach heard immunity and as soon as that happens of course these companies will come back to working at the office.

John Kim -- BMO Capital Markets

Okay. And Angela in your prepared remarks about an hour ago, you mentioned the strength of the Life Science office market. I'm just wondering if there is an opportunity to focus more in some of the biotech clusters that you operate in?

Angela L. Kleiman -- Senior Executive Vice President and Chief Operating Officer

I think that's a Adam question on investments.

Adam W. Berry -- Executive Vice President and Chief Information Officer

There are a few markets that we've targeted that -- on the development side and investment side that are heavily driven by scientists and biotechs. So absolutely, we see that as a continued driver to the economy and it continues to grow.

Operator

Thank you. There are no further questions at this time. I would like to turn the call back over to management for any closing comments.

Michael J. Schall -- President and Chief Executive Officer

Thank you, operator. And thanks everyone for joining the call today. We look forward to participating in the Citi Conference coming up in about a month and hopefully we will meet with many of you there remotely. But I also hope that sometime in the not distant future we can meet once again in person. Have a nice day. Again, thank you for joining the call.

Operator

[Operator Closing Remarks]

Duration: 102 minutes

Call participants:

Michael J. Schall -- President and Chief Executive Officer

Angela L. Kleiman -- Senior Executive Vice President and Chief Operating Officer

Barb M. Pak -- Executive Vice President and Chief Financial Officer

Adam W. Berry -- Executive Vice President and Chief Information Officer

Nick Joseph -- Citigroup -- Analyst

Jeff Spector -- Bank of America Merrill Lynch -- Analyst

Rich Hill -- Morgan Stanley -- Analyst

Amanda Sweitzer -- Robert W. Baird -- Analyst

Analyst

Rich Anderson -- SMBC -- Analyst

Rich Hightower -- Evercore ISI -- Analyst

Alexander Goldfarb -- Piper Sandler -- Analyst

Zach Silverberg -- Mizuho -- Analyst

Neil Malkin -- Capital One Securities -- Analyst

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Sumit Malhotra -- Scotiabank -- Analyst

John Pawlowski -- Green Street Advisors -- Analyst

Alex Calmes -- Zelman and Associates -- Analyst

John Kim -- BMO Capital Markets

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