Essex Property Trust, Inc. (NYSE:ESS) Q3 2023 Earnings Call Transcript

Haendel St. Juste: Thank you.

Operator: Our final question is from Linda Tsai with Jefferies. Please proceed with your question.

Linda Tsai: Hi, thanks for taking my question. Over the next 12 months across, which markets would you expect the highest rent growth and how much faster might growth be in these markets versus your portfolio average?

Angela Kleiman: Hi It’s Angela here. We do expect our Northern region to outpace the southern region, and so particularly Northern California and Seattle, and for different reasons. Northern California much lower supply and of course will have a benefit ultimately from the tech hiring when they come. And Seattle, it’s been our strongest job growth market, but Seattle also has a higher level of supply, about two times of that of California as a percentage. So about 1% of stock versus 0.5%. Having said that, both of these markets, particularly in Northern region are rebounding and of course, Northern California, as I’ve mentioned before, has a much better affordability metric. And so for those reasons, we do expect the Northern region to outperformed the Southern regions.

Linda Tsai: And then just one quick follow-up on expenses. Given the commentary about higher utility insurance costs in ’24 , do you see more markets where this is more pronounced versus others?

Barb Pak: Yeah, this is Barb. No, on the insurance front, it’s just a broad — it’s actually a national issue, not an Essex, Pacific or West Coast issue. We’re just seeing a lot of pressure on insurance cost and we expect that to continue. It’s been an issue in ’23, we expect that issue in ’24. And then on the utilities front, we’re up about 6% year-to-date, and we do expect that utility pressures will continue to be above inflationary levels near term, despite all the ESG efforts we’re putting into place. And so those two will cause expense growth to be elevated next year.

Linda Tsai: Thank you.

Operator: This concludes today’s conference. You may disconnect your lines at this time and we thank you for your participation.

Angela Kleiman: Goodbye.