Michael D. Lacy
Senior Vice President, Property Operations at UDR
Thanks, Tom. Today, I'll cover the following topics; our third quarter same-store results; early fourth quarter 2023 results and how they factor into our updated full year 2023 same-store growth outlook; and an update on operating trends across our regions.
To begin, third quarter year-over-year Same-Store revenue and NOI growth of 5.3% and 6.1%, respectively, as well as sequential same-store revenue growth of 2.3%, met our expectations. Similarly, quarterly Same-Store expense growth moderated primarily due to favorable real estate tax outcomes in Texas and fewer insurance events. Thus far in 2023, a variety of demand and profitability indicators have benefited our business. These include stable occupancy, improved revenue retention and renewal lease rate growth holding above 4%.
However, since mid-September, some challenges have emerged, including weaker traffic, lower leasing volume and new lease rate growth decelerating beyond typical seasonal norms. Combining all of this, we have seen a demand environment that continues to hold up well but one that has been overtaken by growing concessionary pressures from elevated apartment deliveries as we entered the seasonally slower period of the year.
In short, the consumer seems okay right now, but in place and prospective residents can choose among more options at a discounted price in many of our markets. Buyers have become shoppers, which has pressured blended lease rate growth and occupancy across the industry. And ultimately led us to reduce our full year straight-line same-store revenue and NOI guidance ranges by 75 basis points each at the midpoint. Nevertheless, our revised guidance still remains above the peer group average.
To provide a little more context, when we reported second quarter results in July, we were aware of the elevated new delivery forecast through the back half of 2023. At the time, we saw a resilient consumer elevated supply with developers offering approximately one month free and not competing with our predominantly B quality product and easier year-over-year comps in the fourth quarter. This dynamic persisted through early September until things begin to change. The financial health of our consumer was and still is okay, for lease-up concessions in many of our markets increased rapidly and began to compete directly with B quality product. This was something we did not expect and place our brands in occupancy under more pressure than originally anticipated.
UDR typically does not use many concessions, but as a result of more direct competition, our average portfolio-wide concessions have increased threefold from half a week to 1.5 weeks. This equates to approximately 2% lower blends or the difference between the 3% to 3.5% fourth quarter blends we thought we would achieve back in July versus the roughly 1% blends we are currently realizing. We expect this concession-heavy dynamic to continue throughout the fourth quarter and into 2024.
Looking ahead, and based on this revised outlook, we are forecasting a 2024 same-store revenue earn-in of approximately 1%, slightly below our historical norm. We will provide official 2024 guidance in February, but two initial considerations include, one, as it relates to same-store revenue market conditions suggest that 2024 rent growth will be below the long-term average of approximately 3% due to the negative impact of elevated deliveries combined with potentially lower forward demand. And two, our same-store expense growth is likely to approximate 2023 levels, driven by pressure on insurance, utilities and personnel. In particular, we faced a difficult year-over-year comparison in the first quarter, due to the $3.7 million one-time employee retention credit realized at the beginning of 2023.
Moving on, we continue to make solid progress implementing our innovation initiatives, which we expect will enhance our growth profile in the years ahead. The two largest initiatives underway, one, building wide WiFi installations, we have underwritten and are achieving incremental revenue of $50 per month, per apartment home at a nearly 75% margin. We expect to end 2023 with community-wide WiFi installed across roughly 20,000 units, with additional rollout planned through 2025. Two, our customer experience project will help to reduce turnover over time. We've spent the last two years analyzing nearly a decade worth of leasing data and resident interactions across every possible touch point. From this, we built real-time resident-specific experienced dashboards and found that 50% of our turnover is controllable.
We sell across various operational metrics, but acknowledge our turnover has been higher than the peer average off late and believe there is a large opportunity to put upon this. While still early in the process, we are operationalizing our dashboards to identify resident or property-specific probe areas, make changes and ultimately improve retention. On its own, every 100 basis points of improved retention equates to approximately $2.5 million of higher NOI. Over the coming years, the tangible effects of our efforts should be evidenced by lower turnover, as well as higher occupancy, expense savings, increased other income and improved pricing power.
Turning to regional trends. The relative outperformance of Coastal versus Sunbelt markets in recent quarters has continued, although elevated supply exists across all regions. On the East Coast, New York and Boston, which comprised nearly 20% of our total NOI, continue to be two of our strongest markets. Weighted average third quarter occupancy for these markets was 96.7%, and we achieved nearly 7% year-over-year same-store revenue growth. Minimal competitive new supply and high levels of demand continued to support pricing power with blended lease rate growth of nearly 4% during the quarter and annualized resident turnover, 330 basis points lower than a year ago.
On the West Coast, occupancy has remained in the mid to high 96% range. Orange County, which is our second largest market at 11% of total NOI, showed the greatest strength with year-over-year occupancy increasing by 70 basis points and NOI growth of 7% during the third quarter. Other markets across the West Coast, however, have seen an increase in concessionary activity, with the San Francisco Bay Area most impacted. While we are currently averaging three weeks of rent concessions across our San Francisco portfolio, it is not uncommon to find four to six weeks of free rent in the market.
Lastly, the Sunbelt continues to face elevated levels of new supply, which has resulted in year-over-year new lease rate growth of negative 3% to negative 6%, equating to an approximate three-week concession on new lease. Based on job growth and traffic volumes, we believe demand remains solid and absorption is positive. However, because of the multitude of new options available to residents, renters have been wanting to shop more, we expect Sunbelt supply deliveries will remain elevated in 2024, which should continue to constrain pricing power across the region.
In closing, while the near-term operating environment presents some challenges for us, I thank our teams for continuing to utilize new tools and technology to drive superior long-term results.
I will now turn over the call to Joe.
