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Public Storage
Earnings Call Analysis
Q3-2024 Analysis
Public Storage
In the third quarter of 2024, Public Storage reported signs of stabilization across its portfolio, which has been greatly anticipated. Revenue growth accelerated in many markets, culminating in a positive outlook for future quarters. Notably, move-in rents, which had seen a significant decline previously, were down 9% year-over-year in Q3 but showed improvement compared to earlier in the year when they were down 16%. As a result of this stabilization, there is an expectation for the first sequential revenue growth in over two years in the fourth quarter, suggesting that the company is on the path to recovery.
The self-storage industry is currently characterized by declining new competitive property deliveries, which is expected to either stabilize or improve operating fundamentals over the next couple of years. This backdrop is further supported by robust consumer demand. Although overall demand was down by 20% earlier this year, it has rebounded to roughly flat year-over-year as of October, indicating a recovery trend that should benefit Public Storage.
Public Storage reported a core FFO of $4.20 per share, marking a 3% decline year-over-year. However, revenue within the same-store portfolio declined only 1.3%, an encouraging sign that revenue growth may soon return. The guidance for fourth-quarter same-store revenue growth has also been lifted, projecting it to be nominally better at the midpoint than the previous annual forecast. The revised guidance sees core FFO for the year sitting between $16.50 and $16.85 per share. The company has also indicated strong performance from its non-same-store assets, with an expected incremental NOI of $120 million by 2025, positioning these assets as future growth engines.
Public Storage continues to improve its customer engagement through extensive digital initiatives. Now, 75% of move-ins utilize their digital rental platform (e-rental), which significantly eases the process for both customers and staff. The company has effectively attracted nearly 2 million app users, promoting a hybrid approach to customer service that melds digital engagement with traditional in-person assistance. This strong digital footprint not only enhances customer satisfaction but also provides efficiency gains that can potentially lower operational costs in the future.
In light of recent natural disasters, particularly hurricanes, Public Storage reported a $7 million financial impact due to property damages. Despite this, the company has shown resilience, with most of its affected properties quickly returning to operational status and benefiting from rebuilding efforts in impacted regions. This reflects Public Storage's commitment to service continuity and its role in community recovery, positioning it favorably in the eyes of consumers.
Looking ahead, the company is encouraged by the current pent-up demand in the acquisition market, expecting to see an increase in transactions as both buyers and sellers reach a more agreeable market consensus. Public Storage is strategically positioned with industry-leading balance sheet capacity and low cost of capital, which will enable it to act decisively on attractive acquisition opportunities. As the company braces for a slight decline in development deliveries heading into 2025, it has challenged itself to maintain a consistent pace in future years to maximize growth potential.
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Greetings, and welcome to Public Storage Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Ryan Burke. Thank you. You may begin.
Thank you, Rob. Hello, everyone. Thank you for joining us for our third quarter 2024 earnings call. I'm here with Joe Russell and Tom Boyle. Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, October 31, 2024, and we assume no obligation to update, revise or supplement statements that become untrue because of subsequent events.
A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our earnings release, supplement report, SEC reports and an audio replay of this conference call on our website, publicstorage.com. We do ask that you initially limit yourselves to 2 questions. Of course, after that, if you have more, feel free to jump back in queue. With that, I'll turn it over to Joe.
Thank you, Ryan, and thank you all for joining us today. Tom and I will walk you through our recent performance and updated views. Then we'll open the call up for Q&A. As we anticipated, operating fundamentals are stabilizing across our portfolio in the broader industry. We started the year with sequential revenue growth acceleration in a handful of markets. We are now achieving acceleration across most markets and expect the trend to continue. The improvement will be gradual and take some time to be fully reflected in our reported financial results. But as we'll discuss today, many things are moving in the right direction for Public Storage. In particular, pricing for new customers is stabilizing with move-in rents down 9% year-over-year in the third quarter and down 5% in October.
This is a meaningful improvement from the first quarter of this year when move-in rents were down 16%. Our in-place customers are also behaving very well. Payment patterns are strong, average length of stay is long, and move-outs are down year-to-date. All of this speaks to the convenience and affordability we provide to our customers. With move-in rents down nearly 30% since 2022, we have become even more affordable relative to other space alternatives, including moving into a larger home or apartment just to get the incremental space.
Self-storage is the affordable and convenient choice. The supply environment is also on a favorable path with deliveries of new competitive properties slowing further over the next couple of years. Less new competition will support operating fundamentals on top of the improving demand trends. We continue to focus on growth-enhancing initiatives that are unique to us as well.
Public Storage customers are fully embracing the new and modern experience we've created by putting a full slate of digital engagement options in their hands. These options complement the service provided by our fantastic property managers, local teams and customer care center representatives. The ability to choose between interacting digitally and in person is a major draw to customer seeking self-storage today. I am proud of the entire team's efforts in creating the industry's most comprehensive hybrid digital operating model that cohesively connects our customers, team and systems across field and corporate operations.
And we're tracking ahead of schedule on our transformation with now 75% move-ins using e-rental, our digital online lease. We have nearly 2 million PS app users. And on a daily basis, tenants across our entire portfolio using our digital property access and remote customer service. The transformation is amounting to a win, win, win across our customers, team members and financial performance. Through it, we have created more specialized and career-advancing roles across the company. New opportunities for our property managers have been particularly well received as they now have career paths that aren't available elsewhere in the industry.
Due in part to these efforts, we are proud to have received the Great place to Work designation for a third year in a row. Another area of focus is utilities. We have reduced usage by 30% through conversion to LED lighting across the portfolio and installing solar power at more than 800 properties so far. We recently increased our solar goal to 1,300 properties by the end of 2025. The team has innovated and implemented at a rapid pace over the past few years. We are fully in gear and are excited about more to come. Now Tom will provide additional detail.
Thanks, Joe. With fundamentals improving and the team keenly focused on transformation and optimization initiatives, we are very well positioned with signs that the acquisition market is picking up. We see more one-off deals, more portfolios and evidence of convergence around buyer and seller expectations following a quiet couple of years. Our growth-oriented capital and liquidity profile is strong. Industry-leading leverage, balance sheet capacity and cost of capital have us poised to execute on pent-up seller dialogue in combination with our operational and acquisition integration advantages.
Shifting to our third quarter financial performance. We achieved core FFO of $4.20 per share, representing a 3% decline compared to last year. Revenues in our same-store portfolio of stabilized properties declined 1.3% compared to last year, with a relatively even balance between rent and occupancy. A couple of important things to note regarding the stabilization that Joe spoke to.
First, the second derivative of growth continues to improve. Revenue growth in the quarter decelerated 30 basis points sequentially, relative to the growth in the second quarter of this year. This is significant improvement from the 380 basis points of deceleration reported from the second to third quarter of last year.
Secondly, as implied by our guidance midpoint, we expect our nominal same-store revenue growth to begin improving due to the positive trends that Joe described. At the midpoint, the fourth quarter would be the first sequential growth improvement in more than 2 years.
Moving now to the outlook. We reiterated our core FFO guidance of $16.50 to $16.85 per share, rolling through higher third quarter G&A and lower third quarter ancillary income while lifting our same-store revenue outlook for the year. The strong performance of our non-same-store pool continues. We increased the outlook for our incremental NOI from this pool of assets in 2025 and beyond through stabilization to $120 million in total to come from this pool. Currently, at 23% of our total square footage, the pool will be an engine of growth for the remainder of this year and into the future.
With that, I'll turn it back to you, Joe.
Thanks, Tom. At Public Storage, our team continues to enhance the industry's strongest brand, highest quality portfolio, best revenue, NOI and NOI margin, leading acquisition, development and integration platforms, the lowest leverage and best cost of capital, the highest free cash flow conversion and strongest FFO and dividend growth over the past few years.
With many things moving in the right direction, including improving operating fundamentals, transformation efforts that are further enhancing our advantages and a reinvigorated transaction market, we are excited about Public Storage's trajectory over the near, medium and long term.
And finally, I'd like to make a call out to the full operations and asset management teams at Public Storage during the 2 significant hurricanes. Fortunately, our employees and properties were well prepared with safety as the top priority, and we are grateful to have had relatively minor impact.
With that, I'll turn the call back to Rob to open it up for Q&A.
[Operator Instructions]
Our first question comes from Jeff Spector with Bank of America.
Maybe I'll start just big picture. I consider you guys to be conservative, especially with your outlook. So just given the time of the year, November, you've made a few comments here, not just about stabilization but actually improvement, which means it seems like you're saying you're going to end the year strong and again, it bodes well for '25. I guess, can you talk about that a little bit more, the decision not just to talk about, okay, as you said, it's clear you see signs of stabilization. But it does seem like you're messaging pretty strongly here that you expect improvement into '25. And I guess, is that regardless of improving housing, et cetera?
So yes, Jeff, there's a few things, obviously, that give us confidence that 2024 has become a year as we predicted of stabilization, where we've seen, as Tom and I noted in our opening comments, the progression of better and higher degrees of market improvement that we're seeing across more of the portfolio than we've certainly seen at the beginning of the year.
That continues to trend. Now we're into the fourth quarter of 2024. Stabilization should fundamentally lead to improvement. So we're pleased by the continued trajectory we're seeing as we've spoken to stabilization. And with that, we're going to be in a better position going into 2025 than we were going into 2024. Many things are trending well. Additively, and then we'll see what impacts other effects could have too, whether it's an improved housing market, change in interest rates, continued growth in the economy, et cetera. But again, we're very pleased by what we continue to see through 2024.
And just to clarify, I mean, again, improvement, you don't really need to -- if demand just continues as is, where you talked about improving demand for that demand has improved, if it stays as is versus the backdrop you described, including lower supply pressure in '25. That ties into your thoughts on improvement?
Yes. I mean I think there's a couple of things there, Jeff. I mean, we've been talking about stabilization of demand throughout this year. And in Joe's prepared remarks, he commented on that, including industry-wide demand. But we've been speaking all year to the fact that we've actually seen some improvement in a number of different markets. So some of the early markets we called out like Seattle, for instance, is still actually negative on revenue growth for the third quarter, but it's consistently improved quarter-by-quarter throughout this year.
And so that's been a leading market that we've been observing. And there are other markets like that and frankly, more. That doesn't mean that overall, we're seeing significant growth. Obviously, our outlook is still calling for same-store revenue growth to be down for the year, just a touch better than 1%. So as Joe spoke to in his remarks, the stabilization will take a little bit of time to roll through our financial metrics, but stabilization is the first step, and we've seen that across a number of markets, and we'll obviously update you on a path to recover as we move from here.
Our next question comes from Michael Goldsmith with UBS.
Seems like there's been an improvement in the move-in rents down 9% in the third quarter, down 5% in October. Is there any -- what do you think is driving that? And then also, can you provide the October occupancy update just to provide a little bit more context around the influence on street rates?
Yes, sure. Happy to. So the -- as you noted, we've continued to see improvements on move-in rents through the year. The October number is encouraging. And I would call out that it's driven by improving demand trends, right? When we started this year, industry-wide, demand was down still 20%. And we're in a point now in September, October, where it's roughly flat year-over-year. And so some may call that comps. But again, you need to lap those comps without setting fresh new lows to stabilize, and that's what we're starting to see here.
We've got some markets, as I highlighted earlier, that have move-in rent growth as we sit here today, but some are certainly still setting fresh lows. So the dynamic there is a stabilization trend as we've been anticipating heading in through the fourth quarter of this year. In terms of further October updates, occupancy is down about 90% -- or 90% down -- 90 basis points. As we sit here today, the move-in rents again, down 5% for the month. Existing customers are performing well. Move-outs are again down year-over-year in the month. So continued encouraging trajectory from the existing customer base and really strengthened the consumer overall.
Got it. And you talked a little bit about demand improving and recognize -- and I think you kind of recognize that some of it is comparisons. But is there any other factors that are just driving demand in particular, whether it's -- are you seeing a better housing turnover? Are you seeing a better demand from apartment renters? Just trying to get a sense of who is using the facilities more.
Yes, that's a great question, Michael. I think the demand picture has shifted over the last several years, right? We've talked about how the existing home sales driven demand has softened. The apartment renter activity has continued to be strong. And at the same time, we've seen more customers that are using storage that have ran out of space at home, frankly, record usage of that through this year.
And overall, levels of demand pretty consistent year-over-year as we sit here entering into the fourth quarter.
Speaking to housing specifically, there is some encouraging pending home sales numbers that came out yesterday, we watch that all closely. But at this point, what we're looking for, again, is stabilization and we're looking for not setting fresh lows, i.e., not demand going lower from here, and that's what we're starting to see across the portfolio.
And maybe, Michael, to add on one other thing. Again, no different, but consistent and very encouraging trend. Length of stays are still longer than prepandemic levels. We've seen with many of the things that Tom just spoke to customers continuing to retain space on average higher than what we saw certainly prepandemic.
And again, with the stabilized set of metrics around delinquency and payment patterns, et cetera, no different view relative to the stable customer base that we are very pleased to have here at Public Storage.
Our next question comes from Samir Khanal with Evercore ISI.
Tom, as it relates to the move-in rates, you mentioned down 5% in October. I mean is there a way to kind of think about the trajectory of that move-in rates over the next, I don't know, let's call it the next several quarters. I mean do we need the housing market to pick up to see that trend turn positive? Or help us think through that a little bit more, please.
Sure. So as we've noted a number of times on the call already, really what we're looking for is a stabilization and level of demand. As that stabilization occurs, you should see a stabilization in things like move-in rents and customer activity.
And so in our outlook for the year, we've expected that move-in rents are down mid-single digits at the end of the year. So it feels like we're heading in that direction based on October performance. But then we're likely to hit the trough of the year just seasonally. And so without getting into specifics around assumptions for 2025, I would expect that we probably would start the year clearly at that sort of ZIP code and would take the lift of demand seasonally in the spring to meaningfully improve that number from that point.
Okay. And then just on the -- just shifting gears a little bit on the expense side. Payroll has been down this year in the quarter and even for the 9 months ended September. Is that just a function of sort of higher e-rentals you're doing that dynamic? Trying to see how much further in terms of savings there is kind of into next year.
Yes, Samir, I talked about the many advantages that we continue to lead in the industry relative to our digital platform. One key being, the one you noted, our e-rental, our digital leasing platform. So now with 70% to 75% of our customers using that channel, we continue to use that as one way of optimizing the way in which we're using employees and properties relative to their optimization and skill sets and the things that they can do even on a more focused basis. So it's worked well not only for a customer interaction, but employee engagement and employee opportunities relative to, as I mentioned, different specializations that we're putting through in different career paths, et cetera, property management levels as well. So the great news that, that leads to our levels of optimization that continues to work well, not only for customers, but for our employees as well.
Our next question is from Eric Wolfe with Citi.
I was just curious in the markets where you've seen the biggest occupancy uplift. Are you seeing any greater signs of improved move-in pricing there? Or is the customer still just very elastic to that move-in price. I'm effectively just wondering if improving occupancy should be viewed as a leading indicator of pricing or if there are other dynamics that's preventing that from happening?
Sure. I would say, it's improving demand trends overall, right? We're trying to balance both occupancy as well as rental rate to maximize revenue. So occupancy is certainly one thing you can look at. But just using Seattle as an example as a market I highlighted earlier, occupancy there was up 35 basis points year-over-year and has positive move-in rent growth. So there's some -- there's certainly some momentum in that market, but it's not purely occupancy based.
And I guess based on the test that you're doing, I'm assuming that you're adjusting your algorithms to test various price points and seeing how the customer is responding. Like are you seeing any decrease in that sort of elasticity of demand? Or when you adjust pricing like you see a big shift in revenue potential from potential changes in occupancy.
Yes. So I guess taking a step back, we're looking to try to optimize the revenue associated with customers that come in the door. And that -- based on our understanding of what our inventory is likely to be, and so we understand what likely rental units we have to offer our customers. And so we offer those online and in the store. At the same time, we have an understanding about what demand is for that sort of unit at the local trade area level.
And to your point around price sensitivity, we're consistently testing and augmenting our understanding of what that customer price elasticity is. But if you have an understanding of what your inventory is to sell, and what the demand is for the unit and the price sensitivity, we're trying to optimize that equation to lead to the maximum revenue opportunity for Public Storage given the amount of inventory we have there to rent. And what we continue to see is customers are competitive and price-sensitive to new customers, but place a lot of value on those units once they move in. And that's been pretty consistent over time.
Our next question comes from Eric Luebchow with Wells Fargo.
You touched on this a little bit about how you were encouraged by the transaction market picking up. It sounds like that's more likely into 2025. So maybe you could give us some color on where kind of bid-ask spreads are and what kind of stabilized yields you're seeing on transaction activity you're underwriting today?
Yes. Sure, Eric. We've spoken to this for the last few quarters, which there's been a lot of interest on sellers' behalf to potentially trade, but factually, very few have indeed done so. And we've got almost now a 2-year track record where, again, industry transaction volumes have been quite low even on a historic level.
So now rounding out 2024 differently, even than we've seen in prior quarters, the volume of not only those inquiries, but again, even some additional assets coming through traditional brokerage channels and otherwise, there's momentum building.
Again, it's tough to say yet what the bid/ask spread is going to be because a lot of those transactions haven't been completed yet. We've had a lot of inbound calls, both again from owners that are looking to us even on a private basis to potentially transact. So we're encouraged by the fact that, again, after 2 years, there's, I think, a landscape of different opportunities rounding out this year and going into 2025. We'll see how that plays out. But would say, it'd be unusual for us to go into a third year of the low volumes that we've seen. And with that, we're encouraged by the type of assets that are coming to market, both small and large. And the receptivity in a different way that owners have, I think, settled out relative to their price expectations, et cetera.
Got you. That's helpful. And then I guess, secondly, I think you touched on kind of existing customer activity being a little bit better in terms of ECRIs than you previously expected. So maybe you can provide a little more color on that. Is that your ability to push rents to the newer customers coming in at lower rates or your longer duration customers that are more receptive to that? Any color there would be helpful.
Sure. Yes, I think it's a number of those factors you highlighted. The existing tenant pool continues to be strong, as Joe mentioned, really across the metrics that we monitor, be it payment patterns and delinquency, length of stays, vacate activity, customer price sensitivity to rental rate increase, all pointing to a very stable and strong existing customer base, which is encouraging, and we've been pleasantly surprised as we move through this year. And really, that was the primary driver of the lift in revenue outlook for the remainder of the year is just continued strong trends there.
In terms of the rental rate program, in particular, it's a combination of the price sensitivity being very strong, and frankly, a touch better than we expected as well as the continued follow through, as you mentioned, of those newer customers that we've moved in over the past year, 1.5 years, given our strong move-in volumes over that time period that give us more contribution really to the existing customer rent increase program.
Our next question comes from Nicholas Yulico with Scotiabank.
Turning back to the move-in pricing. If you look at the promotional discount, they were up in the third quarter year-over-year. They also look like as a percentage of revenue, one of the highest -- percentage of move-in rents, one of the higher numbers in the last year or so. So can you just talk a little bit about like what's driving that higher promotional discounts in the third quarter? And how we should think about that impact going forward, maybe in the fourth quarter because I know you talked about move-in rents, that delta improving, but I'm not sure how we should think about the promotional discounts in the fourth quarter.
Sure. Yes, promotional discounts obviously ebb and flow throughout the year based on really the -- at the unit level analysis and pricing strategies. We did use promotions a little bit more into the third quarter. But again, pretty modest still relative to historical trends. And so throughout the year, between 40% and 60% of our customers have received some sort of first month promotion. In the third quarter, it was closer to that 60% number. The comparison period in, say, 2019, for instance, would have been closer to 85% or 90%. So the -- there's no question that there continues to be an ability for us to utilize promotions as well as advertising as move-in rents to optimize that customer acquisition plan.
Okay. That's helpful, Tom. I guess just following up on that. Can you just remind us how that works for the promotional dollars, like the timing and just the accounting treatment? Is that just all the money literally being sort of spent as -- and it's a contra revenue account in the quarter? Or is there some sort of like amortization of the promotion?
Sure. Yes. Our most popular promotion is the dollar special for the first month rent. And as you just highlighted, that's a contra revenue discount that will be applied in that first month. And so if we move a customer in on September 1, we're going to recognize $1 of revenue from that customer in rent.
our next question comes from Spenser Glimcher with Green Street Advisors.
Maybe just a follow-up on the transaction landscape. In terms of what you're seeing marketed today, is it predominantly still the single asset deals? Or are there any portfolios being marketed today?
Yes, Spenser, it's a combination. The traditional, smaller deal activities been with us. And again, that's been still muted, as I mentioned, overall, but there's still a fair amount of individual or small asset activity in the market. But there are larger portfolios that are starting to surface. Again, that's no different than what we've spoken to, though over the last couple of years where we had a lot of private inquiries, particularly on some larger portfolios, but there are now a few that are starting to come into the market through, I would say, both traditional processes and then still some of the, again, off-market conversations we're continuing to have as well.
Okay. And then just on the ECRI front, if we do a rough back-of-the-envelope math, like just given where move-in rents were for the quarter, it does appear that rent bumps were maybe a little bit higher in the quarter. Is that fair to say? And are you able to just give us an idea of where you see ECRIs ending the year on an annual basis?
Yes. Just given what I had spoken to in terms of their performing better in the third quarter, I would agree, the contribution in the third quarter was a little bit better year-over-year. But would go back to the commentary I just made around, a lot of that's driven by those newer customers that we moved in over the last 12 to 18 months and their contribution to that program really driving it versus a change in strategy or otherwise.
Our next question comes from Juan Sanabria with BMO Capital Markets.
Just on the acquisitions market, recognizing there hasn't been a ton of actual deals closing, but just curious on your expectations for cap rates. I believe, earlier in the year, you were kind of looking for 6-plus percent initial yields or stabilized yields. So just curious if that's moved down as the general market has improved from a REIT's cost to capital perspective and rates have come down at least on the unsecured side. So just curious on your latest expectations on pricing and cap rates or where you'd be willing to do deals.
Yes. Thanks, Juan. Good question. And I would generally say that the way you characterize it is pretty consistent and has been for some time, meaning that we're still looking for stabilized yields that are in the 6% sort of ZIP codes. And what that typically means is, we're acquiring things in the 5s. And obviously, that was the case for Simply last year, probably the largest private transaction that we've been speaking to but that's been consistent for the last year or so, and that's the current state of play. Obviously, as more transactions occur here over the next couple of quarters, we'll have more to talk about on cap rates. But that's the right sort of ZIP code to be thinking about.
Okay. Great. And then just curious if you could talk a little bit about the strategy or thinking behind the COO hiring and what you expect the seat to bring or the person to bring as a result of the addition?
Yes, sure. Obviously, without question, as you've seen and track the things that we're doing relative to our investment in all the tools, digital optimization, the advantages that we're continuing to deploy through our scale, our brand, and everything that again drives operations day-to-day, the leadership tied to that is incredibly critical as well. So we're excited about Chris Sambar joining us, great experience with a very solid career at AT&T for over 20 years, certainly understands many of the components of what drives our business, particularly technology and infrastructure-related, great experience with running large teams within the AT&T platform. In his last role, he had over 25,000 employees reporting to him. So these are all key attributes that we're excited to bring into the senior leadership ranks, and we're very confident he's going to be able to put a strong mark on the business operations and otherwise.
Our next question is from Todd Thomas with KeyBanc Capital Markets.
I wanted to go back to the promotions in the quarter and some of the commentary there and ask about the use of promotions in October as we think about the down 5% move-in rent and the improvement that you saw there relative to the third quarter. And then I think in the past, you previously indicated that the use of promotions on some level may have attracted a slightly lower lifetime value customer. Has that changed now? Or are you seeing a better response and sort of stronger customer entering the portfolio with the use of promotions?
Sure. That's a multipart question there we'll get into. So in October, I'd say, year-over-year promotions pretty consistent to prior year. The driver of the promotions in the third quarter was just a different mix of promotions. So we used a little bit less of the 50% off and a little bit more of the dollar special. So -- and that's just more tactically on the ground. In terms of the promotions, you're right, different promotions have different profiles. They attract customers and ultimately are used based on the amount of inventory we have to sell, the pricing dynamics in the local market and are tuned to try to maximize revenue over the medium term in conjunction again with advertising and move-in rental rates.
Okay. And then my second question, I wanted to just ask or trying to try to clarify the occupancy update that you provided for October, was that -- did you mean a decrease from September, so down 90 basis points? Or do you mean that the year-over-year decrease at the end of October is down 90 basis points. Can you just clarify and maybe just provide an occupancy rate for where the portfolio sits today?
Yes. That's a good clarification there, Todd. What I was speaking to was 90 basis points year-over-year. And as we've talked about through this year, we had a little bit more occupancy uptick through the summer and have anticipated a little bit more occupancy decline into the fall, and we've seen that play out kind of as anticipated. And we're anticipating through the year, at our last outlook update, we said down 80 basis points on average. Given the increase in the outlook, it's probably down closer to 70 basis points on average through the year from here. But continue to see a closing of that gap overall on a year-over-year basis, but some different seasonal patterns through the year.
And then in terms of quarter end occupancy or month end occupancy, obviously, we haven't closed the month of October, but it will be pretty similar to where we ended September. But obviously, that's not a number that you often see. So -- but just seasonally, you don't see a big move there. So just a touch lower than where we finished September.
[Operator Instructions] Our next question comes from Ron Kamdem with Morgan Stanley.
Just following up on the stabilization comments. I think you talked about different markets and obviously move-in rents sort of improving. But anything on sort of the website data and the website visits, any other sort of data points that are sort of confirming that story would be helpful.
Yes. So we've talked about industry-wide demand, and that really reaching parity as we moved into September and October, that's been really encouraging, and we've continued to see good traction from web visits through our platform as well. Really a combination of strong web visits that are in positive territory year-over-year as well as good conversion rates, frankly, online and through our different channels to the store.
And then just my second one was, I think you've been interesting stat on 70% to 75%. I think I heard that right through the channel. Just wondering, as you're thinking about over the next 3 to 5 years, is that sort of optimal? Is there more room there? And what the implication could be on cost savings?
Yes. No, I think that's right. So about 75% of our customers are utilizing a digital channel to complete their rental and that's a number that's grown pretty steadily over the last several years. And just a reminder, we're not providing any sort of incentive for customers to utilize that as the way to complete their rental agreement. But customers continue to embrace it and frankly, more and more year-over-year. And so we're optimistic that more customers will choose that channel to complete their rental agreement before they arrive at the property over the next several years, and that will lead to continued optimization alternatives that Joe spoke to earlier in terms of providing that win-win-win, both for customers and how they choose to complete their rentals, our employees and how we think about their career opportunities, specialization and centralization that we've utilized as well as the financial impact.
Yes. And Ron, I'd add too. It's certainly a very impactful channel and the infrastructure and the effectiveness of our digital platform is certainly playing through relative to speed, effectiveness, et cetera, that customers are embracing. We also, as I noted in my opening comments, now have about 2 million users on our PS app, that tool as well, again, is additive to the way customers are interacting with us is much easier from an account management standpoint, communication standpoint, et cetera.
So we're bolting on and building a very robust environment. The customers, as Tom mentioned, are not being incentivized by us to use these tools. They're telling us these are tools they want and they're gravitating to them very aggressively. So we'll still provide when customers require it, face-to-face interaction with, again, our skilled property managers at properties, but this is one additional way for them to have that much more of an effective transaction with us. And then from an ongoing relationship standpoint, it's a different level of service we can provide them through the PS app as well.
Our next question is from Caitlin Burrows with Goldman Sachs.
I don't think this has been talked about yet, but we talked about acquisitions and the volume. It looks like guidance is reduced for the year, but you mentioned the pent-up seller dialogue. So is that just timing and you expect an above-average January or have some deals fallen off or some mixture?
Yes, you hit it. It's just a timing element, which is we have been anticipating that the transaction market would improve throughout the year and it has. But just in terms of the level of dialogue, it's really picked up over the last 60 to 90 days. And so a good bit of the activity that we're speaking about is likely to fall in the start of '25 versus finishing out closing in '24. But obviously, you saw we had under contract a pickup in acquisition volumes, and we have more to come on that front as we close out the year, but some of it will slip into '25.
Got it. And then maybe just on your own development. I was wondering if you could give a sense of your own pace of development deliveries in '24 and how you think that will end up comparing to '25 and '26. Is a pretty consistent increasing, decreasing or your goals?
So yes, Caitlin, this will be a record year of deliveries for us from a development standpoint. So we'll finish out 2024 with about $430 million of development deliveries that includes both ground-up new construction as well as redevelopment. The work and the timing of consistent level of deliveries year-to-year can be somewhat challenging, particularly with many of the hurdles that we're facing with development across multiple markets, longer entitlement times, more complicated, improvement processes, different areas of the business from a development standpoint that create more risk and much of that's time related.
So we're going to see a bit of a drop going into 2025. And with that, we'll continue to work to elevate the amount of deliveries we'll see in 2026 and beyond. So the team's doing a great job developing and redeveloping great new assets, giving us more scale in markets. And with the record amount of deliveries this year, it was a great bar to hit, and we're going to challenge ourselves to match, if not exceed that in subsequent years. But 2025, we'll see a slight decrease in deliveries.
Next question comes from Brendan Lynch with Barclays.
Maybe on the labor front, how do you balance the labor saving -- cost savings versus the risk of reducing on-site staff too much? I'm sure you're cognizant of this risk. Just how you monitor and how you think about it?
Yes. That's part of what we've been very diligent about making sure that we're using a variety of different tools analytically and otherwise, to not only property by property, understand the impacts of the way that we've been changing our operating model that may give us the opportunities, as I've spoken about to reset the type of skills and labor that we have with properties to properties, but we've got growing sets of analytics that help to predictively look at staffing levels because sometimes properties are busy, for instance, beginning end of the month or it could be because of some seasonality issues that may be different times of the month, different times of a week.
So we've got a lot of very interesting and growing analytics that are helping us optimize the ability to put our own people where we know they're going to be able to serve customers even more effectively. Part of that also relates to the specialized roles that our platform has been able to create within our property management ranks. So a lot of great tools that give us the confidence that we've got a very good balance. And as I mentioned earlier, customers are gravitating to this quite effectively as well. We've got a vibrant back channel that's become more and more effective through our care center as well. So we've got many tools even beyond just the amount of labor that's resident at a particular property that actually enhances the amount of service that we can provide to customers.
Great. That's helpful. And my other question is just on kind of market strength. Tom, you called out Seattle as being particularly strong. I think Florida has been weaker in some of the past quarters. Maybe just give us an update on which ones are performing best, which ones are still struggling a bit.
Yes. So we've provided a good list of markets that have started to accelerate earlier in the year. So I mentioned Seattle, but the DCs and San Franciscos as well. The markets that we've highlighted that are still working through normalization continue to be those that were really the highest flyers through the 2021 and 2022 time period. So a market like Atlanta, for instance, has that normalization, but also some new supply to work through.
And so that's how I would characterize the performance. That said, even those markets that maybe are having a tougher go at it, if you look at overall changes in same-store revenue growth year-over-year, you're starting to see some improvement in some of those markets, like in Orlando, for instance. For the quarter, revenue was down 6.1%, but that's frankly starting to improve from there. And so some of those initial indications of stabilization are occurring in a few of those markets as well, even those that had really strong performance in '21 and '22.
On the West Coast of Florida, you highlighted Florida specifically, Joe highlighted the hurricane impact. We disclosed that, that's likely to have about a $7 million impact financially. But at the same time, the customer traffic on the West Coast of Florida has impacted, and we want to be there to help serve those customer bases as they seek to rebuild on the West Coast of Florida. And so we've seen an increase in move-in activity and occupancy there related to the storm activity and really the storm rebuilding.
Our next question comes from Ki Bin Kim with Truist Securities.
Just going back to some of the comments on stabilization. Correct me if I'm wrong, but last October, I thought you guys cut rates pretty deeply. So when you talk about stabilization, how do you take that into account? And when you look at rent trends sequentially, does that paint a similar story of improvement?
Yes. I think there's a few things there. One, I'm giving you a rent number in October that is kind of an apples-to-apples rent number. And again, we're looking for move-in rents to be in the kind of down single digits towards the end of the year, and I think we're on track for that.
Okay. And on the hurricane impact, how much NOI benefit did you get on the portfolio level from people maybe moving in?
Well, I just highlighted the fact that actually we'll have a financial cost associated with the storms. And as I noted, we are seeing some move-in activities, but I think it's too early to tell to talk about NOI impact overall. But no question, we've had some cleanup work to do at a few of our properties that were impacted, and those are getting right back online. Frankly, most of them are back online serving customers as we sit right here. And as Joe mentioned, relatively modest impact overall and relatively fortunate given where the storm came through.
Our next question is from Mike Mueller with JPMorgan.
Going back to development. Can you talk a little bit about your land positioning and the visibility to kind of keep the development engine going? For example, how many years of development starts do you control?
I'll speak in general terms, Mike, as far as our strategy around land holdings, and then we can give you a little bit more color, more specifically to your question. But what we more often than not do in a vast majority of the development transactions is we'll take control of a parcel depending on the timing for entitlements and other permitted processes you have to go through. We have a contractual option on the land.
We don't own the property itself. So that's far more typical than just putting a big land inventory on our balance sheet. So we'll typically acquire a property. And again, this would be a vacant parcel once we've gotten through what we feel are necessary and any risk-related improvements. So once we get to that point, we'll go ahead and take ownership of the land site. But frankly, more often than not, we're literally ready to build as we do that. Tom, I don't know if you got a specific number to point to relative to overall holdings, but...
Yes, we own about $60 million worth of land in that context, given the strategy that Joe just highlighted.
And out of curiosity that $60 million of land that gives you about what in terms of total expected investment, what's buildable on that?
Yes, that's going to give you ability. Obviously, part of our activity is redevelopment as well. So as you think about that $60 million, that gives us visibility over the next couple of years. And as Joe mentioned, we've got an ability to see further than that based on the agreements we have in place with landowners.
We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Ryan Burke for closing comments.
Thank you, Rob, and thanks to all of you for joining us today. Have a great Halloween, and we'll talk to you soon.
This concludes today's call. You may disconnect your lines at this time, and we thank you for your participation.