Good news for the Manhattan office market is in several highly reported forms, including vacancy in attractive “trophy” buildings, rising investment sales prices, and lower anchor tenants’ commitments.
However, what is often overlooked is the expansion, expansion and renewal of existing leases. They are a major factor in their success, especially at Empire State Realty Trust. This is the public owner of prewar office towers, mainly the public, including the legendary Empire State Building.
ESRT Chairman and CEO Anthony Malkin explains why REIT’s 7.8 million square feet of large offices were leased 94.2% in the fourth quarter of 2024 (1.6% year-on-year).
“Since its launch in October 2013, we have existing tenants and expanded leases of over 3 million square feet,” Malkin said.
Not only are ESRT buildings primarily leased, they are filled with most people despite the home phenomenon held during the community pandemic.
“We won’t talk anymore [how many are] A string of jobs in the office – it’s finished,” Malkin scoffed.
King Kong’s favorite skyscraper, who died in 2021 by the New York Times, has leases of over 95%. According to Malkin, rents for the middle section of the tower have risen 28% since 2023, surpassing $80 per square foot on similarly located floors.
“We have tenants who come to us for what they consider value, solid landlords and strong balance sheets. They stay in our buildings and expand even when rents go up,” Malkin said.
A proper case: Three very different companies signed this month with a 150,000 square feet of updates and expansions across three buildings. Such a modest size deal will have a major impact on the fate of ESRT as they prepare for the April 30th investors’ call.
The previously unreported lease was updated to the Gerson Lehmann group, over 77,000 square feet in one spectacular central location. On business days, we will expand 12,338 square feet to the Empire State Building to 39,069 square feet total and 34,000 square feet at 501 Seven Avenue in Carolina Herrera.
In 2024 alone, approximately 450,000 square feet of ESRT’s lease volume was due to early renewals with existing tenants “a proactive extension of future satisfaction.”
Holding, for example, has more than doubled the footprint of the Empire State Building to 64,000 square feet.
ESRT often misses media attention given to public and private competitors developing new skyscrapers such as Tishman Speyer’s Spiral and SL Green’s One Madison.
Architectural Ageism is part of the problem.
The “youngest” building on ESRT rose in 1958. The Empire State was almost 100 years ago. The advance properties are often considered outdated, if not entirely on the hills.
Just two years ago, JLL’s Chief Financial Officer Karen Brennan told investors that “buildings built since 2015” were “the only category in terms of the era that recorded strong positive net absorption since the pandemic,” a real perception at the time.
But “every property category has the highest level and we recommend that our buildings be at the top tier,” Malkin said.
Since 2005, ESRT has spent about $725 million on modernizing and relocating the Empire State Building. This is part of an over $1 billion upgrade to the portfolio.
All ESRT properties are considered Class A despite their age.
However, Malkin says that the general distinction between the various classes, such as “trophies”, class A, and class B, is not as important as before, as owners strategically invested in turning previous Class B properties into class A, and some A lost juice.
Malkin didn’t mention that, but the most extreme case was the half-blank 135 West 50th St. in the 1960s, which was considered Class A until last year.
