Empire State Building Observation Deck Hemorrhaging Visitors, Value

Fewer tourists are coming to Manhattan and visiting the top of the Empire State Building, dragging the tower's owner into the red.

Empire State Realty Trust wrote down $166M in value tied to its namesake skyscraper's observation deck, sending the REIT to a net loss of 15 cents per share in the second quarter. 

The net operating income of the tourism attraction — a pop culture icon featured in the Tom Hanks-Meg Ryan romantic comedy Sleepless in Seattle — has fallen by half, plummeting from $24M in the second quarter of 2025 to $12.4M during the same period this year.

ESRT's shares were down 14% by Thursday afternoon following the disclosure of the decline.

“We began a total re-evaluation of our observatory business model and execution early in the first quarter, in anticipation that market conditions may continue to work against our historic customer sourcing mix,” ESRT CEO Tony Malkin told investors during a conference call on Thursday. 

ESRT attributed the loss to a decline in international tourism, despite the World Cup bringing more than 1 million people to New York and New Jersey. The number of visitors to the observatory dropped by approximately 18% and 29% year-over-year in the first and second quarters, respectively. 

“I think the World Cup was a distraction,” Malkin said. “Not a lot of people on the streets, not a lot of people who were there for anything but the World Cup.”

Typically, more than 60% of visitors to the observatory are international. Last week — the days following the World Cup final across the Hudson River in New Jersey — the deck had its second-highest visitor count of the year, with more than 60% being domestic, Malkin said.

In part, that’s because the observation deck participates in sightseeing passes, which bundle discounted admissions to multiple attractions and are particularly popular among international travelers on a budget. Comparing 2024 and 2026 year-to-date, Malkin said there has been a 45% decline in customers participating in such programs.

Malkin added that ESRT is adjusting its advertising and online presence, including shifting from traditional search engines to artificial intelligence searches. 

ESRT’s core funds for operation — a key measurement of REIT performance — for the quarter was 21 cents per share, slightly beating Wall Street’s expectations of 20 cents, according to a report by Evercore ISI shared with Bisnow.

Its primary business of leasing NYC office and retail space has improved, with occupancy rising to 89.4% at the end of June from 88.2% three months earlier.

But the company updated its 2026 guidance in response to the observation deck's struggles. Assuming no improvement to current visitation levels, the observation deck’s forecasted NOI was cut from a range of $87M to $92M to a new midpoint of just $55M.

Even so, Malkin highlighted to investors that the figure “is a framework.”

“We don't want to hold ourselves to that because we just don't have a lot of confidence in what we see right now,” Malkin said.

As a result, ESRT’s expected FFO for the year decreased from between 85 cents and 89 cents per share to between 75 cents and 79 cents. 

“While we expected a guidance cut as outlined in our preview note, the magnitude of the observatory NOI reduction was higher than expected,” Evercore analysts Steve Sakwa and Manus Ebbecke wrote in their report.

Historically, ESRT’s business has relied heavily on its observation deck, something the company has tried to change in recent years. In 2019, the asset accounted for 25% of the REIT’s overall NOI, according to an investor presentation. As of the second quarter, that percentage is down to 20%. 

In that time, ESRT has also offloaded its suburban assets, redeploying that capital into crafting a purely New York City portfolio. It also began investing in multifamily and making a play for the outer boroughs, specifically street retail in Williamsburg.

Meanwhile, competition has heightened for Manhattan observation decks. In 2020, The Edge opened in Hudson Yards, followed by Summit One Vanderbilt’s launch in 2021. 

Summit, owned by SL Green, reported more stable revenue in the second quarter, bringing in $31.5M, slightly higher than the $31M in revenue the company reported during the same period last year. The landlord, which operates the venture with artist Kenzo Digital, plans to expand the attraction to Paris and Tokyo.

During SL Green’s second-quarter earnings call, Chairman and CEO Marc Holliday acknowledged the “challenging market” but said there has been an uptick in sales, including a bump from the World Cup.

“I think some of our competitors have had to resort to discounting tickets. We've been able to keep our rents high,” Holliday said. “We don't participate in the pass program, probably the only object I know that doesn't participate in that program, which generally discounts the tickets, just because we have a great following.”