While many Manhattan office owners had a bumper third quarter, Empire State Realty Trust had its slowest leasing period in three years.
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ESRT, which owns the Empire State Building as part of a 7.8M SF office portfolio, signed tenants to 72K SF of Manhattan office space in the third quarter, according to its earnings report, released Wednesday.
It is the first time since the fourth quarter of 2022 that ESRT's office leasing activity was below 100K SF, according to a Bisnow analysis of the REIT's quarterly filings.
The REIT’s stock price dropped by nearly 6% on Thursday. It has now lost more than 29% of its value this year.
Across Manhattan, tenants signed nearly 8.4M SF of leases during the period, more than 50% higher than the five-year quarterly average, according to CBRE. This year is on pace to be the city's strongest for office leasing since before the pandemic.
ESRT's Q3 numbers also stand in direct contrast to its recent performance. It signed a combined 443K SF of Manhattan office leases in the first half of the year and 289K SF in last year's third quarter, its filings with the Securities and Exchange Commission show.
ESRT Chairman and CEO Anthony Malkin said on the company's earnings call Thursday that it has signed an additional 50K SF of leases in October and has another 150K SF in the pipeline.
“Our highly leased portfolio has benefited from strong lease-up executed over the last several years, and 3Q was a slightly lighter quarter for office leasing,” Malkin said.
The REIT's focus is leasing up the 500K SF of available Manhattan office space, Malkin said, with some being held off-market to lease as contiguous blocks.
“We remain focused on our ability to drive occupancy and maximize lease economics,” he said, adding that the firm has also been pushing to increase rents, reduce concessions and sign extensions with current tenants.
Its Manhattan office occupancy rose in the third quarter to 90.3% from 89.5% in Q2 as companies that previously signed leases occupied their space. But its leased percentage, which takes into account more recent deals where move-ins haven't occurred, dropped from 94.1% in Q3 2024 to 93.1%.
The company affirmed its guidance on its earnings, funds from operations and occupancy for the year and reported increases in rents it is able to derive from its portfolio, which is largely made up of older properties.
The average rent per square foot in its Manhattan offices in the third quarter was $69.97, compared to the market average of $72.57, according to CBRE.
The REIT also owns 800K SF of retail space, which was 94.7% occupied before ESRT announced a deal with Rolex at one of its recently acquired Williamsburg storefronts.
The quarter's results come a little over a month after the REIT announced that longtime executive Thomas Durels would be stepping away from his role, transitioning leadership to Chief Revenue Officer Ryan Kass and newly hired Chief Operating Officer Jackie Renton. Durels plans to remain involved with ESRT until June 2027.
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