Empire State Realty Trust (NYSE:ESRT) opened 2026 with what Chairman and CEO Tony Malkin described as “solid earnings” and “steady execution across our portfolio,” supported by continued cash flow from the Empire State Building observatory and an active Manhattan office leasing market for the company’s “top-of-tier product.”
During the company’s first-quarter 2026 earnings call, management also detailed a retail acquisition in Williamsburg funded through capital recycling, recent financing activity that pushed out near-term maturities, and leasing progress at 130 Mercer Street.
First-quarter performance and office leasing trends
On leasing, EVP and Chief Revenue Officer Ryan Kass said the company signed 113,000 square feet of new and renewal leases in the quarter, with office transactions averaging 10.5 years in term. Kass said ESRT had approximately 280,000 square feet of leases in negotiation, up from 170,000 square feet discussed on the prior quarter’s call, while “tour activity continues to be robust.”
Malkin said ESRT’s commercial portfolio was 93.2% leased and that the company expects occupancy gains for the full year. Kass added the office portfolio was 93% leased, marking the 13th consecutive quarter above 90%, and reiterated the company’s confidence in year-end occupancy guidance of 90% to 92%. Kass also outlined expected move-outs, saying ESRT has about 210,000 square feet of known vacates through the rest of the year but expects its leasing plan “will more than cover those vacates.”
Pricing remained positive, according to management. Malkin said ESRT achieved its 19th consecutive quarter of positive mark-to-market rent spreads in the Manhattan office portfolio. Kass quantified the first-quarter mark-to-market spreads at 6.8% and said average lease duration was 12.2 years across the commercial portfolio.
Notable leasing activity cited on the call included:
- Steve Madden: a 13-year, 60,000-square-foot new office lease for the entire third and fourth floors at 501 Seventh Avenue.
- JPMorgan: a 20-year, 22,000-square-foot retail renewal lease at One Grand Central Place.
Kass also addressed the company’s strategy of holding some space off-market to create larger blocks. He said roughly 15% of available office space is currently held off-market for consolidation into larger availabilities, down from about 20% previously due to leasing progress including the Steve Madden transaction.
130 Mercer leasing progresses ahead of planned improvements
Management highlighted leasing progress at 130 Mercer Street, a property ESRT acquired with initial vacancy. Malkin said the company leased the first floor and had a pipeline expected to convert in the second quarter.
Kass said that subsequent to quarter end, in April, ESRT signed a 10.5-year, 38,000-square-foot new office lease for the entire third floor with a financial services tenant. Kass said the building’s lease percentage moved from 70% at acquisition to 80%, leaving two full floors to lease.
Asked how the April lease compared with underwriting, Kass said the transaction was supportive, citing rents “in the high $90s,” tenant improvements consistent with expectations, and a “little bit better” pre-rent. He also said the lease was signed faster than underwritten and before the start of the planned capital improvement program, noting early traction following a marketing launch.
Observatory results pressured by softer international and pass-program demand
The Empire State Building observatory remained a key cash flow contributor, though first-quarter results reflected what management described as a seasonally light period and softer tourism trends. Malkin said first-quarter observatory NOI was $10.6 million, calling it the company’s “seasonally lightest quarter.” Horn similarly said the observation deck generated about $10.6 million of NOI in the quarter.
Horn said that excluding the gift shop, observatory NOI declined by approximately $3.5 million year-over-year. Malkin said revenue per capita increased about 1% year-over-year, excluding gift shop license fees, but results were impacted by soft visitation from “international and budget-conscious tourists-centric pass programs.”
President Christina Chiu emphasized the weighting of observatory earnings later in the year, saying the balance of the year typically represents about 85% of annual NOI, with approximately 60% coming in the second half. She also pointed to the business’s “low capital intensity, strong operating margins, and dynamic pricing capability.”
In response to a question about confidence in full-year expectations given early visitation trends, Malkin said the company updates quarterly and was reluctant to adjust expectations based on roughly 15% of the year. He cited ongoing geopolitical and travel-related disruptions, including reduced travel into the U.S., and said management would keep “a strong weather eye” as the year progresses.
Capital recycling into Williamsburg retail and balance sheet actions
Chiu said ESRT acquired 4155 N 6th St, a newly constructed, currently vacant retail asset in Williamsburg, for $46 million. The property comprises approximately 22,000 square feet and sits at the corner of 10th and N 6th Street. She said the acquisition, along with the company’s mid-2025 purchase of 8690 N 6th St, completed the redeployment of investment capacity from the company’s December 2025 disposition of Metro Center “without recognition of a taxable gain.”
In aggregate, Chiu said ESRT exited its last suburban commercial property and reinvested in about 37,000 square feet of prime retail on N 6th Street. ESRT’s N 6th Street portfolio now totals 124,000 square feet, which Chiu said continues to perform “strongly and in line with our expectations.” She said the company built the N 6th Street position over about 2.5 years for roughly $300 million, “all without leverage,” to enhance control over tenant mix and leasing momentum.
Asked about the decision to buy a vacant retail property versus share repurchases, Chiu said the N 6th Street acquisitions were a specific capital recycling trade tied to the Metro Center sale and aimed at avoiding taxable gain “leakage of proceeds.” She said the company views buybacks as part of its capital allocation considerations and added the company has liquidity to conduct repurchases over time.
On expected returns, Chiu said ESRT has previously indicated its N 6th Street portfolio was acquired in the “high fours to five” range and expects it “to be around six” with lease-up and storefront delivery. For the newly acquired vacant asset, she said ESRT would expect “yields higher than that” given the lease-up opportunity, and that the company would provide more detail as progress continues.
On financing, Chiu said ESRT executed $184 million of financings year to date. The company announced $130 million of senior unsecured notes in a private placement at a rate of 5.99%, expected to fund in mid-July and mature in 2032, with proceeds used to pay down existing debt including the line of credit. ESRT also closed a $53.5 million mortgage refinancing for 10 Union Square East, a 10-year interest-only loan at a fixed rate of 5.3% replacing a $50 million loan that matured April 1, 2026.
Chiu said the financings leave ESRT with no unaddressed debt maturity until January 2028. She also cited net debt to adjusted EBITDA of 6.3x and emphasized a “well-laddered debt maturity schedule.”
Cash flow and outlook
Horn said Core FAD in the first quarter was approximately $33 million, up from about $1 million in the first quarter of 2025 and above $31 million in the fourth quarter of 2025. Horn attributed the improvement primarily to a reduction in FAD capital expenditures, which were about $22 million in the quarter compared with $53 million a year earlier, following elevated spending tied to prior lease-up activity.
Horn said ESRT’s full-year 2026 guidance remained unchanged.
In closing remarks, Malkin said ESRT remained focused on five priorities: leasing space, driving observatory performance, maintaining a strong and flexible balance sheet, reallocating capital toward growth, and maintaining sustainability leadership. He added the company believes it is “well-positioned to execute in the quarters ahead and create long-term value for our stakeholders.”
About Empire State Realty Trust (NYSE:ESRT)
Empire State Realty Trust, Inc is a publicly traded real estate investment trust (REIT) focused on the ownership, management and operation of office and retail properties. The company’s portfolio features the iconic Empire State Building in Midtown Manhattan, alongside a diversified collection of commercial assets situated throughout Manhattan, Brooklyn and select markets in Upstate New York. By offering premium office space and street-level retail, Empire State Realty Trust positions itself as a landlord of choice for corporate tenants, retailers and experiential brands seeking high-profile addresses.
Established through a spin-off of assets in early 2013, Empire State Realty Trust consolidated a mix of landmark and Class A properties, creating scale in one of the world’s most competitive real estate markets.
