ESRT Reports Strong Balance Sheet Despite Temporary Headwinds in Q1

Empire State Realty Trust (ESRT) enjoyed its 19th straight quarter of positive leasing spreads in the first quarter of 2026, as pricing power increased despite market headwinds. 

The real estate investment trust (REIT) reported higher-than-expected revenues of $190.3 million in the first three months of 2026, its first quarter since consolidating its entire portfolio to New York City at the end of 2025. That revenue topped the $180.1 million in total revenues for ESRT during the first quarter of 2025, but fell short of the $199.2 million in the fourth quarter of 2025.

“We remain focused on a clear and consistent set of priorities,” Anthony Malkin, chairman and CEO of ESRT, said during a Thursday afternoon earnings call. “Lease our space, drive observatory performance, maintain a strong and flexible balance sheet, reallocate capital towards growth, maintain our leadership and sustainability.” 

ESRT reported funds from operations (FFO) of 20 cents per share, up modestly from 19 cents per share in the same period of 2025, but down from 23 cents per share in the fourth quarter of 2025. 

The first quarter saw several large retail acquisitions for ESRT, including the acquisition of a 22,000-square-foot newly constructed commercial property along North Sixth Street in Williamsburg, Brooklyn, for $46 million. The April deal added six new storefronts to the REIT’s existing 102,000-square-foot portfolio of investments in the popular retail corridor.

The REIT is also currently in contract to sell a 26-story office building at 250 West 57th Street along Billionaires’ Row in Midtown for roughly $280 million.

ESRT’s commercial portfolio reached 93.2 percent leased last quarter, according to the report. Throughout the three-month period, ESRT secured 113,484 square feet of new or renewed leases. ESRT’s office portfolio was 93 percent leased, according to the report, marking its 13th consecutive quarter with occupancy above 90 percent. 

Marquee deals included J.P. Morgan Chase inking a 21,683-square-foot renewal at One Grand Central in February and footwear designer Steve Madden taking 60,003 square feet at 501 Seventh Avenue. The REIT reported that it recently secured a 38,084-square-foot, full-floor lease with a financial services tenant at 130 Mercer Street, as well. 

“In today’s bifurcated market of haves and have-nots, ESRT firmly is in the have category,” Ryan Kass, senior vice president and director of leasing and marketing at ESRT, said during the call. 

Approximately 280,000 square feet of leases are now in negotiation, company leadership said, and roughly 15 percent of its available office space in New York City is being held off-market for consolidation. The company has 29 spaces to lease today, 16 of which are full-floor footprints.

“Our lease percentage changes will likely be lumpy,” Kass said. “Importantly, we remain confident in our year-end occupancy guidance of 90 to 92 percent.” 

ESRT’s multifamily portfolio ended the quarter at 96.4 percent occupied, and was at 98 percent as of Thursday, according to company leadership.

However, the Empire State Building’s observatory continues to be a pain point for the REIT, largely due to decreased visitation from international and budget-conscious tourists. Net operating income for the observation deck declined year-over-year by $3.5 million, although the first quarter of the year tends to be their seasonally lightest quarter. Company leaders said a recovery is expected in the latter quarters of this year. 

“Against this backdrop, we focus on our domestic and direct sales program, which support higher revenue per visitor and better margin performance while we await the return of our traditional international demand,” Malkin said during the earnings call. 

Emily Davis can be reached at edavis@commercialobserver.com.