Thought Leadership

Four Takeaways from Commercial Observer’s Fall State of CRE Forum | Empire State Realty Trust

November 29, 2023

ESRT’s Executive Vice President, Real Estate Thomas P. Durels participated in Commercial Observer’s Fall State of CRE Forum on Nov. 14. Tom joined Durst Organization principal and Chief Development Officer Alexander Durst, HqO CEO Chase Garbarino, and the Designers Group Founder and CEO Blima Ehrentreu to discuss where commercial real estate is headed and plans for success in the next two years. 

During the panel, Tom spoke about how ESRT delivers on tenant needs and its fully modernized and amenitized portfolio with office and retail availabilities in New York City and beyond. 

See major takeaways from Tom below!

Tenant Requirements are Simple

We deliver what tenants ultimately want, which are properties that are modernized and amenitized. [They want] thoughtfully designed and functional spaces that are either prebuilt or turnkey and often fully furnished and wired – in great locations near mass transit and neighborhood amenities. They want a landlord with a strong balance sheet that can execute on the promises and commitments that landlords need to make and the comfort that they will be there to serve them over the long term. 

Amenities Must Be Planned and Executed Well

“We gave a lot of thought to our amenities to make sure that they are functional and well designed. We are building a 400person all hands meeting space at the Empire State Building that converts to a full basketball and pickleball court with two golf simulators, a fullservice bar, and a tenant lounge. These complement a 15,000 square foot fitness center that is of Equinox quality but is exclusive to tenants at the Empire State Building. There is a 23,000 square foot Starbucks Reserve in addition to seven other onsite food and beverage options at the base of the building. We think of our retail spaces as services and amenities to the office tenants above. At 1333 Broadway, we are building a 200person outdoor rooftop lounge that will be available to all of our tenants in the Broadway campus. These tenants can similarly access a tenantonly lounge and all hands gathering space at 1400 Broadway for meetings. [We recently built] a Wellness Center at 250 W. 57th Street that is very attractive and very functional. [Amenities must] be the right size for the building. We cannot replicate what we plan to build at the Empire State Building at 250 W. 57th Street, because it is roughly half the square feet, but since [250] is close to Central Park, we added a Wellness Center for those individuals that want to get their exercise. They can bike or walk in Central Park, come back, take shower, and get back to the office.  

ESRT is Well Positioned in the Market

“We have had tremendous success, with seven consecutive quarters of positive leased percentage absorption. Most of the leasing that we do is in the most active part of the market, and that is $60 to $75 per square foot in rent. That’s where most of our portfolio is priced, and that requires a strong balance sheet. ESRT did not over leverage during the years of low interest rates. We do not have any floating rate debt and we have no significant nearterm maturities on our debt until 2025. We are well positioned to fulfill our promises and commitments to tenants. We have the execution capability to provide the services that they demand and look for in the long term. We are also well positioned to take advantage of opportunities like acquisitions on a go-forward basis. 

Landlords Need to Plan Now for the Future

“Tenants are smart consumers today. They want buildings that are healthy, they want clean air and natural light for their employees to be productive. This requires intensive planning in the near and long term to avoid fines in 2024 and 2030. ESRT is the industry leader. We developed the first concept for whole building energy efficiency retrofits at the Empire State Building with the Rocky Mountain Institute and the Clinton Climate Initiative, among others. We lowered our utility costs there by 54%. Now we can offer tenants a healthy workplace environment, clean air, and lower occupancy costs through lower utility costs if they follow our high performance, energy efficient design guidelines. If landlords are not building tenant spaces today, with a plan towards compliance with Local Law 97, capital is wasted and those spaces will likely have to be rebuilt.” 

Learn more about the Fall State of CRE online. 

These responses have been edited for clarity. 

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