Empire State Realty Trust Raises Outlook as Office Occupancy Improves, but Quarterly FFO Falls

Share this article!

Empire State Realty Trust raised its 2026 core funds-from-operations forecast Monday as occupancy improved across its New York office portfolio, even though its third-quarter operating earnings measure fell from a year earlier.

The company reported third-quarter results November 2, including core FFO of $0.20 per fully diluted share, down from $0.23 in the third quarter of 2025. Net income was $0.02 per fully diluted share. Core FFO is a non-GAAP measure and is not interchangeable with net income.

Management increased its full-year core FFO outlook to $0.77–$0.80 per share, compared with its July range of $0.75–$0.79. The company attributed the updated range in part to capital-markets transactions and a stronger-than-expected property performance.

Office occupancy rises, with leasing still uneven

Office occupancy reached 91.9% at September 30, up from 89.7% a year earlier. The office portfolio was 95.5% leased, including signed leases not yet commenced, versus 92.4% a year earlier. The gap between leased and occupied space indicates that not all contracted space was yet producing occupancy.

Empire State signed 189,477 square feet of commercial leases during the quarter, including 170,608 square feet of office space. Office leasing spreads were positive 9.9%, marking the 21st consecutive quarter of positive office spreads. Retail leasing spreads, by contrast, were negative 13.9% for the quarter’s executed leases.

Same-store property cash net operating income excluding lease-termination fees rose just 0.5% year over year. Adjusting for specified nonrecurring items and a previously disclosed federal-agency lease expiration, management calculated 1.9% growth. These are different measures; the adjusted figure should not be presented as the unqualified same-store result.

$217.5 million Broadway sale and share repurchases

Following quarter-end, Empire State completed the sale of 1359 Broadway for $217.5 million. Thor Equities Group confirmed it was the buyer in a separate November 2 announcement issued at 5:20 p.m. Eastern. The 22-story, approximately 486,000-square-foot Midtown Manhattan office building sits near West 36th Street. The company said proceeds would support share repurchases and debt repayment. It repurchased $85.8 million of common stock between its second-quarter earnings call and November 2.

The sale is a completed transaction, but the November 2 earnings release did not identify its exact closing date. The share repurchases are a cumulative figure for the stated interval, not purchases made solely on Monday.

The portfolio repositioning highlights a strategic choice facing office landlords: monetize assets, reduce leverage and return capital while trying to preserve rental income in the remaining portfolio.

Observation Deck demand remains a concern

The Empire State Building Observation Deck produced $15.6 million in third-quarter NOI. Management maintained its previously introduced framework of $55 million in 2026 Observation Deck NOI and said visitation remained weak.

That matters because tourism is a distinct revenue driver from office rent. Better office occupancy does not automatically offset softer ticket sales, and the company faces ongoing expenses, tenant-improvement commitments and leasing costs as it repositions its buildings.

For commercial property investors, the quarter presents a mixed picture: better leasing and occupancy, a higher full-year adjusted outlook, and successful asset sales alongside lower quarterly core FFO and continued tourism weakness.

Primary source: Empire State Realty Trust third-quarter 2026 earnings release, November 2.

Featured image: Illustrative Manhattan skyline, not identified as a company-owned property. Photo: Neil Cooper/Unsplash.