Empire State Realty Trust Q2 Revenue Up

Empire State Realty Trust (ESRT -0.54%), the real estate investment trust known for its Manhattan office buildings and the Empire State Building Observatory, released its Q2 2025 earnings on July 23, 2025. The key news was GAAP revenue of $191.3 million, topping analyst estimates of $188.5 million. However, profit metrics such as earnings per share (EPS) fell short of last year, with GAAP EPS of $0.04 compared to $0.10 in Q2 2024. The company also lowered its full-year 2025 outlook for both core earnings (Core FFO per fully diluted share) and Observatory profits (Observatory NOI). Overall, the quarter showed solid leasing and a stable balance sheet, but highlighted ongoing pressures on margins and profitability.

Source: Empire State Realty Trust. Note: Analysts' consensus estimates provided by FactSet.

Overview: What Empire State Realty Trust Does and What Drives Success

Empire State Realty Trust is a real estate investment trust that owns, manages, and operates a portfolio of office, retail, and multifamily properties, primarily in New York City. Its most famous asset is the Empire State Building, which includes both office space and a high-profile Observatory tourist attraction.

Key focus areas for the company include leasing strategy, operation of the Empire State Building Observatory, sustainability initiatives, and disciplined financial management. The company's competitive position is built on modernized buildings in desirable locations, strong relationships with tenants, and a commitment to energy efficiency. These factors have helped it attract high-credit tenants and weather fluctuations in the broader market.

Quarter Highlights: Leasing Strength, Cost Headwinds, and Observatory Update

Leasing was a bright spot for the quarter, especially in Manhattan offices. The company signed a total of 221,776 rentable square feet of Manhattan office leases, including both new and renewal leases, achieving blended leasing spreads of 12.1%. These positive spreads—reflecting the difference in rents between expiring and new leases—marked the 16th straight quarter of gains, showing the company could secure higher rents when signing new tenants or renewing expiring ones. The Manhattan office occupancy rate climbed to 89.5%, up from the previous quarter and from the prior year, with the overall commercial portfolio occupancy also rising slightly to 89.0%. Retail, however, remains a weak spot: leased rate in the retail segment dropped to 90.7%, with negative leasing spreads pointing to depressed rents on new deals.

Several major deals supported the company's performance, including a 39,610 square foot lease expansion at One Grand Central Place and new or renewed long-term leases at both the Empire State Building and 1359 Broadway. The duration of new leases averaged just under 10 years.

The Empire State Building Observatory, the company's ticketed visitor attraction, continued to deliver positive cash flow but did not meet original expectations. Observatory net operating income reached $24.1 million, Observatory revenue slipped slightly to $33.9 million. Management revised down the full-year 2025 Observatory NOI guidance to $90 million to $94 million. The new forecast is $90–94 million, lowered from $97–102 million. This adjustment highlights ongoing uncertainty tied to discretionary travel and the competitive tourism landscape in New York City.

On the expense side, the company reported a 5.9% decline in same-store property cash net operating income (a measure of recurring property-level cash flow) year-over-year The release attributed the drop to rising real estate taxes and higher operating costs. Total operating expenses (GAAP) grew to $156.1 million, a 4.0% increase over the prior year. These cost increases led to year-over-year declines in profitability, with GAAP EPS and non-GAAP Core FFO per share both lower than the previous year. Net income attributable to common stockholders (GAAP) dropped to $6.52 million from $17.07 million in Q2 2024.

Portfolio activity included the acquisition of a prime retail asset in Williamsburg, Brooklyn, for $31.0 million. The company also noted an ongoing sale process for its suburban Stamford, Connecticut asset, staying focused on optimizing its core portfolio in New York City. Management repurchased $2.1 million of common shares and maintained a quarterly dividend of $0.035 per share, emphasizing a cautious approach to capital returns as it looks to balance growth opportunities and financial flexibility.

Looking Ahead: Guidance, Dividend, and Key Items for Investors

Management updated its 2025 guidance in the earnings release. The new forecast for Core FFO per diluted share is $0.83 to $0.86 for 2025, lowered from the previous range of $0.86 to $0.89. The year-end commercial occupancy target remains unchanged at 89–91% for 2025, and revised expectations for same-store property cash net operating income (excluding lease termination fees) are –2.0% to +1.5% for the full year. The Observatory income outlook is more cautious, with anticipated full-year net operating income of $90–94 million for 2025. No major debt maturities are expected until late 2026, and the company continues to emphasize a strong balance sheet, with total liquidity at $0.7 billion and no floating-rate debt.

The quarterly dividend was maintained at $0.035 per share, with no change reported. Looking forward, investors should track trends in office and retail leasing spreads, cash flow from the Observatory as a barometer for tourism demand, and any sustained pressure on operating expenses. Management’s lowered guidance reflects current market pressures and the need to manage costs carefully as it seeks to maintain occupancy and optimize returns in the coming quarters.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.