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Empire State Building owner to spend up to $150M on new observatory entrance

Property Markets / Planning, Zoning, Infrastructure

United States of America

Jul 28 2017

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Will Parker

If it ain’t broke, don’t fix it — unless it’s bugging your office tenants.

On a Thursday morning earnings call, Empire State Realty Trust announced a new capital project to move the entrance of the Empire State Building’s lucrative observatory from Fifth Avenue to the western side of the building along 34th Street.

The effort will alleviate congestion in the high-trafficked Fifth Avenue lobby and further separate the tourists from the tenants. That’s welcome news to the office workers, who are often held up by an observatory sales pitch when they’re just trying to make it in to work on time.

To create the larger observatory entrance on West 34th Street, director of leasing and operations Thomas Durels said the company would spend $40 to $50 million annually for the next three years. The project “will greatly improve the experience for our office tenants and their visitors and our observatory visitors and the value of our 34th Street retail,” Durels said.

“This new observatory entrance will provide a separate dedicated entrance for observatory visitors, eliminate observatory visitors from entering the Fifth Avenue lobby, thereby eliminating traffic in the Fifth Avenue lobby by more than 50 percent,” he said.

The company also expects the move will direct more foot traffic into its 34th Street retail stores.

Observatory revenues were up year-over-year in the second quarter of 2017 to $34 million from $31.8 million, with much of that increase attributed to a bump from Easter weekend, which happened to fall in the second quarter this year. The company said that construction work on the new entrance will not disrupt visits to its observatory, which accounts for about a quarter of the company’s total revenue.

CFO David Karp declined to make any projections about future observatory revenues.

Company chairman Anthony Malkin, citing State Department cables reported by Reuters, said that immigration policies from President Trump’s administration were affecting tourism numbers. “The visa-granting U.S. consulates in China, we believe that the instruction they have given has resulted in a decrease of visits of Chinese to the United States. We will tell you other than that we don’t see many observatory visitors from the six countries with proposed travel restrictions.”

Malkin previously said he was concerned about a “PR bruise” from Trump’s immigration policies.

SOURCE: The Real Deal


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