7/2/2018 | By Nareit Staff
John Kessler, president and COO of Empire State Realty Trust, Inc. (NYSE: ESRT), participated in a video interview at Nareit’s REITweek: 2018 Investor Conference in New York.
The New York office market remains competitive, according to Kessler. The high level of interest in the sector from private equity and other sources has kept prices stable and cap rates low, he said.
While the REIT continues to look for growth opportunities, “so far, we haven’t found anything that competes with the type of returns we’re getting on the redevelopment of our portfolio,” Kessler noted.
Empire State Realty has been able to achieve “very substantial” mark-to-market increases in rents, Kessler said. In the first quarter the increase was roughly 11 percent.
“That redevelopment opportunity is pretty consistent across our whole portfolio…we’re seeing a very good return on that redevelopment investment,” Kessler said.
Meanwhile, Empire State Realty’s portfolio contains about 700,000 square feet of retail space, mostly at the base of office buildings. Retail assets are about 91.5 percent leased, Kessler said.
To improve foot traffic at its 34th Street retail storefronts, Empire State Realty will relocate the entrance to the Empire State Building Observatory from 5th Avenue to 34th Street. Kessler said the move will divert about four million incoming visitors.
Looking across the portfolio, Kessler noted that “in a tough market, we’ve done very well on the retail side.”