Half-Billion-Dollar Modernization and New Class-A Amenities Attract Larger Space Users

Long known as the world's most famous office building, the Empire State Building has begun a significant transformation over the past year, as Wien & Malkin repositions the building to be part of W&H Properties' Pre-War Trophy portfolio and a real estate centerpiece for the 21st century in terms of tenant amenities, technology, and management efficiency.

"Our objective is for tenants and brokers to regard the Empire State Building as a prime option for locating a business," says Anthony E. Malkin. "Based on the quality and volume of leasing activity we are seeing from brokers and tenants that have not previously considered the building, I am optimistic that we're achieving our goal."

The Wien & Malkin-led program will see a half-billion dollars invested in an all-encompassing modernization and re-tenanting of the building.

Some of that work has already been completed. The tenant consolidation program is reducing the number of smaller tenants, freeing up space to create blocks for occupancy by larger, more credit-worthy users. Before Helmsley-Spear was removed as managing and leasing agent, the Empire State Building had over 800 office suites occupying its 2.7 million square feet of rentable office space.

"There are multiple benefits to be realized from tenant consolidation," Mr. Malkin explains. "Having fewer but larger tenants creates management efficiencies in terms of maintenance, lease administration and downtime for re-leasing. And larger, more credit-worthy tenants that can expand, survive economic cycles, and renew at the building's new, higher rental structure, enhance the financial strength and flexibility of Empire."

The modernization and consolidation programs already show compelling evidence of success, with full floors being leased by large companies that are well known in their fields. For example, the internationally acclaimed firm of Brennan Beer Gorman Monk Architects will relocate from its home on Madison Avenue to occupy the entire 30,000-square-foot 25th floor.

Taylor Global Communications is moving from the Penn Plaza area to its new headquarters comprising the entire 24,600-square-foot 38th floor, as is the international accounting firm, Funaro & Company, which will move from One Penn Plaza to occupy the entire 41st floor comprising 20,000 square feet.

Lufthansa Airlines, although not taking a full floor, is relocating to the Empire State Building from its current Fifth Avenue address in the Plaza District, a move that is especially notable, says Mr. Malkin.

"Even the map is changing," he adds. "CB Richard Ellis has redefined its market reports to include the Empire State Building in its midtown surveys. When we are attracting tenants from prestigious addresses, we know we're getting our message across and tenants and brokers are buying into it. The Empire State Building is rising to a level of prominence as an office building that it has not had for decades. Combined with the increasing vitality of the 34th Street Corridor, we have all of the elements we need to market the building proactively to the business world."

Rendering of the lobby, restored
to its original art deco grandeur.

An example of how the message is being received is reflected in a recently signed retail lease: Starbucks will soon open one of its largest outlets in the world in the Empire State Building, occupying 8,400 square feet on three levels.

"Starbucks' decision brings into sharp focus the direction we are taking to create value for our investors, by placing the Empire State Building within the top tier of choices for mid-size and larger office tenants while continuing to develop the property's full potential as a center for retailing, tourism and broadcasting," says Mr. Malkin.

The Empire State Building's $500 million modernization program so far has provided tenants new energy-efficient, operable windows throughout the building; new elevator controls and new cabs with imported Italian marble; a new messenger center with uniformed door-to-door delivery service; and upgraded telecommunications systems with T3 lines, DSL, ISDN, and fiber optic and cable.

Still in progress are the complete restoration and renovation of its landmarked lobby by Beyer Blinder Belle (the architectural firm famous for its restoration of such landmarks as Grand Central Terminal and Rockefeller Center); new common public corridors with air conditioning, new restrooms on all floors, thorough electricity and HVAC upgrades, and major investment in new office suites to meet the needs of 21st century businesses.

Completion of the entire program will take place over seven years, with most of the common areas concluded by year-end 2009.