As office vacancies in New York and the country reach record highs, the owner of Manhattan’s iconic Empire State Building seems to be bucking the trend — but not with shiny new trophy towers.

Empire State Realty Trust, with a Manhattan office portfolio made up of mostly pre-war buildings such as its namesake tourist landmark, reported its second-quarter Manhattan office lease rate, including deals signed but not yet started, rose to 91.6% from 88.3%. That came after the New York-focused real estate investment trust signed 25 office leases totaling 308,310 square feet in the largest U.S. commercial property market.

The average starting rent on the Manhattan office leases signed last quarter was $64.48 per rentable square foot, 15% higher than previously escalated rent, the New York firm said.

Driven by that performance in Manhattan, the REIT’s office portfolio, spanning 8.6 million square feet and its biggest property type, posted six straight quarters of more move-ins than move outs. The REIT also owns retail properties and some offices outside the city in the greater metropolitan area and has expanded to buying residential rental properties.

“We’ve outperformed our peers,” Tony Malkin, the REIT’s chairman, president and chief executive, said on a conference call Thursday. “We got proven leasing results. We’ve got increased occupancy. This whole narrative that only AAA brand new stuff will lease, we say that’s wrong. We got quality tenants which are prepared to pay rents at attractive prices. Flight to quality isn’t as simple as new versus old.”

In contrast, both New York and the United States have had more move outs than move ins, with vacancy rates reaching record highs of over 13%, according to CoStar data.

Even so, there are still limits and challenges facing offices, old and new. The office utilization rate has remained below pandemic levels, and for owners of older buildings, there can be quite a bit of expensive renovations involved to provide a successful combination of prewar charm and 21st-century features.

Empire State Realty said it’s spent $1 billion in “modernizing” its office properties, nearby the Penn Station and Grand Central Terminal transit hubs, with appealing amenities while making them more energy efficient and with good indoor air quality, among features that Malkin said tenants want.

While top-tier properties with similar features can command over $200 per square foot in rent, the REIT said in a presentation “prewar trophy retrofit” properties in the city charge just about $70 per square foot. About 94% of its leases are in the $50 to $75 range, versus that price range making up just about 47.2% of market leases.

We provide “trophy experience in prewar assets,” he said. “We make investments to make our assets future ready. … It makes us a destination for flight to quality. … We are primed to take advantage of the city’s recovery.”

For instance, the 102-story Empire State Building has included among its overhaul over 65,000 square feet of amenities that include a 15,000-square-foot fitness center, a lounge space that can accommodate more than 400 people, and a basketball and pickleball court.

Global management consulting firm Capco, a unit of Indian tech giant Wipro, recently leased a full-floor space at the 92-year-old tower, which counts Microsoft’s LinkedIn as its largest office tenant with 453,500 square feet occupied, according to CoStar data.

Among other major leases last quarter, Flagstar Bank, which bought most of the deposits and retail branches of failed Signature Bank, took over Signature’s entire former office lease spanning 313,109 square feet at 1400 Broadway, another prewar building. The REIT recently opened a new all-hands space at the property and unveiled plans for an outdoor rooftop deck and event space with city and Empire State Building views at 1333 Broadway.

With higher interest rates and uncertain economic outlook having seized up lending in the market, Malkin said the REIT also attracts tenants with its balance sheet. The REIT said it has zero floating-rate debt with no-near term debt maturities and a weighed average interest rate of 3.9%. Malkin said it also owns 100% of its properties with “no complex joint venture structures.”

“Tenants look to partner with financially stable landlords,” he said, adding brokers want to make sure landlords can fund tenant improvement allowances and other things. “Tenants and brokers look closely at landlord sponsor qualities. It’s on the tip of brokers’ tongue. All of that plays to our benefits.”

With the market remaining pummeled, the REIT will be shopping for office properties in the city, he said.

The REIT also said its namesake observatory’s net operating income jumped 26% to $24.8 million, topping even the pre-pandemic level in 2019. The observation deck’s visitor count rose 16% last quarter to about 666,000. The tourist attraction has extended its hours and expects the return of more international tourists, Malkin said.

The second-quarter results “exhibited surprising strength in its office portfolio … lending support to [the REIT’s] ‘flight to quality’ thesis,” BMO analyst John Kim said in a report. The REIT is “more than a two-trick pony.”