Manhattan is the most exclusive real estate market in the world.

The tiny, 34-square-mile island is home to Wall Street, the global headquarters of the United Nations and some of the most powerful and influential companies in the world.

That exclusivity has driven big gains for one of Manhattan’s most prized properties. Since going public in the spring of 2010, Madison Square Garden (NYSE: MSG) is up a market-crushing 198%.

#-ad_banner-#But if you missed out on that impressive run, don’t worry. The most exclusive real estate market in the world is setting the stage for another big winner.

Clocking in at $1.3 billion, this company’s recent IPO was the second-largest ever for a U.S. REIT (real-estate investment trust). It controls more than 8 million square feet of some of the most desirable commercial real estate in the world. And it also pays investors to own shares with a solid dividend yield that is higher than the benchmark 10-year Treasury.

Empire State Realty Trust (NYSE: ESRT) went public in early October. The REIT owns 12 office properties and six retail properties. The trust’s prized asset is the iconic Empire State Building, which is the second-tallest building in New York City. Not only is the Empire State Building one of the world’s most recognizable buildings, but it’s also located in one of New York’s strongest real estate markets, with the nation’s lowest local vacancy rates.

A report from leading global real estate specialist CBRE shows Manhattan leasing rates are accelerating, with overall leasing activity in September rising 16% from last year and 36% from just last month while availability rates fell 20 basis points to 12.3%. Those macro tailwinds will continue to support leasing demand in the Empire State Building and the trust’s other properties in Manhattan.

	Flickr/David_Shankbone
	Not only is the Empire State Building one of the world’s most recognizable buildings, but it’s also located in one of New York’s strongest real estate markets, with the nation’s lowest local vacancy rates.

But the Empire State Building isn’t just an investment in commercial real estate. It’s also a play on one of the most popular tourist destinations New York City has to offer. The Empire State Building generates 40% of its revenue from selling tickets to its observation decks. That provides a nice source of revenue diversification against any short-term weakness in commercial real estate.

Even though the Empire State Building is the flagship asset for Empire Realty Trust, one of the knocks against the building is its lease rate of 78%, well below some of its neighborhood peers trending between 94% and 96%.

But that subpar lease rate is set to climb as the building continues to execute a $550 million investment project to upgrade infrastructure, tenant suites and lower energy costs.

Lead contractor Johnson Controls (NYSE: JCI) projects that the upgrade will cut the building’s energy consumption by 38% and save $4.4 million annually when finished and lease rates accelerate. That will continue to attract new tenants for the Empire State Building’s smaller office spaces that are in demand from the large number of media and technology startups operating in Manhattan.

As a REIT, Empire State’s new corporate structure will also increase profitability, reduce its cost of capital and drive operational efficiencies. And since REITs are required to pay 90% of their income as distributions to shareholders, it also sets the stage for a solid dividend yield that is projected to be around 2.6% in an income-starved market.

Risks to Consider: The Empire State Building is the crown jewel of the Empire Realty Trust, but that can also be a double-edged sword with a high percentage of revenue concentrated in one building. The observation deck revenue also poses a threat in the event it would be closed due to terroristic threats.

Action to Take –> Manhattan commercial real estate is amongst the most coveted in the world. And with its recent IPO, Empire State Realty is in position to cash in on that strong demand. ESRT is a potentially powerful source of growth and income for investors looking for exposure to the most exclusive real estate market in the world.

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