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Before buying into Empire State, know who rents it

Fotosearch | Getty Images

America built it, King Kong climbed it, and starting Wednesday, investors are able to own a piece of the iconic Empire State Building as shares of its owner, the Empire State Realty Trust, begin trading on the NYSE.

But before buying into the building, investors should know who's already renting it.

That's because rent from tenants inside the Empire State Building accounted for more than a quarter of all rent from the Realty Trust's 12 properties as of September 2011, according to its S-11 filing with the Securities and Exchange Commission. That means that companies setting up shop within the trust's flagship property will play an outsized role in driving the stock's financial performance.

According to the trust's S-11 filing, about 68 percent of the Empire State Building's existing 2.8 million square feet of office and retail space was rented out as of September 2011, with companies such as Walgreen, Bank of America and LinkedIn making up some of the biggest tenants.

LinkedIn spokeswoman Blair Decembrele said the professional networking website chose to locate its New York office inside the 102-story building not only because of the structure's cultural prestige, but also because its office space is well-positioned for a resurgence in New York's technology sector.

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"As the city of New York continues to reinvent itself as a hub for some of today's fastest-growing technology companies, the Empire State Building was a natural fit for our New York office," said Decembrele.

Alexander Goldfarb, a senior REIT analyst at Sandler O'Neill & Partners, said that increased interest in recent years from advertising, technology and social media companies like LinkedIn has helped push up average monthly rent for office space in the Empire State Building's Midtown South neighborhood from between $35 and $38 per square foot in 2008 to $65-$70 today.

"There is a lot of social media, a lot of advertising that wants to be down there. It's gone from being a low-cost alternative to being a desirable high-cost," said Goldfarb. "It's really been a beneficiary of the new economy."

'Conveniently located for our employees'

A major selling point for the Empire State Building, said tenants, is its convenient access to central transit hubs in the city.

"We strive to ensure that our offices are conveniently located for our employees, so that commutes are not unnecessarily difficult," said Decembrele. "The Empire State Building's midtown Manhattan location makes it easily accessible to most subways, Grand Central Station and Penn Station."

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The commute convenience factor doesn't just resonate with multibillion dollar firms like LinkedIn, but also with nonprofits including the Boy Scouts of America's Greater New York Council, which maintains an office of about 50 employees in the building.

"We serve every community in New York City, and the Empire State Building is in a central location that allows us to do that, with mass transit nearby," said Joseph Schiltz, the council's spokesman.

Other noteworthy tenants include the FDIC, beauty products maker Coty, and China's People's Daily newspaper.

While rent represented more than half of the building's $197.4 million in revenue in 2010, according to the Trust's S-11 filing, revenue from the skyscraper's observatory, which saw more than 4 million visitors that year, accounted for about 40 percent. Proceeds from TV and radio broadcasting operations represented about 8 percent.

—By CNBC's Adam Molon. Follow him on Twitter @CNBCMolon.

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