News

Mar 04, 2024

L&L Holding bets on large offices with Terminal Warehouse in West Chelsea

261 11th Ave. A massive conversion project in West Chelsea is set to test whether large offices can still find takers in a work-from-home world where corporate tenants are downsizing. Terminal

261 11th Ave.

A massive conversion project in West Chelsea is set to test whether large offices can still find takers in a work-from-home world where corporate tenants are downsizing.

Terminal Warehouse, a redevelopment of a full-block prewar warehouse by L&L Holding Company, Columbia Property Trust and Cannon Hill Capital Partners, is putting the finishing touches on the 1.2 million-square-foot, $2 billion project and will start marketing it by the end of the year.

Much has changed since 2018, when the developers paid $880 million for the building, a hulking structure at 11th Avenue and West 28th Street cut through with a former railroad tunnel long known as Terminal Stores. But other than slightly tempering expectations about snagging a single major tenant for all the office space, the developers remain bullish that a mix of classic architecture, modern amenities and a trendy High Line-area address will be a win.

“The reality is, whether workers are in the office three days a week or five, they will be there on the same days and need space to interact,” said David Orowitz, a managing director at L&L.

The developers have not yet set rents for Terminal Warehouse, which has about 1.1 million square feet of office space and 75,000 square feet of retail and restaurant space. But Columbia Trust CEO Adam Frazier said that prices will be comparable to some of the newest office skyscrapers nearby. At 50 Hudson Yards, which opened last year, asking rents average $125 per square foot annually, and the gleaming 77-story spire is 85% leased, according to CoStar Group.

But by creating a something-for-everyone medley of offices, restaurants and bike concierges inside an industrial relic, Terminal Warehouse seems to be aiming for tech tenants. Indeed, its layout is reminiscent of Chelsea Market, the nearby food hall and office complex owned and occupied by Google parent company Alphabet.

Yet tech tenants have not been immune to recent economic challenges. Meta, for one, has reduced its New York headcount in recent weeks, including at locations like 372 Ninth Ave., a location consisting of the top floors of the former Farley post office whose base was converted into an Amtrak station peppered with retail offerings.And there’s the macro environment. The average daily occupancy rate for offices in the New York region in late June was 49.1%, about where it’s been all year, according to Kastle Systems, a company that tracks building use.“Even if we don’t have tech tenants, a lot of employers are competing for talent that might otherwise go to tech companies, so our building can help with recruitment,” Frazier said. “Not everybody wants to work in a shiny glass-and-steel high-rise.”

This story has been updated with the current name of the project, Terminal Warehouse.

261 11th Ave.

William Rossiter, a former Civil War officer whose brother Edward Rossiter was an executive with New York Central Railroad, developed the oldest section of this full-block structure in 1891, at a time when rival railroads were constructing similar facilities nearby. Originally called the Terminal Warehouse Company, the seven-story site was a collection of two dozen walled-off storage areas under one roof served by trains that would enter a 689-foot tunnel from 11th or 12th avenues to discharge their goods. (The “cold storage” advertised on the façade referred to the site’s ability to stash furs.) In the 1980s, the Tunnel nightclub availed itself of the site’s cavernous through-block first-floor space. In later years, most of the floors featured self-storage units, though Uber also occupied a 54,000-square-foot column-lined berth. Currently being remade as a stylish office complex by a team that includes L&L Holding Company with a design by CookFox, Terminal Warehouse has added several terrace-lined stories on its Hudson River side, a 10,000-square-foot courtyard and an auditorium. And the tunnel now features peek-a-boo-style floor openings to reveal the long-ago tracks.

281 11th Ave.

Railroad companies once dominated this stretch of the West Side, including at this 3.6-acre site. In 1902, the full-block property was established as a transfer point for freight for the Erie Railroad, which ran to Chicago by way of the Southern Tier region of New York state. In 1909, the railroad added a “float bridge”-style barge to shuttle train cars back and forth across the Hudson to New Jersey. (The Hudson was still called the North River then.) In 1960, the Erie merged with rival Delaware, Lackawanna and Western Railroad and hung on until the mid-1970s. But Con Edison bought the site in 1978 from the railroad’s Ohio-based trustees for $1.2 million, public records show. Most of the property today provides parking for Con Ed vans, though members of the public who drive vehicles that run on compressed natural gas can fill up their tanks at pumps there. The filling station is one of six such Con Ed sites region-wide.

613 W. 29th St.

The Ohm, a 369-unit, 34-story tower at 312 11th Ave. from Douglaston Development, was one of the first luxury high-rises in Hudson Yards when it opened in 2010. Bookending it in a way is 3Eleven, a new 938-unit, 60-story spire also from Douglaston across the street at No. 613. (The tower’s alternate address is 311 11th Ave.) Currently leasing its studios to two-bedrooms for prices that start at about $4,700 a month for market-rate units, 3Eleven occupies a large L-shaped site that once contained one of Manhattan’s few remaining gas stations (a Mobil) and a studio for the sculptor Jeff Koons. Douglaston leased the site in 2018 for 99 years for $130 million and spent an additional $37 million on air rights. The lender HSBC provided a $350 million mortgage. Handling the ground lease deal on behalf of an unnamed family was a firm called Eight Points Asset Management that specializes in such transactions. 3Eleven’s 60,000 square feet of amenities include an outdoor pool and two dog runs.

601 W. 26th St.

Perhaps the most significant example of repurposed railroad infrastructure prior to Terminal Stores (and a potential competitor) is this 19-story, 2.3 million-square-foot full-block edifice, the Starrett-Lehigh Building. Constructed in 1931 to serve a railyard below—some elevators are still big enough to fit train cars—the Starrett-Lehigh today is mostly offices, courtesy of a gradual transition that began in the late 1990s. Fashion businesses are mainstays today, including Ralph Lauren, Tommy Hilfiger and Under Armour. An ongoing renovation by owner RXR Realty is adding 10 floors of amenities including Hav & Mar, a restaurant from celebrity chef Marcus Samuelsson that should open this fall. There are 18 office spaces now for rent, with the largest being a third-floor, 103,000-square-foot berth, according to RXR, which in 2011 bought the building from Mark Karasick’s 601W Companies for $920 million. Karasick had purchased the Starrett-Lehigh at an auction in 1998 for $152 million.

270 11th Ave.

The industrial area boasts an automotive legacy as well. This five-story building houses a branch of Manhattan Motorcars, a dealership specializing in high-end models from Porsche, Bentley and Bugatti. The owner of both the business and the building is Michael Dezer, a Florida-based developer whose portfolio includes a Trump Towers complex in Sunny Isles Beach. Billionaire Dezer also owns one of the world's largest car collections, some of which is in the process of being installed at a once-abandoned shopping mall in Orlando called Dezerland Park. In 1988, shortly after Dezer bought No. 270, he opened a 1950s-style club there called the Hot Rod Diner and Bar. Embedded car frames studded its facade.

Hudson River Park

The Hudson River’s shores, once jammed with large cargo-laden ships and isolated by an elevated highway above West Street, were mostly a destination for workers. But after a reinvention that has played out over four decades, the strip now has much broader appeal as the four-mile, 550-acre Hudson River Park, which is on the verge of being completed, 25 years after Gov. George Pataki incorporated it. Required to self-fund, the park collects revenue from retail leases, air-rights sales and donations and had an income in its last fiscal year, which ended in March, of $28 million, according to its annual report. But the park has not come cheap. Since its 1998 creation, the authority that operates it has spent $915 million on construction and maintenance, according to its website. Among its refurbished maritime relics is Pier 66, which features a piece called Two Too Large Tables, steel-and-pipe creations by the artists Allen and Ellen Wexler. One table is for sitting at, while the other is for sitting under for shade.

282 11th Ave.

The tidal wave of development that washed over this High Line-adjacent enclave in the 2010s allowed AvalonBay Communities to gain a considerable beachhead, a large L-shaped site at the corner of West 28th Street that was once parking lots. Today it has not one but two Avalon rental towers. They are 2013’s AVA High Line, a 13-story, 405-unit development, and 2015’s Avalon West Chelsea, a slightly more upscale 30-story, 305-unit version. According to the City Register, AvalonBay leased the three tax lots that make up the site in 2007 for $173 million from Valeray Real Estate Company in a deal coordinated by the same third-party asset manager, Eight Points, of 613 W. 29th St. In 2018, Invesco Real Estate bought an 80% stake in five New York AvalonBay rental towers, including this pair, for $607 million, records show.