New York Times | Developers Sense the Time Is Right to Play Off the Aura of West Chelsea

By January 10, 2012August 26th, 2014In The News

Frank Gehry’s IAC building was a shot of glamour for West Chelsea when it was built in 2007, an almost ethereal assemblage of white, sail-like forms at 18th Street and the West Side Highway. At 130,000 square feet, it is one of the largest commercial buildings in the neighborhood.

The nondescript warehouse will be replaced with a nine-story office building. At one time a hotel had been planned there.

Now, it may have a rival, at least in size. The Albanese Organization just closed on a deal for a nondescript warehouse abutting the High Line elevated park that was once intended to be a hotel built by the musician Jay-Z. Albanese plans to replace it with a nine-story 175,000-square-foot office building.

The $140 million project, at 510 West 22nd Street and 10th Avenue, a few blocks north of the IAC building, is to have 160 feet of frontage on the High Line, 14- to 20-foot-high ceilings and floor plates of 15,000 to 20,000 square feet.

“The IAC Building was ahead of its time,” said Brian Gell, a vice chairman at CBRE, who with his partner Laurence Briody is leading the leasing for the Albanese development, “but there is demand for another corporate headquarters-type development now in the neighborhood.”

Cook + Fox Architects is designing the structure and is hoping to obtain LEED Platinum certification as a sign of its green credentials. “It will have entirely new infrastructure, and from the interior you will feel engaged with the High Line and with nature,” said Richard A. Cook, a partner at the firm. There will be terraces on the north and south sides of the second floor, as well as a penthouse-style setback on the ninth floor and a planted roof. The ground-floor retail space will most likely be for a gallery or events, Mr. Cook said.

To begin construction on the office building, the Albanese Organization is looking to secure an anchor tenant to occupy at least 75,000 square feet, with rents in the vicinity of $80 a square foot.

Brokers and landlords in the area are keeping a close eye on the development. “The office market down here is relatively small when it comes to number of buildings,” said Charles R. Bendit, a co-chief executive at Taconic Investment Partners, which owns several buildings in the neighborhood. “I’m not sure what the demand is for 100,000-square-feet signature properties like this, but I would say there are a lot of cool companies that want to plant their flag down here. It will be very interesting to see how they do.”

Mr. Gell said that with a vacancy rate of just 3.2 percent in the Chelsea office submarket, there was plenty of room for new construction.

Since Albanese closed on the deal just before Christmas and has yet to send out any marketing materials, Mr. Gell has had no formal discussions with potential tenants. However, he said, he envisioned a technology company like I.B.M. that might be looking for a fresher, more downtown image by leasing space in the building.

Tiffany & Company made such a move last year, he said, when it relocated its corporate headquarters to 200 Fifth Avenue, at 23rd Street, from 600 Madison Avenue, at 57th Street. “We are targeting companies who are looking to change their corporate culture or make a statement about it, and are willing to pay to achieve that,” Mr. Gell said.

The West Chelsea neighborhood abuts the southern boundary of Hudson Yards development. In November, Coach announced it would be the first major tenant to commit to the Hudson Yards project, leasing 600,000 square feet for its global headquarters. Construction on the office tower, being developed by the Related Companies, is set to start later this year.

The warehouse at 510 West 22nd Street, which also has the address of 511 West 21st Street, is zoned for commercial use and was originally considered as a site for a hotel. Jay-Z, whose real name is Shawn Carter, acquired the site with partners in 2007, but after the partnership defaulted on the $52 million mortgage, Highland Capital Management of Dallas took ownership of the 88,000-square-foot building.

Last year, Albanese paid Highland $54.5 million for the building in an off-market deal, before the property had been publicly listed.

“We believe that we obtained the highest price per buildable square foot ever paid for a development site zoned for office or hotel in the West Chelsea submarket,” said Ted Dameris, managing director at Highland Capital Management. “The purchase price exceeded the opinions of value received from multiple brokerage firms and allowed Highland to achieve a significant return on our investment.”