Truck Terminals Aren’t the Most Attractive Building Type, But This Architect Had Other Ideas

Truck terminals may not be the most glamorous building type, though they are in demand from transportation and heavy equipment companies that like the big parking lots, coveted zoning and interiors spacious enough for moving around freight pallets.

Even so, architecture firm HGA and a client, construction company McGough, had an altogether different use in mind. The firm’s idea shows possible design alternatives for the scores of terminals up for sale in the United States and Canada at a time when the Chapter 11 bankruptcy of trucking company Yellow Corp. raises the profile of these kinds of properties.

For HGA, it all started when McGough, a family-owned business, was struggling to decide how to replace its dingy, cramped and outdated headquarters office in the St. Paul, Minnesota, suburb of Roseville.

“This was a real rabbit farm of a facility they had been in for decades,” HGA architect Bill Blanski said during a recent guided tour provided to CoStar News.

McGough and HGA searched for existing offices within a 10-mile radius of McGough’s headquarters at 2727 Fairview Ave., but nothing was appealing. They discussed new construction but couldn’t determine the best location or design style It turns out they didn’t need to look far to find a solution, one that at first seemed unlikely.

Brad Wood, chief operating officer at McGough, and Blanski decided to peek inside a vacant truck terminal next door at 2785 N. Fairview Ave. As soon as they saw the loading dock portion of the 1950s-era building, covered by a barrel vault roof, they knew they had found McGough’s new headquarters.

“HGA was aware of this building and it wasn’t until they came inside and really saw the beauty of the structure, of the steel trusses, the decision was made,” Blanski said.

Truck terminals are in high demand these days, according to brokers that specialize in the property type. Major trucking companies own hundreds of them, spread across North America, to facilitate quicker freight deliveries.

Yellow’s bankruptcy filing earlier this year put more than 170 terminals in the U.S. and Canada up for sale, sparking a bidding war, to help it pay off creditors. Yellow is also seeking court permission to walk away from about three dozen leased properties, many of which are truck terminals.

The most common users of truck terminals are sellers and leasers of backhoe loaders, excavators and other big machinery; pallet distributors; garbage haulers; operators of long-term parking lots for 18-wheeler trucks; and businesses that offer storage drayage trucks that transport freight from ocean ports to rail facilities, according to industrial brokerage Morprop Advisors.

The interior space that comes with a truck terminal is hard to find, Blanski said. The former terminal portion of the McGough office, for example, is 25,922 square feet with no load-bearing walls or columns in the middle of the space.

“It’s also extremely difficult to build new ones,” said Chris Pennington, a senior vice president and partner at Binswanger who represents industrial clients in property sales. “Most residential neighborhoods balk at having truck terminals located nearby that operate around the clock. But it’s precisely those in-town locations that are most desirable for freight distribution. A lot of municipalities, especially in the Northeast, want nothing to do with trucking.”

Because of the scarcity of truck terminals on the market, Yellow’s portfolio sale triggered competitive bids from at least two trucking companies, Estes Express Lines and Old Dominion Freight Line. The United States Bankruptcy Court recently approved Estes as the lead bidder with a $1.525 billion offer, but more bidders could emerge for Yellow’s portfolio in an auction scheduled for later this month.

Some investors and trucking companies aren’t waiting for the auction and are snapping up terminals as they become available. Biynah recently acquired terminals in Atlanta, Dallas and Miami for a combined $28.7 million. Saia Motor Freight Line in October paid $9.4 million for a terminal in the Richmond, Virginia, area previously occupied by FedEx Ground.

“The interest from industrial companies in truck terminals means owners of the property type are getting smarter about what their terminals are worth,” said Jeff Josephs, managing member at Biynah Industrial Partners, the owner of about 40 terminals.

The average sales price for the 54 truck terminals sold in the U.S. in the third quarter was $8.3 million, according to CoStar data. That’s a 32% increase from the $6.3 million average of 65 sales in the third quarter of 2022.

Biynah’s Josephs said his company’s plan for terminals it acquires is to rehabilitate the buildings for use by trucking companies or other industrial occupants. That shows why conversions like the McGough building are still relatively rare.

“We put capital in them, clean them up and lease them out,” Josephs told CoStar News. “I don’t get any expressions of interest from potential buyers who want to convert them to offices.”

“Former industrial buildings converted to offices, retail and residential properties have proven to be popular,” said Brian Parker, head of the interior design studio at architecture firm Cooper Carry. “It makes sense that a truck terminal, if structurally sound, could be used in the same way. The industrial look has a very deep and broad appeal. I just wish there were more examples of it. The good news is that many cities have lots of properties like truck terminals, warehouses and manufacturing plants. They have a character and warmth that you can’t recreate in new construction. It’s hard to replicate that.”

While rare, it’s not unheard of for a truck terminal to be converted into offices. Architecture and design firm HOK renovated a nearly century-old truck terminal in Springdale, Arkansas, into offices and a retail store for Tyson Foods.

HGA retained many elements in McGough’s headquarters that show it was once a truck terminal. For example, cinder blocks are painted with numbers that were used to designate dock doors.

“A big debate was whether to paint these walls or not and we kept them pretty raw,” said Wood, McGough‘s COO. “McGough’s previous headquarters lacked big windows, and management wanted to ensure the new office had plenty of daylight. Everybody was thirsting for natural sunlight. The truck terminal provided opportunities for that in bunches, Blanski said. The former dock doors were converted to large windows evenly spaced up and down both sides of the building. Every employee now has access to daylight, regardless of where they sit.”

A gap that runs straight down the middle of the roof was converted into a skylight equipped with remote-control blinds. McGough spent $19 million on the terminal’s renovation. The cost also covered the demolition of two structures that were attached to the main docking area and the construction of a new two-story office addition.

One of the main challenges, according to Blanski and Wood, was the bowstring truss roof that covers the docking area. The building served for years as a place where freight was loaded and unloaded off trucks. It later sat vacant for decades. The last known occupant was the shipping company Jahn Transfer.

The roof was in bad shape, covered in a thick layer of grime caused by diesel fuel exhaust. HGA decided the best way to restore it was by blasting it with ground-up walnut shells.

“Sandblasting would have damaged the wood,” Blanski said.

Local building codes also required another step. Although the terminal’s roof had withstood decades of heavy Minnesota snowfall, it needed additional support if the space was going to be used as an office.

“There’s a major problem with all curved truss buildings in a snow environment,” Blanski said. “When the snow is blowing, it creates a huge drift on the roof. Imagine a six-foot snowdrift hanging down off the roof. Most people are going to move their cars away from the building” to keep their vehicles from being smothered by snow.”

But snow melts and HGA needed to design a way to deal with the melted water.

“You have this bowstring truss roof, you don’t want to put gutters on it,” Blanski said.

HGA decided to salvage concrete from the demolished portion of the terminal as a type of water drainage system. The concrete was broken into smaller pieces and installed around the perimeter of the former terminal to collect and siphon off the snowmelt.

“The 240 McGough employees assigned to the new headquarters love the space and rave about the renovated terminal and its abundance of natural daylight,” Wood said. “The new office has also helped McGough’s staff with recruitment. McGough’s hires span engineers, carpenters and project managers, fields where the competition for talent is tight. The expansive look and feel of the terminal sells McGough to many of those job candidates. It’s the natural light, it’s the air quality.”

Blanski, Amanda Henderson and Jake Turgeon at HGA were design team members for McGough’s new headquarters.

Source: CoStar