Office space, apartments or a hotel? Here's what could happen to Wilmington's PPD building

It's unclear what the future holds for the sleek high-rise that's towered over Wilmington's waterfront for the last 15 years, except that it's set to be sold.

Thermo Fisher Scientific Inc., the company that owns the clinical research firm PPD that has owned and occupied the building since 2007, announced its plans to sell the iconic structure and look for new office space in the area earlier this week.

Local real estate agents say 929 N. Front St. has potential for redevelopment, which means a portion of the structure could become apartments, a hotel or commercial space, depending on the buyer's plans.

But if the building remains strictly offices, the structure's large square footage could flood the Wilmington market, disrupting current trends, commercial brokers say.

Towering approximately 193 feet above downtown, the building, which opened in 2006, is the tallest in New Hanover County. (It's even rumored you can see all the way to Carolina Beach from the rooftop.)

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It has at least 380,000 total square feet and sits on a close to 7.5-acre lot, according to New Hanover County property records.

An appraisal of 929 N. Front St. places the property's value at more than $71.7 million. The high-rise is valued at $68.1 million while the land has a value of more than $3.6 million, according to property records. The building cost approximately $80 million to build in 2007.

A changing work environment

Although the decision may come as a surprise to the public, some in Wilmington's real estate circles have for years heard rumors the company would leave its downtown space as more and more employees began working remotely even before the COVID-19 pandemic hit.

PPD employs approximately 1,700 people and is one of Wilmington's largest private employers.

In a press release announcing the move, the company noted its seeing more workers who "prefer a hybrid work model" that "necessitates more flexible workspaces and fewer dedicated offices." The company has not announced details about its plans to sell but stated that finding new office space could take two or more years.

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While no one can say for certain what will happen, Wilmington-area commercial real estate agents offered insights into how the sale fits into real estate trends and how the PPD property could be redeveloped.

Lindsey Hess, a vice president at Cape Fear Commercial, sees three possible options for the building after it is sold.

For one, the buyer could choose to own and occupy all of the office space -- like PPD is doing now. Instead of occupying, the buyer could also choose to lease out the office space to one or more businesses.

In the Wilmington market, it's becoming more common to lease office space than to own and occupy, according to Paul Loukas, a partner and broker in-charge with Cape Fear Commercial.

A third option is to redevelop a portion of the property into apartments, a hotel or commercial space while maintaining some office space.

Loukas said he sees the building as a "prime candidate" for redevelopment.

On social media, some Wilmington residents have pitched using the structure for affordable housing, which is in high demand as rents and home prices continue to climb in the region.

In Wilmington, the market for office space -- much like the residential market -- is strong, according to Nick Silivanch, a partner with Eastern Carolinas Commercial Real Estate.

When the pandemic first hit, the market saw some turbulence. The area saw office vacancy rates peak at 18% when the pandemic hit in the first quarter of 2020. But since then, things have rebounded.

Currently, vacancy rates sit at 2% in the Wilmington area, according to data from a CoStar analysis of the Wilmington market provided to the StarNews by Eastern Carolinas Commercial Real Estate.

A strong but still fragile market

Even with its growth, Wilmington has a small market for office space, making it a "somewhat fragile" market, Loukas said.

“One change can have a big ripple effect in everything,” he said. "One vacancy can have a major influence in the overall market.”

If PPD's 380,000 square feet of space goes on the market at once, it could "change the landscape" of the market, Hess said.

“Hopefully, they don’t put it all on as office,” she added. “I don’t think it’d be good for our market.”

In comparison, the largest office space leased in Wilmington in the last year was just over 26,500 square feet, according to the CoStar report.

Real estate agents are seeing demand for office space across the Cape Fear Region, including in Brunswick County.

Since the COVID-19 pandemic, Kelly Stuart, a broker with Carolinas Commercial in Shallotte, has seen an uptick in demand for office space in southern Brunswick County. The demand for square footage is on a smaller scale than what Wilmington real estate agents are seeing, but it illustrates the changing workplace trends that may have pushed PPD to reassess their space.

“A lot of the offices are splitting up and opening up smaller locations closer to where their workforce is,” Stuart said.

Still, the PPD building has a lot to offer -- 12 floors of office space, its own parking deck, sunset views of the Cape Fear River along with proximity to downtown Wilmington and the up-and-coming Brooklyn Arts District.

“I think the building almost sells itself,” Silivanch said. “It’s just getting the right purchaser down here.”

Loukas said he sees the building as a way for the Wilmington Chamber of Commerce or Wilmington Business Development to draw one -- or several -- new companies to the area or for an existing company to grow its footprint.

The building could provide an opportunity to continue the economic growth the area has seen in recent decades, said Silivanch.

“I think it's a real opportunity for our city to grow and invite even more folks to relocate here and expand on what we have,” he said.

Reporter Emma Dill can be reached at 910-343-2096 or edill@gannett.com.

This article originally appeared on Wilmington StarNews: Sale of PPD building could lure new businesses to Wilmington, NC