Market factors are impacting commercial development in the Wilmington area, including the potential transformation of the downtown block owned by New Hanover County.

Called Project Grace, previous plans for the property's redevelopment stumbled in September when the Local Government Commission did not approve a financing arrangement for a new county library headquarters and Cape Fear Museum to be built. The project, in partnership with Wilmington-based Zimmer Development Co., would have included private development – potentially a mix of residential units and commercial space – in the 3 acres bordered by Grace, Third, Chestnut and Second streets.

At the time of the LGC decision, county officials said they intended to proceed with replacing the library and relocating the museum to downtown. But a county release Wednesday indicates that progress toward building a new facility won't be immediately evident.

"In the coming months, the county will continue to work on this project but does not expect for construction to begin right away on the new facility. This is primarily due to inflation, increased interest rates, and construction costs in today’s market, given the timing delays for the project and now that the county will need to finance the project on its own," the release stated. "By actively monitoring market conditions, reviewing the design for possible cost reductions and value engineering, and determining how best to partner with a developer to ensure a compatible development and tax revenue on the other half of the block – the county hopes to move forward with the project sometime in 2023."

Some of the same limiting factors county officials cited for Project Grace – inflation, interest rates and construction costs – are also top-of-mind for those working on other local mixed-use projects. 

"Such is the risk of development," said McKay Siegel, partner with River Place and Project Gateway developer East West Partners, on Wednesday. 

He added, "Right now I think the financial markets are pumping the brakes, developers are pumping the brakes," but developers hope to start seeing positive changes in the near future. 

"The idea is that labor will level off and materials demand will reduce to something manageable with our new supply chain world," Siegel said.

For Project Gateway, a mixed-use development East West Partners is working on with the city of Wilmington, Siegel said time is on the company's and city's side. Also referred to as the Northern Gateway Project, the mixed-use development at the north entrance to the city could include residential and office buildings, along with a grocery store and other commercial occupants.

"There's another year’s worth of design and conversations before we would want to basically break ground on that project," he said. "The thinking is that between now and a year from now, the world will level itself out."

In September, Greensboro-based developer Roy Carroll, who is working on mixed-use project The Avenue on Military Cutoff Road in Wilmington, said he, too, had been watching the economy and construction costs in hopes of being able to make progress early next year.

For The Range on Oleander, another East West Partners development in Wilmington where site work has begun, financing was already in place before the latest market shifts ramped up, Siegel said. The Range, at 5026 Oleander Drive, will have 345 apartments, including 35 workforce-rate units.

For Project Grace, the New Hanover County Board of Commissioners' agenda for Nov. 14 includes "a budget amendment to acquire the design plans for the library and museum building and a resolution that outlines the county’s intentions for the existing Cape Fear Museum building," the county release stated.

County officials added in the release, "The development team and county staff have worked hard to create a purpose-designed facility that meets the vision and needs of both the library and museum to best serve the community. As outlined in the Memorandum of Understanding, the county will purchase the design plans and construction documents for $2.5 million.

"This amount is based on actual costs incurred by the developer during the Project Grace process, and the county will receive a full accounting with invoice details to verify the amount being paid."

In addition to the item on the purchase of the Project Grace construction documents, the board will consider "a resolution outlining that the current museum facility on Market Street will continue to be used for museum operations, either in its current capacity or as an extension of the new museum ... This helps to solidify the county’s vision to use the current building as a component of the museum. The county is also proceeding with a master study plan for the current museum building that will help to shape the overall needs and uses of that facility. "