A peek into what’s to come with the Innovation District

The innovation district will feature prominent parking and easy access to work, retail shops, restaurants and green spaces.

Big changes are coming to downtown Chapel Hill, a makeover for Blue Heaven driven by the University’s need for more room to launch startup companies and the town’s desire to revamp Franklin Street.

After years of quiet discussion between Carolina’s leaders and town officials, a plan is underway to turn a district of takeout food and T-shirt shops into a hub for biotechnology startups, young professionals and free-spending visitors. 

“I think we’ve reached a tipping point where this has to happen,” says Chancellor Kevin Guskiewicz. “For the University to grow the way it needs to, to become the anchor for economic development in this region, we need a strong and vibrant downtown.”

For the first time in decades, the University and the town have a shared vision for what that might look like. Last spring, Kevin and Chapel Hill Mayor Pam Hemminger announced a joint development strategy, led by Innovate Carolina (UNC’s initiative for entrepreneurship and economic development) and the Chapel Hill Downtown Partnership. Their plan envisions thousands of square feet of new offices and commercial lab space on East Rosemary Street rising just behind Sutton’s Drug Store, the Shrunken Head Boutique and the Franklin Street post office.

The plan also calls for moving UNC’s admissions office and its 50,000 annual visitors to a new office building on the south side of Franklin Street near Carolina Coffee Shop along Porthole Alley. Downtown streets and sidewalks will get an overhaul sometime next year to accommodate more pedestrians, green space, outdoor dining and retail shops. 

“You have a lot of smart people who are all pushing in the same direction,” says Matt Gladdek ’12 (MPA, MCRP), executive director for the Chapel Hill Downtown Partnership. “We have a chancellor, a mayor, a town council and a town manager who all understand the importance of creating a beautiful downtown and an economic development strategy to go along with it. Right now, I think all the stars are aligned.”

Falling Behind

That alignment was helped along by the realization that Chapel Hill is behind the rest of the Triangle and other college towns nationwide in the race to nurture startup businesses and build an urban center that can attract business investment. Clay Grubb ’93 (JD), the CEO of Grubb Properties, which is leading one of the largest redevelopment projects, says Franklin Street long ago lost its status as the coolest and most vibrant spot in the Triangle, falling behind neighboring cities as they invested more in their downtowns. “The last 10 years have not been good to Franklin Street,” he says. “Everyone has flocked to Durham and Pittsboro and Raleigh.”

Clay blames what he views as the town of Chapel Hill’s general opposition to development – “trying to stop all growth, put everything like it’s in a museum,” he says – but there’s also been a lack of coordination between the University and the town on how to redevelop the area.

Over the last three decades, while N.C. State University built Centennial Campus in south Raleigh to welcome public-private partnerships, and Duke invested hundreds of millions of dollars to transform downtown Durham into a technology and innovation hub, Carolina pursued a piecemeal strategy. UNC added startup labs in the Genome Sciences Building, tucked behind the School of Nursing; a small coworking office for entrepreneurs above a Franklin Street restaurant; and high-tech workshops where students can tinker with 3-D printers. But there was no master plan to link that activity to economic growth in Chapel Hill.

Carolina is one of the largest research institutions in the country, bringing in more than a billion dollars in grants each year from the federal government, state agencies, foundations and private businesses. Despite outranking Duke in federal research dollars – UNC is the sixth largest recipient and Duke ranks ninth – Chapel Hill doesn’t have the scale of medical and life-science startups clustered in downtown Durham. In 2021, Innovate Carolina counted more than 446 UNC-affiliated startups employing more than 12,000 people in North Carolina. But the startups created in the past 10 years account for fewer than 1,000 jobs in Orange County.

Matt, who oversaw Durham’s downtown development plan before coming to Chapel Hill, pointed to the growth of commercial “wet-lab” space in Durham as a key element for business investment there. Wet labs are specially engineered facilities that can safely handle chemicals, tissue cultures and other biological materials that are requirements for companies in the life-sciences industry. Low-cost lab space, with shared equipment and short-term leases, has contributed to the growth of biotechnology startups working on everything from more accurate cancer detection to better water purification. Durham has more than a million square feet of off-campus commercial wet-lab space. Chapel Hill has none.

“A lot of those people are locating [in Durham] to have proximity to Duke and Duke faculty and access to well-educated people who will work in those jobs,” Matt says. “That’s what we want to see in Chapel Hill.”

A deeper town-gown partnership came together in 2021. Doug Rothwell ’78 (MPA) retired to Chapel Hill after spending his career working for the Michigan Economic Development Corporation and Business Leaders for Michigan. He recognized that Carolina’s status as a research powerhouse was at risk without more off-campus labs and offices where faculty could partner with private companies. “Downtown just really didn’t have the bones to support the University’s aspirations for innovation,” he says.

Last year, Doug made his case to Kevin, showing the chancellor a benchmarking study that compared Chapel Hill’s meager commercial partnership space with larger efforts at the University of Virginia; University of California, Berkeley; and UCLA. “We were the only top five public research university without an innovation district near campus,” Doug says, who now chairs the Chancellor’s Economic Development Council and in June completed his three-year term on the Downtown Partnership board.

The University’s innovation district launched next spring, when Innovate Carolina moves into the newly refurbished office complex that Grubb Properties is redeveloping at 137 E. Franklin Street and 136 E. Rosemary Street. The old Bank of America tower – “arguably the ugliest building in Chapel Hill,” Clay says – has been gutted, and its exterior is now sheathed in sleek glass panels. It will house coworking space where entrepreneurs can rent desks or small offices by the month, and where University leaders hope national firms might open offices to be closer to Carolina faculty and recent graduates. 

The GAA’s alumni records department helped identify the largest employers of recent graduates, as well as science and technology firms that employ high concentrations of Tar Heels. University officials have made pitches to some of those companies and floated the idea of alumni using the coworking space as a remote office during visits to Chapel Hill.

Clay’s decision to invest was driven by Carolina’s commitment as an anchor tenant and Chapel Hill’s decision to designate downtown an “opportunity zone,” a special status created by the 2017 federal Tax Cuts and Jobs Act that gives large tax breaks to developers for investing in economically distressed areas. “It is a pretty odd anomaly in the world of opportunity zones,” Clay says. “And it’s primarily because of all the [zero-income] student base you have inside that zone.”

Proximity is the Key

A recent tour of The Gwendolyn, a smaller Grubb Properties office building just completed a mile from campus in the Glen Lennox neighborhood off of U.S. 15-501, offers a preview of what startup space downtown might look like. Floor-to-ceiling windows illuminate furnished office suites ready for eager young professionals to plop down laptops and work. Each floor includes shared conference rooms, kitchens and common seating areas – “collision spaces,” in industry jargon – where colleagues from different businesses might rub elbows and collaborate on a project.

The more flexible arrangements fit the University’s vision of making commercialization and private-sector partnerships easier for faculty. “The amount of time and resources it takes a young company to go through the real estate process is really challenging,” says Michelle Bolas, who has been at UNC since 2013 and was named Carolina’s chief innovation officer this year. “The easier that is for a faculty member to navigate, the easier we can build a vibrant startup ecosystem in Chapel Hill.”

Michelle pointed to AnelleO, a small firm founded by Rahima Benhabbour, a UNC biomedical researcher. Using 3D-printing technology, Rahima developed an inexpensive vaginal ring to deliver hormone and drug therapies. The technology could lead to improvements in women’s health – if Rahima can navigate the path from the research lab to the pharmaceutical market. She works out of the University’s KickStart Accelerator in the Genome Science Building, where AnelleO leases a small office and lab space as it continues to refine the technology.

“It’s great because I don’t have to travel off campus,” Rahima says. “It makes it a lot easier for me to check in with the company.”

But when AnelleO needs to hire more employees and lease more space, the logistics get complicated. The University’s current startup space is big enough for only a handful of employees, so fast-growing companies have to look for space in Durham or Research Triangle Park.

The planned lab space on East Rosemary Street is designed to put larger-scale facilities within walking distance of campus. BioLabs, the private company that will manage much of the space, already runs similar facilities in Princeton, New Jersey; New Haven, Connecticut; Cambridge, Massachusetts; and Durham. The firm specializes in working with academic researchers, and some Carolina faculty already lease space in BioLabs’ Durham location.

“To be able to go just one block down instead of driving to RTP or to Durham, that will be amazing,” Rahima says. “It’ll be so much larger than anything we have now, and I think that will help with attracting talent to Chapel Hill, attracting funding, helping us bring in business leads.”

It will also transform the downtown skyline. The lab and office complex, seven stories of glass and steel set back from the corner of Rosemary and Henderson streets by a small green space, will tower above the storefronts of Franklin Street. “Having the ability to literally just go across Franklin Street and meet the private sector where they are … is just a really, really phenomenal opportunity,” Clay says, who plans to raze a parking deck and start construction of the building next year.

Nobody imagines Chapel Hill as a rival to Boston or even Durham when it comes to supporting a biotechnology sector, but town leaders hope a critical mass of office workers and researchers will transform East Franklin Street into a more viable venue for the stores and restaurants that define the streetscape. Many Franklin Street businesses were hit hard during the COVID-19 pandemic, when students and faculty were absent from campus for nearly 18 months. Even before COVID-19, East Franklin Street buildings had long vacancies and high turnover rates. For a span of a few years, the corner of Franklin and Columbia streets had three shuttered storefronts where restaurants such as Spanky’s and MidiCi Pizza used to be.

“We’re very dependent on students, and that creates a lot of challenges,” Pam says. “We need more office workers, more adults, more people who are here 12 months of the year. We don’t want to be all bars and takeout restaurants. We want a mix of different things.”

Relocating the UNC Office of Undergraduate Admissions, currently housed in the cramped confines of Jackson Hall on the eastern edge of campus, may help sustain a more diverse mix of stores and restaurants. More than 50,000 prospective students and families visit Carolina every year for a campus tour, but many of them never set foot on Franklin Street. Putting the admissions office in the heart of Chapel Hill will increase the chance those families spend at least part of their time in downtown businesses.

Pam says she doesn’t want to lose the small-town character of Chapel Hill or the iconic streetscape of Franklin Street. But given the growth across the Triangle and the ambitions of the University, change is inevitable. “Our downtown is our backbone, and we have to keep it evolving,” she says. “We can’t stay stuck in amber, or we won’t survive.”

This article has been adapted with permission from the Carolina Alumni Review’s May/June 2022 issue. Eric Johnson is a writer in Chapel Hill. He works for the College Board, the UNC System and occasionally for UNC.

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