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The Effects of the Craft Beer Boom on Commercial Real Estate

By: spaceselectors   July 29, 2019
Craft Brewery Real Estate

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When we look at the most consumed alcoholic beverage worldwide, we find that beer is not only one of the oldest but also most consumed options available. By 2025, the global beer market is projected to be valued around $27.6 Billion. This growth is primarily driven

by increases in disposable income, changing consumer preferences, the rise of a more experience-based culture, and changes in how drinking is perceived and accepted socially.

 

One major trend that we are seeing is in the type of beer that consumers are seeking out. Recent trends have shown that beer drinkers are looking for quality over quantity, which is evident due to a growth in both the craft and premium categories, and as a result, we have seen a real response in the market. Now craft breweries hold over a quarter of market share, with more than 6,000 operating in the US, and studies from the Brewers Association show that 79% of legal drinking adults now live within 10 miles of a brewery – showing just how much growth and impact this industry maintains.

 

With such big changes in the craft beer industry, we can only assume that this affects other industries as well. So, what impact is this craft beer boom having on commercial real estate in the US? Let’s talk more about how craft brewing is impacting our economy, helping to strengthen markets nationwide, and boosting denver commercial real estate.

How craft breweries are boosting the economy

We are seeing that many large redevelopment opportunities are centered around craft breweries. This is playing a large role economically in community revitalization, economic development, and small-town revival – often representing a leading indicator for growth and gentrification. Their impact on local economies is immense, as craft breweries help boost local economies with jobs, sales taxes, and licensing fees. In 2014 alone, craft breweries made up $55B of the US economy, and much of the revenue generated finds its way back into local and state economies. In addition, these breweries also generated over 424,000 jobs, and what we are seeing is that those workers in turn spend their incomes on local retailers, restaurants, and housing. So not only are they doing well for themselves, but we see that craft breweries also help boost the value of neighboring properties.

 

Consumers are drawn to craft breweries

We also see that craft breweries are effective at bringing both residents and tourists to a formerly underserved or less visited location. When you are looking at a small-town, having a local brewery can give that big-city feel. This in turn increases the appeal of a more rural area that may be experiencing a decline in population. A big key is that these breweries are able to address demand that is currently going unmet. Most millennials with disposable income look for the presence of a craft brewery and are willing to pay premium price for this. Craft breweries also play an important role in the “foodie” trend – which appeals to younger generations who are looking for both quality and innovation in their beer selection. When you add locally-sourced ingredients to the mix, you are really appealing to these generations. Due to these reasons and more, we are seeing expansions that include tap and tasting rooms, restaurants, and/or event venues further driving the growth of local businesses.

 

Other businesses are attracted by craft breweries

We are seeing that some states are offering subsidies, exemptions, grants and tax breaks to attract breweries into some of their struggling districts. This is largely due to the economic ripple effect they have, where we see a trickle down through the community to grow other artisanal business. This in turn helps local companies flourish. When a craft brewery comes to town, local economies can feel the positive effects and look to jump in on the ripple effect. You will also see many bottle shops, growler shops, and self-serve beer shops joining in on the fun. Another boost comes from the fact that breweries look to have local food trucks and vendors park and sell on their property.

 

Vacant properties are filled because of craft breweries

As we see deindustrialization continue to occur throughout many cities in this country, we see craft breweries finding a new home and taking over left behind space. Craft breweries currently occupy a large amount of commercial real estate space – over 15 million SF of space, primarily in industrial areas, averaging 8,000 SF per location. When we look at many of these deindustrialized, rural areas, we see a plethora of less expensive, underused real estate that is ideal for breweries. These places already have the infrastructure needed – including water, sewage and power that is already in place, but, there are a few other things needed for these areas to be considered for a brewery. These spaces must have a cost-effective supply of quality water, wastewater treatment capacity, and a secure power source. Typically, we are seeing that warehouses, manufacturing spaces, and abandoned mills in general are well-suited to the brewing business. This is due in large part to their sturdy, thick construction that is conducive to better brewing. Luckily, these types of spaces also often come complete with distinctive architectural features, historical charm and character, and a gritty industrial feel, collectively offering a unique experience – giving the look that most have come to expect from a craft brewing location.

 

Growing out of commercial space

As these breweries grow, they need more space and more equipment to keep up with demand. We see small breweries grow into new spaces – leaving the old spaces behind as an incubator for a new company to come in. In many cases, when they move to additional space they will leave behind or sell the old equipment, so that the new breweries coming in can invest in that and begin to grow. Also, when breweries go out of business they can sell off their equipment. So just by having occupancy, breweries invest into the space and bring in value based on tenant improvements and updates.

 

The bottom line

For all these reasons and more, craft brewery real estate requirements are unlike those tied to traditional bars and restaurants. Breweries are not reliant on or tied to having a big city location in order to be successful. This gives brewers the chance to choose locations based on the real estate pricing, customers, or even opportunity to influence future growth. Further impact on commercial real estate loans will be felt as existing breweries begin expansion initiatives, taking up larger footprints and contributing even more to their local economies.

 

Space Selectors is able to provide the knowledge and expertise needed to help business owners find the locations that serve the right demographics. Book a consultation today so you can speak with an expert and get started in the right direction with your commercial real estate needs!

 

Other Locations we Serve in in the Greater Denver Area: ThorntonAurora, & Arvada.

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