How craft beer is cheering U.S. industrial areas

 —  Article by Andrew King
Craft brewers at work making beer
Image credit: Shutterstock

As deindustrialization continues to play out across many cities in North America, the space left behind is supporting the growth of a sector catering for modern tastes: craft brewers.

“Craft brewing is such a hot sector right now,” says Kris Bjorson, Head of Retail/E-Commerce Distribution at JLL. “While they’re not appropriate for most heavy industrial sites, these small-scale brewers are perfect for many urban industrial centers that are being revived across the country.”

America’s brewing industry has snowballed in recent years, with 36 states more than doubling their craft beer production from 2011 to 2016, according to The Craft Beer Guidebook to Real Estate from JLL. As it’s grown it’s played a key role in the transformation of previously abandoned light-industrial buildings and turning barren neighborhoods into thriving communities.

According to the Brewers Association (BA), there were more than 5,300 small and independent breweries operating last year, including 826 new operations and only 97 closings. The growth added about 7,000 jobs to local economies for a total of 129,000 Americans employed by craft breweries.

Brewer-friendly cities

Cities such as Portland (Oregon), Mesa (Arizona), Yonkers (New York) and Duquesne (Pennsylvania) have all been proactive in courting craft brewers in return for the economic and cultural benefits they bring.

“The rise of the craft brewing industry is proving to be a noteworthy catalyst in helping to revitalize communities or define a sense of place in a former industrial area that has now transformed into an emerging urban neighborhood,” says Aaron Ahlburn, Director of Industrial Research at JLL. “Part of the appeal is the economic benefits of having craft brewers in the area, from paying rents on previously unused buildings to creating local jobs. Along with other local businesses and retail, a lot of it has to do with the cultural fit in the neighbourhood, helping create a feel of community and identity.”

The brewers, in turn, get a home that fits their space, rent and transport access requirements within an urban environment, which not only enables them to produce their own style of beer but also to serve it to local craft beer fans on a nightly basis.

“Members of the craft beer community are generally proponents of sustainability, farm-to-table dining, biking to work and other types of behavior that underpin the brewers’ preference for urban-industrial real estate over traditional industrial complexes,” says Ahlburn.

To build their place in the community, many brewers choose to name their beers after local traditions and culture. Chicago’s Off Color Brewing teamed up with the Field Museum to create the pilsner “Tooth & Claw.” San Diego’s Karl Strauss Brewing produces the year-round “Tower 10 IPA,” named after lifeguard Tower #10 in Mission Beach, where the brewery founders started their business idea.

Indeed, the cultural fit of the location is the main issue that makes or breaks many craft brewery real estate deals. “Gentrifying neighborhoods are having an easier time finding new craft breweries to move into vacated industrial space or brownfield redevelopments than office parks or industrial warehouse zones,” Bjorson says.

Bigger players, same requirements

The same goes for established brewers who need new real estate to expand their brand. These business owners are looking for locations that are not only compatible with their image and their established audience, but also provide the logistics for expansion.

This is why major companies are opening second locations on the opposite side of the United States. New Belgium, the No. 4 craft brewer in the U.S. and maker of the Fat Tire beer line, opened a second location in Asheville, North Carolina to complement its original facility in Fort Collins, Colorado. Stone Brewery, the No. 10 craft brewer in the U.S. and one of the most popular tourist destinations in San Diego County, California, opened its second location in Richmond, Virginia.

“These growth stories were both a cultural fit by location and logistically significant because of their proximities to new markets and access to transportation networks that will bring the beer to consumers while it’s still fresh,” Bjorson says. “As craft breweries continue to grow in popularity and reach new markets, business owners are finding eager communities to host their new facilities.”

While logistics access has a huge role to play in which sites craft brewers select, the utility infrastructure of the industrial properties are also key. According to Bjorson, for an urban-industrial site to be considered for a brewery it must have a robust and cost-effective supply of high quality water (the main ingredient in beer), waste water treatment capacity as well as a power source that is secure and redundant, given that an outage can cost a brewer thousands of barrels of precious product.

A hangover ahead?

Although the industry’s growth has shown signs of plateauing lately due to pricing pressure, flattening sales and dwindling access to capital, the once burgeoning sector still only represented about 12 percent of the entire beer industry in the U.S. in 2015 – giving it some hope of further room for expansion, despite increased competition from the big industry players.

“There is still plenty of industrial inventory that matches the craft brewing criteria, especially within the local or regional niche, so we expect the trend to continue within certain gentrifying, urban industrial centers,” Ahlburn says. “The only thing that could slow it down at this point is a generalized economic shift in consumer sentiment, or if people decide they’ve had their fill of craft beer.”

For now it’s encouraging news for those American industrial centers with “space available” signs. They may soon be joining craft beer fans in raising a glass to the ongoing popularity of a new generation of brewers.

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