Wednesday, November 2, 2016

Commercial Revitalization by the Pint

Across the country small to mid-size cities (and their downtowns) are making a comeback. As reported in one of our previous posts on downtown trends, an increasing number of young and older population groups are moving to small and mid-tier cities attracted by their real estate affordability and quality of life. In many places, this renaissance is connected to a phenomenon that has attracted the attention of planners, economic development experts and commercial district practitioners: the surge and growth of craft breweries.

On a recent trip to Waterbury, Vermont, I witnessed this resurgence first hand, and currently in a number of projects that we’re working on across NY State, we have observed the same. A look at the the latest statistic published by the Brewers Association is telling: the number of U.S. breweries is at a 128 year high with over 4,200 craft breweries across the US and 549 new breweries opening between 2014 and 2015.

Beer drinkers are not the only ones enjoying this growth; craft breweries have caught the eyes of local officials and economic developers and they are encouraging the development, growth, and attraction of these companies. Over the past couple of years a number of cities launched attraction campaigns to land the east-coast expansions of some of the largest western craft brewers.For example, Roanoke’s bid to lure Chico, CA based Sierra Nevada included calls from senior political figures, $13 million in incentives, and vials of local water.  Philadelphia marketed the city’s thriving craft beer scene in their campaign for Fort Collins, CO based New Belgium Brewery (maker of the popular Fat Tire Amber Ale) while dangling millions in tax incentives. Both companies, along with Lyons, CO based Oskar Blues, chose brewing hotspot Asheville, NC (and its surrounding region) as their second home, adding to the city’s growing craft beer cluster.

Asheville, North Carolina, is a small city that fights way above its weight class in the craft brewing world, with several Beer City USA titles under its belt. Asheville has numerous home-grown breweries, but it has been able to lure expanding West Coast breweries more than any other city in recent years. New Belgium, one of its recent attractions has recently opened their new facility in Asheville’s River Arts District, which will become a centerpiece of the redevelopment efforts connecting the city’s CBD to the French Broad River. In fact, Asheville has been so successful as a craft brewing center, that it did not win the most recent brewery expansion project–Deschutes recently announced its East Coast location will be in Roanoke, Virginia instead of Asheville –most likely because Deschutes wanted to be a game-changer in a city with a smaller, emerging craft beer scene.

Richmond, Virgina, attracted Stone Brewing (based in San Diego, California) for their East Coast expansion. This new brewery is an important part of the city’s urban redevelopment efforts along the James River near downtown Richmond. 

Cities aren’t just looking to attract established breweries; Wildomar, CA has sought to ease regulations to make their community more appealing to would-be brewers. Mesa, AZ, will soon have its first brewery as a result of a concerted effort to revitalize its downtown Main Street. Mesa chose to focus on breweries because of their ability to become magnets and drive a lot of people to an area as well as citizen support for a local brewery. 

States are also following the trend and seeking to encourage the opening and expansion of craft breweries. In 2012 New York State passed the New York Farm Brewery legislation supporting the state's craft breweries by giving them certain tax credits and other perks linked to the use of locally grown ingredients (to boost local farm production). Since then, the number of craft brewers has more than doubled (from 95 to 208), with production growing by 54% from 557,436 in 2011 to 859,535 barrels in 2013. According to a study from the Stonebridge Research Group prepared for the New York Wine and Grape Foundation and the NY Brewers Association on the economic impact of craft beer on the NY economy, craft breweries generated $3.5 billion on the state’s economy in 2013 and provided over 11,000 full-time jobs.

So how can commercial districts and local development officials help and encourage the trend?

Breweries are industrial operations, and they are expensive. Beer is a mass beverage, and even making it on a brewpub scale means you need to have quite a bit of space for the brewhouse, fermentation, and storage. All that equipment costs a lot, and real estate does, too. When you’re spending a quarter- or half-million dollars on equipment, you can’t afford expensive commercial space. So breweries end up on the fringes, in parts of town where the rent is cheap.

If your district wants to attract breweries, the first and foremost requirement is to have enough space ( 2.16 square feet per barrel of yearly capacity, which is equivalent to 2,000 4,000 SF for a very small operation like a nano-brewery to over 15,000 SF for a mid-size operation). Craft breweries not only need large space, but they especially need affordable space (= cheap rent). This might be one of the most difficult challenges because it requires coordination with property owners, and possibly the crafting of some local incentives to offset less-than-ideal rental costs.

In addition, as the study from the Stonebridge Research Group reveals, most new investment in craft breweries in New York State has been self-financed, often with some help from the Small Business Administration. Commercial banks have provided support for some of the larger craft brewers, but not to the small ones.  Thus, assisting craft beer entrepreneurs find financial options and helping them navigate local bureaucracies is another way commercial district practitioners and local economic development specialists can help.

Craft brewers bring not only booze to their neighborhoods, but especially they bring vitality. Breweries are anchors, attracting folks who are curious to try a pint of locally made IPA. They can create little pockets of prosperity in cities that can (and often do) radiate out into the neighborhood. Pretty soon, other businesses see the bustle and consider moving in as well generating further economic activity and revitalization. Once a brewery moves in and refurbishes an old building, it reveals the innate promise of adjacent buildings to prospective renters.

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