Friday, November 18, 2016

The International Downtown Association (IDA) is seeking a few good downtowns...

Downtown management is at a crossroads. Those of us in the industry know the value of investing in and managing great downtown environments, we also recognize that without good data to tell our story we cannot effectively advocate on behalf of the organizations doing great downtown revitlaization work.

To combat this issue, the IDA is taking the lead in defining the "Value of Downtowns". They just released an RFP requesting applications from downtown organizations interesting in being part of a pilot research project that will help calculate the impact of downtown management and placemaking efforts. Selected communities will  be part of a cohort of about 12 downtowns and will help by contributing metrics that will allow IDA to analyze, compare and contrast performance across a wide variety of downtown communities. IDA will aggregate the data provided by participating organizations and compare this against data that downtowns find difficult to collect on their own, i.e. value per acre, tax revenue, sales revenue, etc. Participating organizations will be extremelly well poised to advocate on their own behalf with the data and analysis that emerges from this study.

If you would like to be part of an industry-led effort that help us begin to better communicate the value of downtown management, please consider responding to this RFP!

Click here to download "Request for Qualifications for Value of Downtowns Standardized Calculation and Analysis.

Larisa Ortiz is an IDA member and board member and serves on the IDA Research Committee.

Wednesday, November 16, 2016

Everything you need to know to attract Millennials to your businesses




We are seeing the term 'Millennial' being used more and more often in various discussions, but what does it mean to retailers? Who are these Millennial customers that are so often being referred to?

In a post earlier this year, ShopperTrak, a company that focuses on shopper analytics, revealed that Millennials between 19 and 35 years of age are price-conscious consumers who are willing to do extensive product research before making purchases. Despite this, they continue to be more loyal to quality products and brands and also expect a retailer to be more "socially conscious, give back, and have a positive impact on society." In other words, Millennials can be a challenge to many retailers. 

Some merchants we've been engaged with recently in our work complained that young Millennials don't have any money and aren't coming to their stores to shop. As a result, these owners have since redirected their attention away from this group of visitors even though the group is slated to possess over $200B in collective annual spending power by 2017. Are their actions founded or is there something they are missing to grab the attention of the challenging Millennial shopper? Here are some strategies that retailers can pursue in order to attract and retain the ever-growing Millennial customer base:

Strategy #1: Ensure convenient digital presence 

Over 92% of Millennials own smartphones and 69% read product reviews on their mobile devices. These statistics indicate to retailers the importance of having an online presence that enables Millennials to not only read product reviews and do their buying research but also to make instant purchases. In addition, retailers should also leverage social media as a key marketing tool to reach Millennials. Applications such as Instagram and Facebook are fast turning into the latest version of 'word-of-mouth' recommendations and this has been shown to be the most effective form of 'advertising' for Millennials. 

Strategy #2: Support a cause and make it known

As mentioned earlier, Millennials have shown that they value companies that support a cause and give back to society rather than just simply making profits. According to research from Barkley, an independent advertising agency, more than 50% of millennials make an effort to buy products from companies that support the causes they care about. TOMS shoes and Warby Parker are some useful examples of socially-conscious brands valued and supported by Millennials.These companies give back by donating one of their very own products for every one purchased and have not been shy about publicizing their respective social missions. There are of course other brands that simply donate a percentage of profits to a charity of their choice. 

Strategy #3: Create a helpful and authentic in-store experience

Millennials prefer an “experiential” retail environment where shopping is more than a transaction and forcing of goods. The trend of carefully curating product assortment and customer experiences in brick and mortar stores is spreading fast. Someone walking into a Warby Parker showroom, for example, is immediately transported to an old library through interior design and staff roles. The showrooms not only expose the customer to a range of eye wear neatly displayed on book cases, but also to carefully curated reading materials that are presumably desired with better eyesight. Sales associates' deep knowledge of products on offer also make the in-store experience substantially better.
All in all, Millennials want to be brought on an engaging and unique journey that most importantly provides them useful information regarding products on offer. 



Regardless of the challenges in attracting and retaining Millennials, it is important for retailers to note that they are influential trend setters. Non-Millennials are apparently following in their foot steps and lifestyles so the faster retailers catch on to these strategies that appeal to Millennials, the more effective they will be at attracting even more non-Millennial customers too.

Thursday, November 10, 2016

Retail Insights: Is the end of the Department Store near?

According to Shopping Centers Today, in-line stores are outperforming department stores - a significant shift in how retail has traditionally functioned ("In-line stores are the new mall anchors at General Growth", SCT, Nov. 2016). As of June 2016, anchor sales in the General Growth Properties (GGP is one of the largest mall owners and managers in the country) portfolio fell by 1.9%. On the flip side, between 2005 and 2015 non-anchor sales grew by 33%. This trend is being felt industry-wide - from 2005 to 2015 department store sales declined by 23%. Analysts suggest that millennials have something to do with it. They enjoy experiences more than things, and spend their money in restaurants, home furnishings, health and personal care.
Broughton Street in Savannah, GA is an example
of an all "in-line" tenant mix

The good news is that downtown was made to offer an experience. The downtown environment is among the most conducive to offering millennials the mix of retail, services, entertainment, and perhaps most importantly the authenticity they crave. Nothing else comes close.

Another potential impact is that as the anchor plays less of a role in driving in-line tenancy, traditional downtown's without traditional department store anchors become much more appealing alternatives to retailers. Consider a project I just wrote about recently, The Broughton Street Collection in Savannah, GA. The $100 million dollar project began as an assemblage by developer Ben Carter and now includes 37 properties and about 130,000 sf of retail space with nary a traditional anchor in site. Instead the mix includes a variety of national, regional and local retailers and restaurants - a lifestyle center if you will - but without the department store anchor. The key to this strategy is to ensure that the in-line retailers who are there are complimentary and share a similar customer base. Without an anchor, in-line retail must create its own synergy, the kind that will collectively attract visitors who seek a cohesive and complimentary set of offerings. I tend to suggest that downtown's ask themselves this question - is there enough to do downtown to support a visit of an hour? or two or three? In-line retailers will care about the answer to this question because in many ways they need one another a lot of more than in situations where there is no anchor tenant.  Downtown district's that curate their retail mix might just be poised to give the regional mall a run for it's money.



Wednesday, November 9, 2016

What are "retail microclimates"? And how can knowing help your retail leasing efforts?

We work in lots of downtowns and find that most are not monolithic. Instead they are comprised of many different subdistricts, what we have dubbed here at LOA "retail microclimates". As I wrote about in the ICSC guide for "Improving Tenant Mix" (which can be downloaded from the ICSC website for free here), retail microclimates are driven by a unique set of conditions, namely location, visibility, access, anchors and tenant mix. These elements, when combined, create unique case-by-case opportunities for retailers. In the vicinity of a subway stop, for instance, we might have the conditions that support convenience-oriented retail (i.e. drugstore, bodega, or specialty grocer). Near a theatre, we might find restaurants. By a hospital, medical supply stores, or better yet, injury attorneys! These are simple examples that illustrate the point that synergistic relationships exist and that these kinds of co-tenancies should be baked into your retail leasing efforts.

Yet another example of retail microclimates can be found in malls where tenant mix is often curated by lifestyle segment. So in one corner of the mall a Nordstrom drives the co-tenancy of upscale apparel retailers, while a Bed Bath & Beyond in another area might find itself surrounded by home goods stores. Long streets are particularly susceptible to exhibiting characteristics of multiple retail micro-climates. Simply put, retailers want to be near other retailers who share the same customer base. Ultimately,  the synergies created by these co-tenancies help support all retailers.

A development in Savannah, GA known as The Broughton Street Collection is utilizing a similar strategy in the $100 million redevelopment led by Ben Carter Enterprises. Carson purchased 35 buildings along Broughton Street and has redeveloped the properties into a mixed-use downtown, replete with 225,000 sf of retail, 40,000 sf of restaurants, and 48 loft-style rental apartments and offices over five of the buildings. When you look at the retail leasing plan all elements of a retail microclimates are there. The eight blocks of the district are divided into seven areas with distinct identities including "upscale", "aspirational", "main street", "contemporary", and "bohemian". These districts are designed to accommodate retailers and restaurateurs who fit each of these themes. On the "upscale" block we have Madewell, Tory Burch and Lululemon. On the "aspirational" blocks we have J.Crew, Bonobos and Banana Republic.

Two blocks of the leasing plan for The Broughton Street Collection
http://www.bencarterenterprises.com/wp-content/uploads/2015/08/bruoghton_release_plan.pdf
This detailed block-by-block leasing plan, with microclimates identified, helps retailers self congregate in areas where they share customers. This kind of natural co-tenancy often happens in traditional downtowns, but in areas where major redevelopment is poised to occur, it happens through thoughtful planning and leasing strategies.

In downtowns, these retail microclimates can also be driven by the immediate surrounding neighborhood. In one community where we recently worked, the immediate surroundings were home to a strong Polish immigrant population, but four blocks away and closer to the subway, the environment and shopper was decidedly Latino. The difference in retail could be easily discerned. Polish speciality stores slowly gave way as the street changed to low-cost general merchandise in the form of dollar stores. For a retailer to succeed, they need to know which part of the district gives them the best chance to attract customers. Better yet, they need to know which block of the district already attracts their ideal customer. This is precisely where they will want to locate - and you can help them by letting them know where that is.

Round Up: APA Awards, Blight Taxation, The Potential of Alleys, Temporary Renters, and Hot Dogs

Great Places in America: People's Choice
Not malls or strip centers, but American's have cast their vote for walkable commercial corridors to shop, district plazas to gather, and authentic neighborhoods to feel community. See the results in this year's APA people's choice.



D.C. Raises Taxes on Blighted Buildings
Blighted buildings plague many corridors and cities. The trend of blight property taxation continues to be a hot topic and a questionable driver of economic development. If it works in one city, can it be modeled in others? We will have to see.


Cities Start to See Potential in Alleys for Commercial Use
I had a great experience in Istanbul at an alleyway bar, which came to show that even overlooked alleys can serve a viable commercial purpose. Cities in the US are beginning to see this potential as well, adding availability and variety to the commercial mix. Learn more about what Downtown Pheonix is doing to activate their alleys. 


Freeman's Restaurant. Image: www.eateryrow.com
Are Commercial Renters Feeling Temporary Like Residents
As urban rents go up an increasing number of residents feel a sense of temporary status in the places they love to live. Are we seeing the same feelings in commercial renters?



Infographic: Charting America’s Hot Dog Obsession
I personally prefer taco trucks but Americans do love their hot dogs. Could commercial corridors benefit from these small purveyors of hot processed meats? They are a testament to pedestrian traffic and business clusters.


Monday, November 7, 2016

The Bike Effect on Retail

Lately, we've been busy conducting stakeholder interviews and focus groups with business owners in downtowns all over the region and a common complaint that often arises is a shortage of parking. No matter where we are, merchants argue that a large number of potential customers and visitors to downtown are not coming because there simply isn't enough parking spaces to meet demand. But will building more parking spaces really increase retail vibrancy downtown? What about alternative transportation options such as walking and biking that so many cities around the country are slowly turning their heads to, and what about building infrastructure for those modes instead?

Biking, as we all know by now, comes with a myriad of environmental and health benefits. However, more recently, it is also proving its worth in bringing economic benefits to commercial districts. Unfortunately, it's not yet intuitive that paying customers might arrive by bicycle so business owners remain the last supporters of bike infrastructure.

Bike lanes, as it appears, do not hurt businesses. In a study by the NYC Department of Transportation in 2012 that followed various street redesign projects, it was revealed that sales income at locally-based businesses along 9th Avenue, where a protected bike lane was installed, increased as much as 49% between 2006 and 2010, compared to 3% borough-wide. Although the better sales performance cannot directly be attributed to the installation of bike lanes, it is clear that the bike lanes did not negatively impact businesses. 


Some posit this phenomenon occurs because cyclists have fewer barriers to stopping at a local business than those driving on the same street (Just imagine the hassle of looking for a parking spot for a car versus a bike that can be locked to any old lamp post or corral). However, it is more important that we recognize the overall calming effect that bike lanes provide to our streets. With the presence of bike lanes, protected or otherwise, motorists are forced to be more aware of cyclists on the roads and therefore move at slower speeds. This traffic calming effect then in turn attracts more pedestrians who, like cyclists, have greater freedom to stop and notice storefronts compared to those in automobiles. 

Although the fear faced by business owners of reducing on-street parking spaces for bike infrastructure may sometimes be unfounded, it is important that commercial districts looking to install bike lanes and corrals, or bike programs downtown engage business owners from the very beginning of the process to maintain transparency and build support among these stakeholders.

The Bike Friendly Business District Program in Long Beach, California, for example, did an amazing job in getting business owners involved from the get-go. The program encourages local visitors to bike to the commercial district to shop and dine by growing the number of bike-related businesses downtown and providing bike racks and corrals, bike lanes and clear signage that bolster the pedestrian and cyclist experience of the corridor. In the beginning of the process, the District partnered with neighborhood groups to research how customers traveled to a particular business and shared that information publicly with business owners, reducing common misconceptions about who shops where and how they arrive. By also putting on neighborhood events that encourage people to arrive by bicycle and on foot, and encouraging businesses to offer discounts to customers who cycle, the program has built a bike-friendly business district that today continues to thrive. 




Narratives about the economic benefits of bike infrastructure downtown may differ from town to town but the key to success lies in involving business owners at all turns of the process and clearing up any unfounded fear of the bike lane. Polk Street in San Francisco, for example, revealed that merchants' fears of removing parking spaces for pedestrian and bike infrastructure were completely groundless when an intercept survey conducted in 2013 revealed that only 14% of visitors to the commercial street arrived by car. 

It is also important to note that not all businesses will benefit equally from a bike lane. Furniture stores, for example, may have to adapt more than a cafe because customers simply cannot bike home with a product purchased in-store. However, there are ways to cope. For example, making available cargo bikes for delivery may be one way of adapting - as carried out in Long Beach, CA. Ultimately, the flexibility of a business will determine its chances of survival no matter the change to the district's physical landscape. If the environmental and health benefits of biking weren't already enough to convince you that customers are slowly converting to this mode of transportation, consider the calming effect of bikes on your commercial street and its potential to drive greater foot traffic - a new bike corral in front of your store may not be such a bad idea after all!

Friday, November 4, 2016

Is your downtown workforce being undercounted by the U.S. Census?

For a downtown with a high workforce population, knowing how many people are working in your district is a critical metric to communicate to retailers and investors. Many people, including us, use Quarterly Workforce Indicators that are collected and updated annually by the U.S. Census Bureau to calculate this figure. The data is updated annually and is incredibly useful. It gives communities insight into how many worker there are and in what industry sectors. It also allows a community to identify workers by gender, age, and income (though the income bands are not quite as detailed as we would like - the highest band is "greater than $3,333/month" which translates to ~$40k annually). This is all great news, right? Not so fast.

We recently worked with a community and found that the workforce figures we pulled from the U.S. Census Bureau differed significantly from internal estimates they kept, which in turn were based on their local knowledge of the area and generally industry accepted assumptions regarding office space utilization. So where were all these missing workers?
Is that local WeWork location throwing
off your official employment statistics?


First, I must say, we really do trust this data source. It is based on Unemployment Insurance wage records that are deducted from every employee paycheck. Unemployment Insurance (UI) is mandatory for nearly every employee from the private sector as well as state and local government. It also includes individuals hired for domestic or personal service in a home. In addition, the data includes information on employees and jobs for most Federal employees, which comes from the Office of Personnel Management (OPM). But there are a few major exceptions, notably five federal agencies have this information suppressed, including the FBI, DEA, Bureua of Alchohol, Tobacco and Fires Arms, the Secret Service and the Treasury. After determining that none of these federal agencies had offices in the district we were back at square one.

Another major exception which held more promise was the fact that self-employed workers do not pay UI. Bingo! We had a lead! A quick google search found a number of collaborative working spaces, including WeWork, Collab and others that collective draw many thousands of additional workers annually. Additionally, when an area has a high number of businesses in the creative fields, the self-employment figures increase. These days, "freelancers" make up a growing percentage of the workforce. According to a recent study by the Freelancers Union, individuals who do any kind of freelance work - and this includes those who also get paychecks from traditional employers - make up 35% of the workforce. So in a district like the one we were looking at, with a high percentage of self-employed workers, it would make sense that the numbers were off. Mystery solved.

If this issue of lower than expected workforce count is happening in your district, there are a few things you can do about it. First, you have to be in a position to communicate quite clearly why you are seeing a discrepancy. Be able to back up the fact that you have lots of self-employed workers in the area, for instance. Show a map of collaborative work spaces and include usage figures from those workspaces. Share pedstrian counts, traffic counts and vacancy rates. Use other information to tell a more robust story about your district than the employment figures may show. Don't think that retailers or investors will believe you just because you say so - be prepared to fully defend your calculations.

As the percentage of self-employed and freelance workers increases, especially in downtown environments where collaborative work spaces are becoming more popular, simply knowing that many of these people are NOT being counted is critical to the success of your retail attraction efforts.

Thursday, November 3, 2016

Retail Insights: Does the growth in on-line retailing spell doom for downtown? And what can you do about it?

Last year e-commerce sales hit $343 billion - that is triple the figure it was just ten years ago. Upon hearing this, many cities and towns across the country have started scrambling to address the issue. But like most complicated issues, the challenge from e-commerce is more nuanced than that $343 billion dollar figure suggests. For example, Amazon.com, the largest on-line retailer in the market, comprises a mere 1.4% of all retail sales. And according to a report by Mckinsey & Co., only 35% of Amazon's customers transactions are fulfilled by Amazon itself. That means that the balance, or 65% of all Amazon sales are derived from third party sellers. Another issue with the figures is that they reflect sales from BOTH pure-play Internet retailers AND bricks-and-mortar retailers who are selling on-line. When we dig further, pure-play Internet sales likely represent only about 3% of total sales, according to a report by the International Council of Shopping Centers.

This does not mean that our Main Street businesses are out of the woods. Mckinsey estimates that some retailers will see a decline in in-store sales by 5-7% a year. Others in the industry suggest the impact will be as high as 10-15% of sales. For a small business, really for any business, that is the difference between paying rent and shutting down. Businesses will also face pressure from shoppers who can quickly and easily compare prices - often while they are in the store - and elect to spend their dollars elsewhere if they find a better price. But the cards are not all stacked against smaller merchants. High-touch items (like apparel) and experiential activities (like dining), continue to drive customers to physical stores. And a shopper that is in a store is much more likely to purchase something - even at a slightly higher price point - because the inconvenience and time cost associated with going elsewhere may not be worth it.

So, are customers changing the way they shop? Absolutely. Will there by casualties among brick and mortar retailers who don't keep up? Without a doubt (see Sports Authority and Aeropostale). But the line between virtual and actual stores will become blurrier over time, not more divided. Experts suggest that E-tailers are outgrowing their digital footprint and seeking space in the real world because they know that giving customers the opportunity to see and touch merchandise is critical to sales. Consider Modcloth, a on-line only retailer who recently opened a store in Pioneer Place in Portland, Oregon. Or Fabletics, Blue Nile, Birchbox, Amazon, Bonobos, Warby Parker, Peleton, etc...all of which have opened physical stores. This doesn't always mean they sign long-term leases for traditional retail space - in some cases kiosks or pop-up stores help bridge the gap between an on-line seller and a brick and mortar presence. Amazon, for instance, has set up 16 pop-up shops around the country that allow people to test products and services and has indicated plan to open as many as 400 brick-and-mortar stores. According to GGP CEO Sandeep Mathrani, 60% of venture capital money being raised today is focused on bricks-and-mortar store.

If we can understand why e-tailers are opening bricks and mortar stores, we can begin to understand the opportunities inherent in a physical location. These include higher conversation rates among customers, i.e. the likelihood that someone who walks into your store will buy something. E-tailers  also recognize the power of brand awareness. "Thousands and thousands of customers have discovered us through Nordstrom" Bonobos CEO Andy Dunn told Bloomberg journalists in February, going on to say, "we view is as a way to reach a much more diverse audience much more quickly."

Here are a few others things to be on the look out for as e-commerce changes the way people shop...

Demand for smaller space will rise
Another opportunity is the potential reduction of physical square footage necessary for traditional big-box retailers. Consider Target's aggressive growth of the "CityTarget" brand. Customers can purchase from Target and arrange for store pickup - effectively making the target a fulfillment center/warehouse right in the middle of the commercial district. Consider Target's new store planned for Central Square in Cambridge, MA. It will consist of a mere 21,000 sf of space on two levels (paltry compared to the average target store of 135,000 sf).

Businesses will need to invest in omni-channel sales 
As e-commerce grows, small businesses will need to get in on the action. Businesses looking to participate in the on-line sales game have a few options. In a previous post, we described a few ways in which businesses can sell through established venues (like Etsy or Amazon) as well as a few tools that allow them to create their own websites. BID's and City's can help support the growth on omni-channel selling by providing training and technical assistance to businesses.

Small businesses will begin to incorporate home delivery
Local businesses are already in the community, and with some investment in delivery, can serve as mini-fulfillment centers as well. The benefit is that if something goes wrong, the customer knows precisely where to go and who to talk to to remedy a situation.

An omni-channel sales effort will cannot end with the launch of a website
Putting a website up cannot be the end all be all. Without clever marketing, especially on on-line platforms and social media sites, efforts to sell on-line can fall flat without the right follow through. This is where many businesses falter - they may not have the staff or resources to maintain and build an on-line presence. Many small business owners are just trying to run their business. We posit that this is where a supportive organization - like a BID or Chamber - can be extremely helpful, but pooling together resources and launching marketing campaigns that draw attention to businesses that are selling on-line. They can also enlist local colleges - a business school marketing class, for instance - can be a great opportunity for businesses to get help they need from savvy young people looking for real world experience and the social media know how necessary to build on-line awareness of the website.

Enhance the experience
As we have written about before, (see How can downtown remain competitive in the face of online shopping?) malls are increasingly looking to round out retail offerings with experiential activities - things that, you guessed it, cannot be accomplished on-line.  The Palisades Mall, a super-regional mall outside of New York City has built a ropes course in what used to be an open atrium.

In this time of rapidly evolving shopping habits, small businesses are being challenged. Those that succeed will be the ones that continue to embrace new ways to meet customer needs through high quality service, on-line purchasing options, and an unrivaled in person experience that allows a shopper to touch and feel the merchandise. The goods news is that these are things that our downtown merchants are poised to offer in spades.



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.

Main Street Waterbury, VT got a boost since the opening of Prohibition Pig Brewery


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.

New Belgium Brewery in Asheville, NC

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. 

Stone Brewing in Richmond, VA

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.