How craft breweries are helping to transform some local economies
MIDDLETOWN, N.Y. — As Equilibrium Brewery opened for business here on a recent Saturday morning, fans were already lined up outside for a fresh batch of its hazy-coloured ales.
The travellers, who came from Massachusetts, New Jersey, Pennsylvania and Rhode Island, snapped up as many cans and bottles as they could buy, at $16 a four-pack. After a sip or two by tailgates, some headed out in search of a meal, their tourist dollars funneled into a downtown betting on a rebound.
“We are having an impact on the community, for sure,” said Ricardo Petroni, a co-owner of Equilibrium, which opened in 2016 in a former meat-packing plant that had been seized over nonpayment of taxes. “When we moved here, you could see old scars of bad times,” Petroni added, “but you can tell that now, new things are flourishing.”
Across the U.S., in once-bustling manufacturing centres, breweries are giving new fizz to sleepy commercial districts. If alcohol-based businesses were blamed for a breakdown of society in the Prohibition era and beyond, breweries are now being seen as a force for good.
“The economic ripple effects are definitely there,” said David Barnett, a Chicago-based senior research analyst for JLL, the commercial brokerage firm. Breweries “create a cool tourism aspect for out-of-towners, but it’s been good for residents as well.”
In 2016, there were 5,301 momand-pop beer makers, which are typically known as craft breweries. That figure rose from 4,548 in 2015, when the country surpassed its historic high-water mark of 4,131 breweries, set way back in 1873, according to the Brewers Association, a trade group. (Zero were recorded from 1920 to 1932, during Prohibition.)
Although they are small, those breweries pack an economic jolt. In 2016, they contributed about $68 billion to the national economy, the association said.
In recognition of their importance, craft breweries received an unexpected gift in the recent
rewrite of the tax code. The Senate included a provision that lowered the tax rate on beer produced in the United States, particularly for small breweries. That special treatment comes on top of generous subsidies from local communities eager to bring business to their struggling industrial districts.
The Northeast, Midwest and West still represent much of the industry, but 36 states doubled their production of craft beer from 2011 to 2016, according to Barnett, who last year wrote “The Craft Beer Guidebook to Real Estate,” a JLL report. “It’s hard to ignore an industry” that has grown this much, he said.
In searching for places to make specialty beverages like sour beers and stouts, breweries seemed to adhere to a formula. They like early 20th-century buildings with up to 10,000 square feet and lofty ceilings, said Sandy A. Barin, a vice president with the commercial real estate firm CBRE based in Minneapolis who counts brewers among his clients.
Usually renters instead of owners, breweries in Minneapolis typically sign five-year leases and pay $4.50 a square foot annually, Barin said, although tenants are usually on the hook for renovations, even if landlords offer credits for finishes like paint and carpeting. “The setup is usually pretty expensive,” he said.
Breweries also seek up-andcoming locations that are within walking distance of houses and apartments, according to Barin, who added that the popular neighbourhood in his city is North Loop, a former manufacturing district that churned out plows and threshers.
Overall, breweries, usually with tap rooms, occupy about 624,000 square feet in the Minneapolis-St. Paul metro region, up from 507,000 square feet in 2016. And in 2017, 11 new breweries opened in that area, according to CBRE, with 11 more expected this year.
Offering food broadens breweries’ appeal, making a visit to them into “more of an all-inclusive night out,” Barin said.
Breweries typically open an adjoining restaurant, but in Minneapolis, they often forge partnerships with food trucks that park outside. Modist Brewing, which opened in 2016 in a former North Loop salt factory, has several food trucks to serve hungry customers.
Breweries have boomed nationally in the last few years. The industry was on track to post a growth rate of 5 per cent in 2017, based on midyear calculations, said Bart Watson, the association’s chief economist. “We haven’t seen much of a slowdown,” he said.
But in many places, the industry remains highly subsidized, raising questions about whether breweries can make it on their own, and how long that might take.
The building that houses Equilibrium, for instance, was sold to the brewery for $260,000, with $225,000 of that forgivable if the brewery remained in business for at least five years, said Petroni, who along with his partner, Peter Oates, invested $1.4 million to upgrade the property. Ten people work there today.
In addition, Equilibrium benefited from a sales-tax exemption on construction materials and a short-term reduction in property taxes, among other local incentives. The nearby three-year-old Clemson Brewing Co., a tall brick former saw-blade factory also seized for back taxes before its current incarnation, received similar breaks, which Middletown officials called necessary.
“We realized in the 1980s and 1990s that industry wasn’t really coming back to any of these cities,” said Maria Bruni, the economic development director of Middletown. “Our community is very supportive because we’ve been staring at these buildings for 20 years and doing nothing.”