crat beer the guidebok - jll real views states have more than doubled their craft beer ... evan...
TRANSCRIPT
The
guidebookcraft beer
to real estate
Summer 2017
What every brewery needs to know about real estate
content
3
State of Craft Beer 4Number of breweries in the U.S. 4
Production trends across states 6
Key craft beer states 8
Local beer hubs 10
Expansions: industrial to retail 12
The Real Estate Process 14From leasing to brewing 14
Outlook 16
2006200520042003200220012000199919981997199619951994199319921991199019891988198719861985
National total craft beer production (barrels)
4 | The craft beer guidebook to real estate
State of Craft Beer Most craft breweries in the U.S. on recordThirty-six states have more than doubled their craft beer
production from 2011 to 2016. Nearly half of those states tripled
their craft beer production. More production means there are more
market entrants and brewers expanding their production capacity.
Warehouses and retail properties benefit from a growing craft beer
industry that has more than doubled its total beer production since
2011. This is a nationwide trend that fills industrial and retail
vacancies and reinvigorates local markets. These trends translate
into a larger impact on the industry’s real estate footprint.
While overall beer sales remained virtually flat in 2016, craft beer
sales grew by 6.2 percent, accounting for 12.3 percent of the
market. This market share is significantly larger than the 5.7 percent
recorded in 2011. Despite rapid growth over the past five years,
the industry is expected to slowdown due to increased saturation.
There were fewer brewpub and micro brewery openings in 2016
than the previous two years, with a slight uptick in closings.
What is craft beer, and why does it matter?According to the Brewers Association’s definition, craft breweries
must satisfy three qualifications:
1. A craft brewer must produce no more than 6 million barrels per
year
2. Less than 25 percent of the company is owned by an entity that
is not a craft brewer
3. Traditional or innovative ingredients account for a majority of
beer alcohol volume and flavor (does not include flavored malt
beverages)
Craft breweries impact local economies with more jobs and
increased revenue from sales taxes, licensing fees and other fees.
According to the Brewers Association, the craft brewing industry
injected $55 billion into the U.S. economy in 2014 and created more
than 424,000 jobs. The industry had an economic impact of $2.2
billion in Illinois alone.
National total craft beer production
Source: Brewers Association
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
20162015201420132012201120102009200820072006
National total craft beer production (barrels) (barrels) What do you like most about the industry?
“
“
5
Beyond economics, craft brewers reflect the culture and character
of their local communities. Any visit to a local beer city, like Chicago
or San Diego, will illustrate that local brewers often 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.
The craft beer guide This guidebook provides production and brewery data in states
across the country and identifies the latest trends in local
beer hubs. It is meant to educate those interested in the craft
brewing industry and provide information for brewers who are
interested in their impact on real estate.
Camaraderie—true, independent
local craft beer is unlike other
industries in that these breweries
collaborate with one another on raw
material shortages, brewery
configuration and beer releases.
– Matt Rattner, President of Karl Strauss Brewing Company
6 | The craft beer guidebook to real estate
Production trends across statesCraft beer is booming across the country, especially in the South. Of
the top 20 states for annual barrel production growth from 2011 to
2016, 8 were in the South.
Alabama brewers opened up a market that was nearly nonexistent in
2011. The state increased production by over 6,000 percent, despite
failure to pass three bills that would have enabled brewers to self-
distribute and sell directly to consumers. The latter changed in 2016,
as Alabama brewers can now sell growlers and packs of beer to go.
7
Production growth by state (2011-2016)
Total craft beer production by state (2016)
Gallons produced per adult by state(21+ years of age)
0% 1000% 2000% 3000% 4000% 5000% 6000% 7000%
West Virginia
Illinois
Connecticut
Tennessee
Arkansas
North Carolina
District of Columbia
North Dakota
Florida
Alabama
Production growth by state (2011-2016)
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
Pennsylvania California Colorado Ohio North Carolina Florida Texas Oregon New York Wisconsin
Total craft beer production by state (2016)
0.0
5.0
10.0
15.0
20.0
25.0
Gallons Produced /21+ Adult
Source: JLL Research, Brewers Association
8 | The craft beer guidebook to real estate
Key craft beer states
Production (2016): 1.2 million barrels
Breweries per capita (2016): 8.1
Notable breweries:
Deschutes, Full Sail Brewing
Production (2016): 337,582 barrels
Breweries per capita (2016): 2.0
Notable breweries:
Revolution Brewing, Two Brothers Brewing Co.
Production (2016): 3.3 million barrels
Breweries per capita (2016): 2.2
Notable breweries:
Sierra Nevada Brewing Co., Stone Brewing Co.
Production (2016): 1.4 million barrels
Breweries per capita (2016): 8.4
Notable breweries:
New Belgium Brewing Co., Oskar Blues Brewing Holding Co.
OREGON
ILLINOIS
COLORADO
CALIFORNIA
Source: JLL Research, Brewers Association
9
Production (2016): 609,415 barrels
Breweries per capita (2016): 2.8
Notable breweries:
August Schell Brewing Co. , Summit Brewing Co.
Production (2016): 1.4 million barrels
Breweries per capita (2016): 2.1
Notable breweries:
Great Lake Brewing Co., Fat Head’s Brewery
Production (2016): 1.3 million barrels
Breweries per capita (2016): 2.8
Notable breweries:
Highland Brewing Co., Foothills Brewing Co.
Production (2016): 846,029 barrels
Breweries per capita (2016): 3.1
Notable breweries:
Bell’s Brewery, Atwater Brewing Co.
MINNESOTA
OHIO
NORTH CAROLINA
MICHIGAN
Production
< 250,000250,000 - 500,000500,000 - 1,000,0001,000,000 +
Breweries per capita is the number of craft breweries
per 100,000 adults ages 21+
10 | The craft beer guidebook to real estate
California408 microbreweries | 209 brewpubs | 26 regional breweries
North Carolina134 microbreweries | 57 brewpubs | 11 regional breweries
Miramar Corridor San DiegoThere are 14 craft breweries along the 2.5-mile stretch
of Miramar Road between I-15 and I-805. This is home
to Green Flash and AleSmith Brewing Company.
Downtown AshevilleThe craft beer industry is a driver of tourism for Asheville. Visitors
and locals can taste a pint from an abundant amount of breweries
within walking distance. The River Arts District is an up-and-coming
location for restaurants and breweries.
Burial Beer CompanyGreen Flash Brewing Company | Source: Jamie Lantzy
Sample flight: local beer hubs
11
Oregon134 microbreweries | 96 brewpubs | 9 regional breweries
Ohio101 microbreweries | 73 brewpubs | 7 regional breweries
Close-In PortlandBeer is synonymous with Portland. The Close-In area offers strong
walkability to more than 10 breweries within a 2-mile radius.
Beer drinkers can also take advantage of the bus tours
that hop from brewery to brewery.
Over-the-Rhine CincinnatiOver-the-Rhine is a diverse neighborhood in Cincinnati that once
served as a commercial and industrial hub for the city. Beer is
helping revitalize the neighborhood, which is now spotted with
music venues, retail, and business incubators.
Taft’s Ale House | Source: 5chw4r7zHair of the Dog Brewing Company | Source: Evan Lovely
12 | The craft beer guidebook to real estate
Chicago, Illinois | Source: Brewbokeh, Half Acre
Half Acre built an additional production facility totaling 60,000 square feet in Chicago,
Illinois. The brewery opened its outdoor beer garden in September of 2017.
Asheville, North Carolina | Source: Authentic Asheville, Wedge
Wedge Brewing Company expanded into 7,500 square feet at the Foundation in the River
Arts District of Asheville, North Carolina. The space includes 1,500 square feet of event space.
expansions
Richmond, Virginia | Source: Stone Brewing - Richmond
Escondido’s Stone Brewing opened its 220,000-square-foot distribution center in
Richmond, Virginia in 2016. This facility will be supplemented by a restaurant on
the riverfront within the next couple of years.
Cincinnati, Ohio | Source: MadTree Brewing
MadTree Brewing opened its 50,000-square-foot facility in February 2017 at 3301
Madison Road in the Oakley neighborhood of Cincinnati. The space includes a
10,000-square-foot, dog-friendly beer garden and 64 taps.13
industrial to retailexpansions
14 | The craft beer guidebook to real estate
From leasing to brewing
First contactContact a local market expert to start your
search for brewing space.
Milling and mashingWhile milling is the first step to ensuring
grains are ready to mash, many brewers
purchase milled grains. Milled grain is
placed in the mash tun and mixed with hot
water, which activates enzymes to convert
starches in the grain to sugar.
Identifying requirements How much space do you need to
accommodate your production?
What is your price point? What is
your logistics strategy?
LauteringThis step separates spent grain from the
sugary liquid, called wort. Water extracts
additional sugar from the grain.
Site SelectionAfter identifying requirements, use the latest
technology to find and tour available spaces
in the given geography.
BoilingWort is boiled for sterilization. Hops are
added during this process to add bitterness.
Hops added toward the end of the boil add
aroma and flavor.
15
Negotiate lease termsYou found the perfect spot to start brewing
your next delicious batch of beer. Now,
it’s time to start negotiating to maximize
your budget.
CoolingAfter the boil, the wort goes through a
whirlpool to collect undesirable matter. This
is immediately followed by cooling, as the
wort will start producing flavor.
Sign/Execute leaseNegotiation went well and you signed
your lease.
FermentingWort is sent to a stainless steel vat to begin
fermentation. Yeast is added to create
alcohol and additional flavors, depending
on the strain of yeast.
Build-out commencementThe lease is signed and commencement is
set. Follow up with details on moving into
the new space and building out your new
home.
ConditioningAfter the beer has matured, it is filtered,
carbonated and conditioned in a bright tank
to leave a clear and drinkable beer.
Start packaging and brewing!
16 | The craft beer guidebook to real estate
outlookCraft brewers need to differentiate and educate as the market saturates and acquisitions increase.
The industry is becoming saturated. There were more breweries in the United States
in 2016 than in any other year going back to 1873. Increased competition is forcing
many brewers to market their product and differentiate with a diverse and high-
quality collection of beer styles. The increasing amount of unproven entrants may
cause fatigue for consumers and distributors.
Since craft beer is the engine behind recent overall beer growth, larger breweries
are making strategic acquisitions. Acquisitions cause confusion for consumers.
Consumers may think they are drinking craft beer, when it is really a brand for a
larger “macro” brewer. As a result, craft brewers need to invest and adapt to educate
their consumer base to maintain production and revenue growth in the long term.
A slowing craft beer industry has immediate effects for commercial real estate.
Absorption is expected to slow overall as demand dissipates from fewer new market
entrants. Other markets that have lifted production limits will continue to grow as
brewers meet demand for craft beer. On the other hand, regional breweries are in
position to expand their distribution and footprint across the Untied States.
©2017 Jones Lang LaSalle IP, Inc. All rights reserved.
ContactDavid BarnettJLL Chicago | Senior Research [email protected]