The modern craft beer brewery has emerged as a niche community anchor with flexible business models and loyal customer bases across the United States, particularly in the Northeast. Combining elements of retail, industrial and hospitality models, craft breweries have quickly become one of the most dynamic and trendy business types in major cities and small towns, alike.
Some of the largest and most popular craft breweries in the United States are based in the Northeast, including the two largest: Pennsylvania-based D.G. Yuengling & Son Inc.; and Boston Beer Co., the parent company of Samuel Adams. Vermont has the most breweries per capita in the United States with more than 66, according to the national Brewers Association’s most recent nationwide census in 2018. The census identified more than 155 breweries in Massachusetts and more than 354 breweries in Pennsylvania — and those numbers have only increased over time.
“Massachusetts and Pennsylvania both have a long history in brewing, and there’s a lot of variation from region to region — even city to city,” says Bart Watson, chief economist for the Brewers Association. “Breweries appeal to their hyper-local community and also can bring in a lot of tourism and outside dollars. During this boom the country has seen in recent years, we’ve seen a huge ‘brewery tourism’ trend emerge where people take vacations or day trips specifically to visit breweries in other cities and states.”
Watson says that breweries can be very complex and capital-intensive businesses, balancing industrial, retail and hospitality models. But if they brew and market their beer effectively, and open in the right neighborhoods, breweries can significantly impact their communities. Even the smallest breweries employ people full-time and part-time, and they can eventually become iconic landmarks and tourist destinations that shape a neighborhood’s growth.
“A craft brewery that is a big producer in a region can have a different impact than a small brewery that only focuses on its neighborhood,” says Watson. “Because of that manufacturing component, breweries can often go into areas that have experienced de-industrialization and bring some revitalization to those areas. They bring business back to those places as well as foot traffic because a lot of them have that consumer-facing component in the brew pub or taproom.”
Revitalizing the Neighborhood
One of the largest brands in Pennsylvania, Victory Brewing Co., will open a brewpub in the Logan Square neighborhood of Philadelphia’s Center City business district, which local developers are actively transforming into a bustling office, retail and entertainment center in the heart of the city. Slated to open in late 2020, the brewpub will open in the ground-floor retail space at 1776 Benjamin Franklin Parkway, where the Embassy Suites Hotel is located. Local developer Pearl Properties recently acquired the space and several other properties in the district.
“Victory is one of the iconic brands born out of eastern Pennsylvania. We are so excited to partner with Victory to bring new energy to this building and to the entire Center City area,” says Reed Slogoff, principal of Pearl Properties. “As the area continues to see significant retail, commercial and residential development, we are confident The Embassy Suites Center City Hotel will benefit from our renewed focus.”
Pearl acquired the 228-room Embassy Suites in December 2018, following acquisitions of the 60,000-square-foot 1709 Benjamin Franklin Parkway office building across the street and the 223-room Cambria Hotel, also in the Center City district. Slogoff says that Pearl’s investment in the district is part of an effort to revitalize the area and capitalize on its tourism attractions, including the historic Liberty Bell, Independence Visitor Center and the Kimmel Center for the Performing Arts. The site is also located down the street from the Comcast Technology Center, where the 219-room Four Seasons Philadelphia hotel recently opened.
“The location is perfectly situated to cater to business travelers and tourists,” says Slogoff. “Pearl opened the Cambria Hotel Philadelphia Downtown Center City on Broad Street because we saw strong fundamentals in the Center City hotel market for assets in prime locations, and we’re equally bullish on the Parkway transformation that is well underway.”
Victory’s 14,000-square-foot facility will feature both a full industrial brewhouse and a full kitchen, as well as a taproom and dining area with three bars and 3,500 square feet of outdoor space. The brewery will keep a roster of its most popular beers on tap as well as a rotating selection of experimental brews that customers will only be able to try on-site. Some of the outdoor space will be located on a street-level patio and some will be on a rooftop space with its own bar and seating overlooking the street. Precision Realty Group LLC represented Victory in the lease negotiations.
“Philadelphia has quickly become a hotbed for breweries,” says Stephen Jeffries, principal of Precision. “Victory wanted to be more Center City-focused because the business is going to focus on food as much as brewing. The company wants to be near the daytime office population in the Center City business district, as well as the tourism.”
Victory will be the second brewpub to open in the Center City district, after 2nd Story Brewing. Philadelphia was densely populated with breweries prior to alcohol prohibition in the 1920s, especially in the Brewerytown neighborhood just north of Center City. Crime and Punishment Brewing Co. is now the only brewery open in the Brewerytown neighborhood, but the downtown area is home to numerous breweries and brewpubs including Yards Brewing Co., Philadelphia Brewing Co. and Love City Brewing. Most of the downtown breweries are integrated into retail spaces of office and residential buildings, and generally appeal to the daytime office and tourism crowd by offering food and comfortable taproom seating.
Jeffries says that many new breweries in the Philadelphia area have opened in up-and-coming neighborhoods of the city, such as Fishtown and Northern Liberties. Those properties tend to be warehouse-style buildings with high ceilings and industrial infrastructure in place and the businesses tend to focus on distribution rather than retail service.
In some cases, breweries can make an interesting focal point for tourists and locals to explore parts of a city that they normally would not. But if the operation has a kitchen and a chef involved, the business generally wants to be in a more conveniently located neighborhood with an established office and residential community.
“The affordable model is to find a cool building off the beaten trail because if people like your beer, they’ll find you,” says Jeffries. “But if you want people to like your beer and also meet at your brewery for lunch with a client, then you have to be easily reachable during heavy daytime traffic. In the right location, it’s possible to find a happy medium between the two.”
Victory opened its first location in Downingtown in 1996 and is known for its Golden Monkey Belgian-style tripel ale. Owned by North Carolina-based beverage umbrella company Artisanal Brewing Ventures, the company operates two other locations in Parkesburg and Kennett Square. The Philadelphia brewery will function as a flagship taproom as well as an innovation hub for experimental and limited beers. Gerner Kronick + Valcarcel is designing the facility in collaboration with Victory.
“We’ve been patiently looking for the perfect downtown Philadelphia location for years,” says Bill Covaleski, co-founder of Victory. “This property and its iconic address presents the perfect venue for us to expose both Philly residents and visitors to innovative, quality craft beer, while expanding the audience for the entire craft beer industry.”
Crafting the Space
While some new breweries are fortunate enough to find the perfect building for their business, not all emerging businesses can find or afford the perfect building when they are just starting out. As breweries grow and become more popular, they often expand their businesses to accommodate their needs for more brewing equipment, additional seating and event space.
Sometimes this can mean building an extension onto the original building or moving the operation to a new or additional location. In 2016, Dorchester Brewing Co. worked with RODE Architects to design and construct its 25,000-square-foot facility in Dorchester, a large neighborhood in South Boston.
Dorchester Brewing Co., located just south of Boston, is a 25,000-square-foot brewery that originally opened in 2016.
“The first step is getting their production facility squared away because the brewers don’t have anything to sell until the beer is clean, standardized and tastes the way they want it to,” says Kevin Deabler, principal and co-founder of RODE Architects. “It’s a gritty process making sure the space is large enough for a small manufacturing facility with machinery to brew the beer and dispose of the odors and byproducts.”
RODE recently completed a $3 million ground-up expansion project at Dorchester Brewing Co., which included 5,000 square feet of additional tasting room space, a restaurant with a full kitchen and a 2,200-square-foot glass greenhouse and roof deck with its own bar and fireplace. RODE has been tapped as the architect for the construction of Brockton Beer Co., which plans to open in Brockton, a southern suburb of Boston, later this year. That proposed project would involve the redevelopment of a vacant property with a brewing facility, taproom and restaurant.
Brewery operators should give serious consideration to selling food in addition to beer before opening their business because customers will go somewhere else if no food options are available, according to sources for this writing. When designing a brewery from the ground-up or redeveloping an existing property, architects often incorporate space for food pop-ups, food trucks or even a full kitchen on-site. Another way to attract customers and keep them at the brewery is to build out indoor and outdoor spaces for large events, parties and weddings.
“Selling beer by the glass is more profitable than selling it by the keg or in six-packs, so the business starts to move toward a hospitality model rather than just manufacturing,” says Deabler. “Over years of evolution, these breweries become a place of community, so they need a nice and comfortable space for people to gather. And if they make good beer, people will drive a long way to come taste it.”
— By Alex Patton. This article first appeared in the January/February edition of Northeast Real Estate Business, a sister publication to Shopping Center Business.