Craft breweries have become a popular destination point in Cleveland and surrounding neighborhoods, and all signs point to the trend only growing stronger in the years ahead, says Rico A. Pietro, SIOR, a Principal at Cushman and Wakefield Cleveland.
“With the organic growth of the Ohio City market, there is an opportunity to take advantage of that demand and really imprint Cleveland on a national scale as the home to some dynamic breweries,” Pietro says. “The Samuel Adams model was the blueprint as brewers and producers found that people are genuinely interested in the craft of making beer. With that, there is a chance for these businesses to highlight their production facilities and position them as a marketing piece to get consumers to their end product.”
The good news is that new entrants into the craft beer market can only help this industry grow, Pietro says, as long as they take a strategic approach to finding the right real estate.
Smart Business spoke with Pietro about what prospective breweries need to keep in mind as they search for a location to start their business.
Where do you begin when searching for a location to open a brewery?
The old model for a brewery was to take a 20,000 square-foot location for a restaurant and use the brewery on site. The problem is when you do that, you limit your opportunity for expansion. You want to keep in mind high-identity sites that could serve as a retail platform to promote your brand and have proximity to other business drivers such as shopping districts, entertainment venues or mixed-use areas such as the Ohio City market.
When you’re looking for property in an emerging sector of the market, you should budget or plan for potential growth. The reason is there is such a barrier to relocation based upon the amount of infrastructure you have to provide to produce craft brews. There are also traditional attributes you want to look for in a space such as good truck access to both the building and to major highways for distribution.
How do you balance the desire to transform an undeveloped market with opening in a market that already has a number of breweries?
That’s a fundamental question in real estate. It’s similar to the approach Wayne Gretzky took on the ice: Don’t go where the puck is. Go where the puck is going to be. Get into a building that allows you to make your investment in a good location without paying a premium on rent. People will come to a brewery if you provide an experience when they go there. You can save thousands of dollars a year in rent if you’re not paying retail rates for your production facilities. It’s five times as expensive to put your production facility in your retail location as opposed to being ahead of the curve and looking to create an industrial brewing district.
Whether you want to add a restaurant, a tour of your brewery or provide venues for corporate outings, you can use the production facility as a way to promote your brand. This business model needs to be a little bit more strategic, but it helps to manage your costs by moving the production facilities to a less expensive space. It also provides flexibility to grow as your brand becomes more economically productive. It would be wise to find a real estate professional who understands and can qualify your long-term approach, and is knowledgeable about the brewery business and its growth potential.
How much of a concern is competition?
The craft breweries in Northeast Ohio are more powerful and have a stronger regional and national message if they can be promoted as a brand or sector rather than trying to operate independently. You can create a district that ends up being a primary tourism destination for anybody coming into Cleveland. There is an emerging area on the south bank of the Flats that wants to coin itself as a brewery district. The sum of these breweries is likely to be more powerful as a group than if each business attempted to stand on its own.
Insights Real Estate is brought to you by Cushman & Wakefield/CRESCO Real Estate
