Colorado Breweries Change Their Real Estate Strategies As Industry Stagnates

Some breweries in Colorado are rethinking their real estate strategies as the industry continues to struggle with lingering challenges posed by the coronavirus pandemic.

Breweries have traditionally gravitated to areas of town where warehouse space is cheap and operators could be near their production sites, making places like River North popular destinations for both national and local breweries. But Odell, Left Hand and New Belgium are among the brewers opening up new locations in areas with lots of foot traffic, a trend some experts think will continue as Colorado’s beer industry evolves. 

“What breweries are seeing these days is that it’s not all about production space,” Shawnee Adelson, executive director of the Colorado Brewers Guild, a nonprofit trade association, told Bisnow. “They recognize the importance of being where their customers are, and connect with the things their customers enjoy like concerts and food halls.”

Colorado’s beer industry is one of the key drivers of the state’s economy. It supports more than 58,000 jobs and has an economic impact of more than $11.5B, according to a 2022 study from The Beer Institute and the National Wholesalers Association.

But the industry suffered several setbacks during the pandemic, from growing inflation to a shortage of aluminum cans caused by supply chain bottlenecks. At the same time, local lockdown orders and social distancing requirements limited the number of customers businesses could serve daily.

Now that the pandemic has subsided, Colorado breweries are looking for new ways to attract customers, even if that means moving or expanding into a new building. Left Hand Brewing Co., for example, opened a new taproom near the Mission Ballroom concert venue in River North in November. In January, Sunroom Brewing opened a new location about a block away from the Gothic Theatre, a historic concert venue in Englewood.

For brewers like Left Hand, simply expanding into new locations isn’t enough. Left Hand CEO Eric Wallace said his company owns about 7.5 acres near downtown Longmont in an area that will one day be home to a mixed-use development. These real estate holdings could also help solidify a customer base for Left Hand to continue operating in Longmont long into the future, Wallace said. 

“The days of finding some industrial park with the cheapest rent are mostly gone,” he said. “Owning real estate is really a key aspect of brewing right now. It’s also impossible to grow a long-term business if you’re constantly having to move to new locations.” 

The shift in real estate strategy comes as the national beer industry is starting to stagnate. Data from the Brewers Association, a nonprofit based in Boulder, shows the number of new craft breweries opening nationally has declined every year since 2018. Meanwhile, the number of brewpubs that closed more than doubled, from 99 in 2018 to almost 200 in 2020, before settling at 77 to close 2021.

Colorado’s beer industry has fared better than the national average, according to a Brewers Association report, posting an 8% growth rate in 2021 compared to the national growth rate of about 1%. That growth has not solved all of the problems that breweries face, though, especially smaller businesses. For example, beer wholesalers and distributors are consolidating, meaning that these businesses have more accounts on their books. This makes it more difficult for small businesses to get shelf space at grocery and liquor stores that sell alcohol. 

Stagnation at the national level signals that existing breweries need to focus on creating spaces where customers can congregate rather than simply focusing on production, said Paul Gatza, a senior vice president of the Brewers Associations’ professional brewing division. That’s one reason Odell Brewing decided to open up a taproom across from Sloan’s Lake Park, near a large multifamily development, he said.

Going forward, Gatza expects these locations to become increasingly important as distribution and wholesaling continue to be troublesome for many breweries. Both Twisted Pine Brewery and The Post Brewing Co. have had to scale back distribution because of cost increases and the consolidation of local liquor store businesses, according to the Greeley Tribune.

Colorado voters also passed a ballot measure in 2022 that allows grocery stores like King Soopers and Albertsons to sell beer and wine, which could further hinder distribution efforts, Gatza added. 

“Breweries themselves aren’t necessarily the destination in these places anymore, but are part of the entertainment package for the evening,” Gatza told Bisnow in an email.