How Craft Breweries Are Helping to Revive Local Economies

Equilibrium Brewery in Middletown, N.Y., drew a crowd of craft brew fans from several states recently for a can and bottle release.

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-colored ales.

The travelers, 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 meatpacking plant that had been seized over nonpayment of taxes. “When we moved here, you could see old scars of bad times,” Mr. Petroni added, “but you can tell that now, new things are flourishing.”

Across the country, in once-bustling manufacturing centers, 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 mom-and-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 Mr. 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, Mr. 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-and-coming locations that are within walking distance of houses and apartments, according to Mr. Barin, who added that the popular neighborhood in his city is North Loop, a former manufacturing district that churned out plows and threshers.

Over all, 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,” Mr. 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 percent 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 Mr. 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 Company, 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.”

Financing from New York State, which under Gov. Andrew M. Cuomo has become a major backer of the brewing industry, seems to also be a key. Equilibrium, for example, has so far received $204,000 in state grants.

Mr. Cuomo, who took office in 2011 and is now in his second term, has also relaxed industry laws over the years. Brewers can now sell beer by the glass at their plants if their recipes partly use locally grown products, which many credit for the explosive growth of breweries in New York.

In February, there were 390 craft breweries in New York, according to the state’s Liquor Authority, up from 97 in 2012. From densely settled Brooklyn to small towns by the Canadian border, the breweries include the Newburgh Brewing Company, which occupies an 1850s former box factory; Battle Street Brewery, in a former train station in Dansville, near the Finger Lakes; and Pressure Drop Brewing in Buffalo, in a former barrel factory. The Binghamton area has also become a hot spot.

If residents support incentives, they do not always agree that alcohol will improve a community, said Chris Andrus, a co-founder of Mitten Brewing Company in Grand Rapids, Mich.

Though breweries are plentiful, none were on the city’s west side, a blue-collar former furniture-making center, when Mr. Andrus and his partner, Max Trierweiler, sought to open one in a dormant 1891 firehouse. Neighbors who were worried that another bar would hurt the struggling area spoke out at zoning meetings, he said.

But opponents may have come around since the brewery opened in 2012. Mitten closes earlier than bars in the area, Mr. Andrus said, “and we attract a lot of families.” The brewery, which is profitable, seems to have also attracted investment in the neighborhood. Across the street is a gin distillery, in a former clothing store, and another corner has a barbecue joint, in a former hamburger stand. Other breweries have also arrived in the area.

Perhaps unsurprisingly, property values are also on the rise. Mitten’s 6,000-square-foot firehouse, which cost $220,000, is worth about $600,000, Mr. Andrus said, which is “largely because of us.”

Whether craft breweries are a fad or will endure may come down to drinkers’ tastes, but evidence suggests passion for the product is high.

On that January day in Middletown, Bob Helligrass and Jaime Loughridge, friends from the Albany area, sat eating lunch at Tapped, a bistro next to Equilibrium that opened around the same time.

Before buying India pale ales at Equilibrium, the pair had also hit up the two-year-old Hudson Valley Brewery in Beacon, N.Y., to buy some of its beverages, while also snagging a meal along the way. “Breweries,” Mr. Helligrass said, “have benefits all down the line.”

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