Craft beer: real estate booster
Portland has the fourth-most breweries per capita in the nation, counting more than 160 craft establishments in the metro area.
"That's impressive given the size of Portland," said Harrison McGeady, real estate analyst with CoStar, who recently came out with the research. "The brewery-per-capita in Portland is kind of astounding. Southeast Portland has the third-most breweries in the entire country, and there are also two submarkets within Portland that have 20-plus breweries, which is actually pretty impressive."
Craft beer is having a larger impact on commercial real estate than ever before, driving population growth, increasing apartment demand and boosting rents, according to CoStar Group. The newer trend began in 2007 in Portland, and really picked up the pace during the current post-Recession economic upcycle.
CoStar Group, a leading commercial real estate data and analytics firm, found that seven of the top 10 submarkets by number of breweries are located in Colorado, Illinois and Oregon. Areas with heavy concentrations of breweries outperform submarkets.
Four submarkets in the Portland metro (Portland Vancouver, Beaverton, Damascus and Hillsboro), all of which have five or more breweries, had apartment rent growth from 2010-2016 of 35 percent or greater compared to the metro average of 30 percent.
The Business Tribune spoke with two real estate analysts from CoStar on the topic, Harrison McGeady and managing consultant Lee Everett, who are both based in Boston.
"What kind of happened is these cooler neighborhoods have had the sort of urban and manufacturing-based real estate that made sense to turn into a brewery or a pub," Everett told the Business Tribune. "Five or six have opened since '07 in Portland — Hopworks, Basecamp, Ecliptic — these are all breweries that opened sort of as the neighborhoods were starting to take off."
According to Harrison's research, submarkets with 10 or more breweries have added an average of 2,221 apartment units from 2010-2016. Submarkets with nine or fewer breweries have only added an average of 520 apartment units over the same period.
As of the first quarter of 2017, submarkets with 10 or more breweries have an average of 1,087 apartment units under construction compared to an average of 220 units under construction for submarkets with nine or fewer breweries.
"Americans are making good beer now. It's probably that simple," Everett said. "It's been a direct sort of increase in the growth of craft beer, a shift in our culture: millennials are these very urban, social people."
As a millennial, McGeady has developed a respect for having a good beer after work and relaxing.
"It's much better than drinking something of lower quality," McGeady said. "A lot of these places have moved into smaller locations away from the massive brewery — something taking up a smaller footprint that allows them to be closer to younger people such as myself."
But the trend is also partly a question of chicken-and-egg.
"In Portland, is it to some extent of breweries being there first, but is it also because the breweries went to the right neighborhood?" Everett said. "At the end of the day I think it's a symbiotic relationship: where there's density, you have neighborhood growth."
The research shows Nashville, Seattle, San Diego and Portland's previously suburban markets are seeing dramatic neighborhood growth as density increases in those areas.
"A market like Portland, which benefits dramatically by being not as as expensive as the San Franciscos of the world, is a young metro, a place where walkability and neighborhood amenities are very important in terms of appealing to millennials," Everett said. "As for weekly craft brews — 57 percent of millennials identify in that route. You're able to build a more complete neighborhood, and it gives these apartment developments some (neighborhood amenity)."
It's happening in the north Boise neighborhood, Buckman and many Southeast Portland neighborhoods.
"That's one of the ways Portland benefits: you have these sort of cool, almost old-school Williamsburg-Brooklyn neighborhoods that haven't really been all the way developed," Everett said. "The breweries were able to get their foot in the door with these cool walkable neighborhoods — brew pubs, dispensaries, things along those lines."
Portland and Denver, both high on the list of breweries-per-capita, have similar cultures.
"Portland is probably a bit younger, a bit more walkable-focused," Everett said. "Where you do have really walkable neighborhoods, you have these neighborhoods that have gentrified to allow these breweries to influx."
Denver is also experiencing a construction boom, but isn't as walkable. Denver is also similar to Portland with regards to its cost of living, which is still more affordable than cities like San Francisco and Boston.
"It tends to be part of the place apartments come — it's about selecting a cool, walkable type of location and then hoping that trails into the followup of the rest of the neighborhood continuing to gentrify," Everett said. "It harkens back to the sort of stigma Whole Foods had back in 2007, and Starbucks before that in 2000: you know a neighborhood's becoming cool if there's a Starbucks or a Whole Foods."
In comparison, Chicago's breweries are more spread out, and Portland's walkability makes it easier to identify the "cool" neighborhoods.
"It doesn't directly create this rent growth, but building neighborhood amenities has been a huge driver of urban renovation we've been going through," Everett said.