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November 29, 2017

Breweries search for space in the tight Seattle-area industrial market

Puget Sound Business Journal

Coral Garnick

Adam Robbings and his wife opened Reuben's Brews in Ballard in 2012, but he has been constrained by space ever since.

After a two-year search, he opened a second facility in 2015. He wanted between 6,000 and 10,000 square feet, but landed in 4,000.

Robbings was almost immediately at capacity again and has been looking for a bigger space ever since.

"We've been in that fortunate position," he said. "Space has been our inhibiting factor since day one."

Reuben's facilities are spread among four separate locations, which Robbings said is inefficient. Ideally, he would like to consolidate production down to a main production and warehouse facility and a smaller space for souring beer so it doesn't contaminate others.

"We didn't set off with the plan of having four little spaces," he said, adding that he is finally close to a deal on a new larger location that will allow for some consolidation within 11,000 square feet.

Robbings is not alone.

As more breweries open and expand, it is becoming increasingly challenging to find the industrial space needed to brew beer in and around Seattle.

Thirty-one craft breweries have already opened in Washington state this year, putting the count at 375. The state ranks second in the country (behind only California) for the number of craft breweries. It is sixth in the nation for breweries per capita, with 6.3 breweries per 100,000 adults.

The Brewers Association estimated that Washington's craft brewery industry had a $1.77 billion economic impact in 2016, which ranked the state No. 15 in the country.

Another challenge for breweries in Seattle is the capital needed to get through the permitting and building process after finding a space, something Robbings was all too familiar with during his search.

Chris Smith, founder of Lowercase Brewing in Georgetown, said that the barrier to entry makes it difficult for small breweries.

Smith opened a new taproom in Georgetown a year ago after unsuccessfully trying to find a space that could host both production and a taproom. He said it would take about nine months to get licensed and permitted, all of which required an address.

"Realistically, you pay rent for a year without any revenue," he said, which is why breweries are popping up in industrial plazas, which are zoned correctly and have lower rent.

Evan Lugar, a partner with commercial real estate firm Kidder Mathews, said it is not surprising breweries and tap rooms are struggling to find space.

The vacancy rate in South Seattle and Georgetown for industrial space, for example, is at a historical low with 14 quarters under 2 percent, he said.

"It is not a brewery issue," Lugar said. "It is an everything issue."

Pike Brewing Co. recently expanded in their same Pike Place Market location after looking for a new facility for about two year. Co-founder Charles Finkel said he and his wife wanted a space that could accommodate both a brewery and a restaurant, which narrowed down their options.

"We had at least three opportunities brought to us by developers, however, none were the right fit for our concept," he said. "In looking around, we found that either the layout wasn't right, for a brewery and restaurant, or that the location wasn't attractive or that we simply weren't excited by what we saw."

The new fermenters, which were brought in through the windows of the market, will allow Pike to grow from 14,000 barrels a year to 20,000.

For the full story, go to Puget Sound Business Journal.

©2017 American City Business Journals. All rights reserved.

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