How is South Carolina’s brewing industry affecting its real estate market?

As the world at large ballyhoos its bigoted big brother, North Carolina, and its HB2 anti-LGBT law, let’s take a sec to discuss its overlooked soul sister, South Carolina. Its brewing scene is doing something respectable. The sizable growth of craft brewing activity in the state is having an impact on the commercial real estate sector. It’s helping revamp old buildings and complexes that needed urban revitalization, and it’s creating jobs, community outreach and great beer.

According to an excellent article on Upstate Business Journal (UBJ), S.C. breweries occupy more than 200,000 square feet with 40 locations throughout the state, and approximately 36.6 percent of that total square footage has opened since 2013.

That’s a nice feather in South Carolina’s cap (kudos), but UBJ is quick to note it’s still not that big of an impact. According to the article:

On average, microbreweries in South Carolina each occupy approximately 7,500 square feet of industrial space. Given the size of South Carolina’s industrial market of roughly 334 million square feet, brewers have a nominal effect on the industrial market’s vacancy rate. More than three million square feet of industrial space must be absorbed to result in a one-percentage point drop in vacancy. That is equivalent to 427 breweries, more than 10 times the number currently open throughout the state.

Still, brewing operations are having a positive impact on S.C. real estate markets and submarkets. They are re-purposing buildings that would otherwise be vacant, creating new pockets of commerce often in challenged neighborhoods. These large, old and often abandoned buildings are much more than just cheap space. The reason that craft brewers are so attracted to these spaces is because they are large, open and usually cost less to acquire. There may also be tax incentives available to aid in keeping start-up costs down.

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According to this awesome Donna Truex article on CBB: “There are also risks to consider such as zoning regulations that restrict the use of properties. The zone district that these properties are located in, such as industrial, may allow brewing and manufacturing, but may not allow retail or restaurant/tasting room uses. If such uses are not allowed as a matter of right, expansion may require zoning relief. Beyond the zoning considerations, older structures have historic, environmental and title issues that may pose barriers to their redevelopment and re-purposing. Oh, and don’t forgot about water. A common environmental issue for brewers is the heavy water use, which poses environmental and economic hurdles due to water consumption and wastewater disposal. The chosen building must have sufficient local facilities and utilities available to it to support the water-related demands.”

As in many states around the country (including South Carolina), that type of recycled real estate market is making a real impact, and it’s only going to grow. From UBJ:

The craft beer craze is here to stay. Softening legislation is helping entrepreneurs venture into the growing sector. Brewpubs, which currently cannot distribute beer for sale off-site, are reporting that they would benefit from a change to the law. Additional sales are needed to help smaller startups and brewpubs grow by generating increased revenue. As the brewing sector grows, there will be a greater impact on commercial real estate markets, which will be reflected in declining vacancy rates for smaller, older industrial properties as well as declines in retail vacancy rates at the submarket level.