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Peppercorn Seeks to Develop Latest US Craft Beer Incubator in Chicago

Speculative Building Targeted for City's Growing Beer District
October 5, 2018

Popular Chicago microbrewery Goose Island was founded in 1988 by Chicagoan John Hall and has been a Peppercorn Capital client since Phil Denny started the business in 2000; Photo courtesy of Julie Corsi via Flickr.

Peppercorn Capital, a Chicago-based commercial real estate development firm, is trying to brew up the latest incubator for the U.S. beer industry.

The developer has been focusing on the burgeoning area west of the third-largest U.S. city's financial district, and now seeks to build a speculative industrial building in that area to house microbreweries.

The speculative building taps a growing national interest in beer, particularly the locally crafted variety. U.S. beer sales have climbed through much of the past five years but were down 1 percent in 2017, according to the Brewers Association, a trade group.

That didn’t hurt small and independent craft brewers, which had a 5 percent jump in volume totaling $26 billion in retail sales. Those numbers, the latest available, represent a 23 percent market share at a time when sales for big players like Anheuser-Busch InBev and MillerCoors are leveling off while craft beer makes inroads, according to the Brewers Association.

The Chicago development is the next step in defining a brewery district. It's roughly a four-block swath redeveloping between Ashland and Damen avenues to the west, and Lake Street and Chicago Avenue to the north, home to the iconic Goose Island Brewery, which distributes its beer to all 50 states.

"Brewers like to collaborate between each other," said Phil Denny, Peppercorn’s president. "We're looking to do a well-built, mechanical-appropriate facility for microbrewers to come together under one roof and create some synergies."

Peppercorn, which owns 18 properties mainly located west of the Chicago River and Interstate 90, according to CoStar research, recently secured a building permit to begin construction on an empty lot below the CTA's elevated Green Line and within walking distance of the planned Damen Avenue stop.

The site is west of the Fulton Market district, long home to the meatpacking industry and food distribution companies that has been transformed into a trendy urban neighborhood anchored by corporate offices of Google and McDonald's.

Phil Denny, president of Peppercorn Capital, wants to develop a multipurpose industrial site for the beer industry in Chicago. Photo courtesy: Phil Denny.

Denny plans to build a two-story, 60,000-square-foot light industrial manufacturing facility for microbreweries that will include a tasting room and related support. The project might attract startups or "more established breweries that might want to be in close proximity to other beer aficionados," he said.

Microbreweries have grown in Chicago's near-west neighborhoods, which are home to more than a half dozen of them including Great Central Brewing Company, Finch Beer Co., All Rise Brewing and On Tour Brewing Company. Among the oldest and more popular is Goose Island, which is located only five blocks away from Peppercorn’s site. Goose Island was founded in 1988 by Chicagoan John Hall -- later sold to Anheuser-Busch -- and has been among Peppercorn’s clients since Denny started the business in 2000.

An incubator space for brewers may be among the most fitting developments for the millennial-heavy area of loft residences, sprinkled with an abundance of bars and entertainment venues.

While the area has been slowly transitioning for the better part of the past 30 years, there has been a rapid transformation in the past decade that has included a growing office presence and new transit stations. Developers are now setting their sights on redevelopment potential further west, while the city’s planning department is taking a fresh look at zoning.

Jennifer Waters, Chicago Reporter  CoStar Group   
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