In this edition of The Startup Dialogues, I talked with Sean from Fullsteam Brewery. Fullsteam is a new brewery set to open in 2010 in Durham, North Carolina. With a focus on local ingredients and developing a Southern style of beer, this will definitely be an exciting brewery to watch in the coming year. For this interview, we talked about real estate site selection when choosing potential brewery locations. When you’re done here, make sure you visit Fullsteam’s website here.

1.  For what specific reasons did you decide to locate your brewery in Durham, North Carolina?

I’ve been mulling over this concept for three or more years, vetting spaces and refining my concept as I learned more about the industry (my previous experience was in craft beer lobbying; I’ve not worked for a brewery before).

Our concept is to develop a Southern beer style using locally-farmed ingredients. So the first several sites I considered where in more rural locations in the fringes of the Triangle (Durham, Raleigh, Chapel Hill) area of North Carolina.

Ultimately, I realized Fullsteam would do best if it was located in a more urban area. My vision for the brewery is to be both a production brewery and an on-premises tavern — the best of both worlds. We’re lucky that North Carolina law allows breweries to serve on-site and distribute off-premises; many Southern states don’t allow breweries to do this.

Why Durham? Tons of reasons, really. Durham’s home to Duke University and I believe it has more PhDs per capita than any US city. It’s plenty large to support a thriving on-site tavern. Historically, it’s a manufacturing town, so it has plenty of stout, warehouse-y buildings to choose from. Durham has a booming food scene that reflects Fullsteam’s interest in celebrating the union of great beer and great food. I attended grad school at Duke. I love Durham’s authenticity and diversity. It truly is the ideal city for Fullsteam.

2. Were there specific neighborhoods or areas within Durham that you wanted to be located in? If so, what about these locations attracted you?

We looked at downtown, East Durham, and the Central Park warehouse district near downtown. While downtown is going through an exciting revitalization period, locating in city-center would have pushed us to a brewpub model. The more economically-distressed area East Durham would be a challenge for a tavern-minded brewery, though not impossible — in fact, there are some excellent development projects in East Durham that we strongly considered.

We honed in on the warehouse area of Durham just four blocks north of downtown. During the boom times of two years ago, Central Park was becoming “speculation central,” with tons of proposed condo projects and mixed-use facilities. It’s since slowed down, but it’s widely seen as Durham’s next up-and-coming area. There’s no better place for a brewery to get up-and-running, especially given that we want people to come on-site.

Every site I looked at during the site selection process, I asked myself two questions:

1) Can it fit a forklift?

2) Will they come on a Tuesday?

That is, is the space “industrial” enough for a forklift…but accessible enough for a Tuesday night crowd? 726 Rigsbee is a resounding YES to these two simple questions.

3. What were the ‘must haves’ in a potential location?

Every brewery is going to have a different answer for this. For us, it was mostly the above two questions, supplemented with this like: strong concrete floors (or the ability to make them strong). Tall ceilings. Big doors to bring in tanks. Three-phase power. Oh, and affordable rent!

But again, this differs based on a brewery’s business model. A brewpub can thrive in a walkable downtown region where rent is $20 a square foot. Scrunch in a 7 barrel brewpub system in 500 square feet and you can do well. But we’re not a restaurant; we’re an 8,000 square foot warehouse split between production brewery, event space, and tavern.

4. You selected an existing building for your brewery, correct? Did you also look at building your own or were you only looking at existing locations?

We briefly considered a “build to suit” site in Central Park, but we liked the idea of adaptive resource of an existing building. One nice thing about our space: it’s a steel-framed Butler building — an 1980s extension to a 1935 bottling plant. It’s very utilitarian and easy to upfit. Very much a blank slate.

5. What square footage requirements were necessary for the brewery? How flexible could you be with square footage?

We explored sites as small as 4,000 square feet and as large as 10,000. It can be dangerous to take on too big of a space. We decided on an 8,000 square foot mixed venue that has a 3,500 square foot brewing space, 3,000 square feet of unconditioned event space, and a 1,500 square foot tavern and future kitchen. We have an option on the next bay over, which is 6,000 square feet. Our hope is to eventually expand brewing operations into all 8,000 square feet of the big steel building and expand the public space into the lower-ceilinged, more “charming” 6,000 square foot bay. We’ll see. Right now we have a lot of operating space for both the brewery and the public space, and a lot of hard (but exciting) work ahead to build interest in our Southern-style beer

6. Some production only breweries are located in very industrial areas (cheaper rent) vs.  brewpubs which can often be located in high traffic retail areas with much higher rent. You will have a tavern at your brewery, so how did you decide to balance visibility vs. rent? Which is more important for your concept – more visibility or cheaper rent?

Cheaper rent.

Our visibility isn’t that great, and parking may present a challenge (though I keep telling myself that hundreds, sometimes thousands, of people attended the Durham Bulls games just a block away at the old stadium).

We’re walking/biking distance to two neighborhoods that we believe can sustain us. We’re not that far from downtown. And there will always be a certain percentage of tourists and beer enthusiasts seeking out a brewery. Plus, our plan is to do weird stuff at the warehouse that may attract a following: frequent showings of Terrible Movies (”The Room” is my favorite), a communal pig pickin’ or red beans and rice, and a diverse range of music and mini-festivals. Durham doesn’t have a “warehouse district” like so many other cities have. I spent some time as a twenty-something in Dallas, where Deep Ellum had both a mix of great food, art, and music. That’s the potential of Central Park (not that Durham needs to emulate Dallas…it’ll be it’s own thing, of course).

But getting back to the question: cheaper rent.

7. Are there special zoning codes for breweries? Did these limit you in what sites you could select or did you have to try and get zoning changed?

Man, you’re asking the right questions. Yes, we had to be mindful of city and state ordinances that regulate brewery and tavern locations. Sites that serve or brew alcohol have to be located a certain distance from a place of worship. This can be a challenge in an urban area, because storefront churches often take advantage of cheap rent — the same cheap rent a brewery is looking for. Luckily, that wasn’t an issue for us.

What was a concern was zoning: we looked at a location across the street from where we ended up. Though it was literally just across the street, that site was zoned by the city as Commercial General (we’re zoned Industrial). A CG zoning meant that half of the site’s square footage would need to be dedicated for “public use.” In other words, it would have to be a brewpub to work. This would have limited any plans for expansion. It’s very important for us — I imagine most breweries — to not be handcuffed when there’s an opportunity for expansion.

8. Did you consider a historical building for your brewery? If so, are there special considerations to take into account when you’re located in an older building?

We’re in a newer section of an old building. The biggest expense associated with older buildings is the wiring and code issues. Often times old buildings will have strong floors and excellent support — they were often oversized compared to modern standards. Again, breweries need to be very mindful that they’re not romanticizing the location. There’s a reason that most breweries are located in plain, utilitarian warehouses.

9. Are you leasing or did you buy your building?

Leasing. Maybe someday we’ll buy, but that’s not in the cards for us right now.

10. What specific demographic parameters (employment, population, education, age, etc) did you consider when choosing a location?

A friend of mine gave me some computer-generated demographic information for some sites that we looked at, but it comes down to gut instinct. And asking a lot of locals what they want. When I first started exploring Durham, I looked at an old church for sale in a nice neighborhood. A freakin’ church. The idea was to specialize in farmhouse and abbey-style ales. I learned pretty quickly that the neighbors did not want a brewpub in their upscale neighborhood. And that, more broadly, Durhamites wanted a “brewery” more than they wanted a “restaurant that brewed beer.” All it took was a move *four blocks away* from the church, and Fullsteam became such a different business: one that the neighbood would embrace rather than fight. That became a “Brewery” versus a “Restaurant.” On paper, a demographic analysis of 726 Rigsbee would hardly be different than the old church in the upscale neighborhood. But the feel of the site is so very different, and perfect for what we ended up deciding to do…and want the community wanted.