Colorado is an odd state.  You are unable to buy full strength beer in grocery stores. In almost every other state, you can walk into a grocery store and buy wine/beer, but not in Colorado.  That is all changing come January 1st.  Why the change?  What is the impact on real estate?  I was surprised to see the passing of Senate Bill 243 in the waning days of the last legislative session.  It seemed oddly out of place that Governor Hickenlooper, a former brewpub owner, quietly signed the bill without a single person to witness the event.  What was in this bill?  This bill radically changes where and how beer can be sold within Colorado. This bill will change consumer choices and have profound impacts on grocery anchored retail.  What percent of stores will close due to this change?

How does liquor law work in Colorado?

The sale of Beer, wine, and spirits is unique in Colorado and one of the most unique in the country. Liquor stores are the only establishments able to sell Beer, wine, and liquor (there was a provision that allowed grocery stores one location in the state, for example Costco had one location on Wadsworth).  Grocery stores could only sell low strength beer, 3.2 alcohol by volume, which very few people actually bought.

Liquor stores had a monopoly on beer, wine, and liquor sales with grocery stores like King Soopers, Safeway, Whole Foods, Walmart, etc..locked out of selling full strength beer. 

What is senate bill 243?

Colorado law today essentially granted a monopoly to liquor stores.  This is all changing starting January first.  Governor Hickenlooper signed senate bill 243 (an update to SB 197 passed in 16) into law effective January 1st.  The main provisions of the senate bill:

  1.  Allow grocery stores that currently sell 3.2beer to sell full strength beer starting January first
  2. Allow employees 18 or older to sell beer
  3. Expand the number of grocery locations allowed to sell beer, wine, and liquor from 1 to 20 over the next 20 years

 Why is this so important?

Currently next to almost every grocery store I’ve visited in Colorado there is also a liquor store. Liquor stores locate next to grocery since many consumers buy groceries and then go next door to buy a bottle of wine or beer.  In almost every other state, you can go to the grocery store and buy beer and wine in the same store.

With Senate bill 243, grocery stores will now sell full strength beer (not wine).  This will drastically change the foot traffic to liquor stores.  Think of how many consumers would go into a liquor store to just buy a case of beer.  This will no longer occur as consumers will likely just buy the case when they are picking up other grocery items.  This will drastically impact the profitability of liquor stores.

Furthermore, stores like King Soopers (owned by Kroger) will be able to buy product considerably cheaper than a single liquor store just due to volume.  For example, there is one Costco in Colorado (on Wadsworth) that also sells beer, wine, and liquor.  Their prices on beer are around 15-20%cheaper than liquor stores.  Large grocery stores will be able to price substantially lower than the liquor store next door due to volume.

Many liquor stores will go under

There is a finite demand for beer, wine, spirits.  As more consumers buy beer from traditional grocery retailers it will be impossible for many liquor stores to stay in business.  The question is how many liquor stores will close?  I did a quick analysis of liquor stores per person to see how Colorado stacked up against other states.  I chose Georgia as a baseline as in Georgia you can buy beer and wine in grocery stores but to buy liquor you would need to go to an actual liquor store.  This is essentially the model that Colorado is transitioning to.

I looked at total liquor stores per population in Georgia and Colorado.  Georgia has double the population of Colorado, yet Colorado has more liquor stores.  With the recent change in Colorado liquor laws, Colorado should look more like Georgia regarding liquor stores per population.

Number of stores Population stores/person
Colorado 2186     5,670,000     0.00038554
Georgia 1658   10,430,000     0.00015896
Predicted Colorado 901     5,670,000     0.00015896
% change 59% less stores than today

Based on Georgia’s number of liquor store per person, this will lead to a decline of almost 60% of all liquor stores going out of business in Colorado.

Impact on real estate?

Grocery Anchored retail throughout Colorado will be under increasing pressure.  According to Costar(the largest commercial real estate data provider):

“Because many developers and landlords still consider the grocery anchored sector to be a safe defensive play against e-commerce that brings foot traffic, we are continuing to see more absorption and development that could perhaps lead to issues with oversupply,” McCullough said.

While total retail space per capita has decreased by about 5% since 2009, the amount of anchored space per capita has increased by the same amount during that period amid competition from big-box chains that have added food and groceries to compete with grocery chains.”

With almost 1200 liquor stores likely closing over the next several years substantial grocery anchored retail space will be available.  At the same time substantial inventory of new centers is coming online and natural attrition from e-commerce is also occurring.  Who will fill all this vacant space that doesn’t already have a presence in these same centers?  In Colorado, grocery anchored retail will be challenging with the increase in supply and limited new demand.

The national economy is already showing signs of cooling off, the increased closing of a substantial number of liquor stores will put downward pressure on retail rents and prices throughout Colorado.  On the flip side, at least it will be less expensive and more convenient to buy beer which might be needed if you are a large owner of grocery anchored real estate. 

Resources/Additional Reading


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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.

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