Capitol Hill’s craft distillery industry is being downed by half and one of the neighborhood’s longest running purveyors of craft cocktails is contemplating more changes on E Pike.

CHS has learned that Sun Liquor Distillery, one of two craft-level spirit makers operating in Pike/Pine’s light-manufacturing zone left behind by the neighborhood’s auto row legacy, is moving operations to a nondescript warehouse on the backstreets behind University Village.

“We need two times as much space and the loading on E Pike is just too dangerous,” Sun’s founder Michael Klebeck tells CHS. Klebeck said his company is also considering working with a new owner to take over the Sun Liquor lounge across the street from the bottling facility on E Pike.

In 2013, CHS reported on the distillery’s huge win — a contract to produce “minis” for Alaska Airlines that boosted the spirits start-up to a whole new plane of business. “We didn’t ever want to go into a factory in an industrial part of town where people couldn’t really see us,” Klebeck told CHS at the time.

But after years of close calls on E Pike and under an increasing order load, Sun needed to spread out — and commit to a “laser focus” on the burgeoning bottle business, Klebeck said.

As part of that, Klebeck’s company is looking at the possibility of finding a new partner to operate the Sun Liquor bar on the north side of the street as the distillery operation and the bottling facility on the south side of E Pike moves out. “The Pike bar situation is in flux and we are contemplating the future of this location,” Klebeck said earlier this week.

“We’re trying to preserve that space and that relationship,” Klebeck said. “If we can find somebody who can really fit…”

A change in ownership and the end of manufacturing booze on site might also make things easier with regulators. State law prohibits distilleries and bars from from operating in the same space, but Sun Liquor’s bar and distillery have been technically located at two different addresses.

The Summit original, in the meantime, is planned to stay in the family. The Sun Liquor on Summit Ave has served the neighborhood for a decade and is a close part of the Klebeck family’s ongoing food and drink ventures in the city. Their Top Pot doughnut empire got its start on Summit 15 years ago and the original cafe in the chain still neighbors the original Sun.

In addition to leaving an empty space on E Pike, the exit of the distillery and bottling operation puts a dent in Capitol Hill’s craft spirit economy. In 2016, CHS looked at Sun and OOLA, the original pioneer distilleries that opened in the wake of changes to state laws that opened up the industry. The state went from one distiller to over 100 by 2015 after the change but the wave has not been sustained. “We keep trying to get parity with beer and wine,” said OOLA owner Kirby Kallas-Lewis told CHS at the time. “A lot of people do their due diligence and they find out it’s not worth it.”

Sun Liquor distiller Erik Chapman told CHS it’s an industry marked by learning as you go. “In five years we have learned so much, and most of it the old fashioned way. Everything from packaging issues, equipment failures, shipping disasters, flooding, you name it.” he said. “There’s no handbook for this business.”

It won’t fully fill the void, but there is one new craft distiller making plans in the neighborhood. Heritage Distilling’s new tasting room on the backside of Pike/Pine on 10th Ave will also include a small-batch distilling operation. Meanwhile, the neighborhood’s industrial legacy will be carried on this summer on E Pike when Redhook fires up its new craft-scale brewery and pub in the Pike Motorworks building.

This week, Klebeck said his hope is to move the business forward while staying connected to what made it great in the first place. “We don’t want it to turn into something that isn’t Sun Liquor,” Klebeck said.