Cannabis Real Estate

Cannabis and Real Estate

Marijuana for medical and recreational purposes has skyrocketed in recent years. Despite the plant’s status as a Schedule I substance under federal law, the legal marijuana business in the United States was valued at $13.6 billion in 2019, according to New Frontier Data, with 340,000 employees dedicated to plant handling.

Further, the global legal marijuana industry size is expected to reach USD 70.6 billion by 2028, according to Grand View Research.

Despite the fact that many people have rushed into the marijuana market, not all of them have the necessary capital to succeed. Some folks may have the time and money, but they lack the necessary real estate. Some people, on the other hand, may have real estate but lack the necessary funds to launch a business. This is precisely where the knowledgeable professionals come into play.

What is the importance of cannabis real estate?

Cannabis is already legal in various places around the country, and the industry is fast expanding. Retailers, distributors, producers, and cultivators will all need a location to do their business. Within their borders, cities have specified zoning for cannabis establishments. Land and property owners must understand how their land is designated in order to know what their land may be used for. This is especially crucial for people intending to sell or rent their cannabis property, as the value of a cannabis property is determined by its potential uses.

We’ve observed a significant surge in the cost of properties that are acceptable for use as a medical marijuana facility in areas where it’s allowed. People are aware that there is money to be earned in the cannabis industry. As a result, the cost of premises that may be used to house marijuana businesses has skyrocketed.

Because cannabis properties are in such great demand right now, many formerly unoccupied and undesirable properties have turned into incredibly lucrative investment assets. Because there are numerous rules and regulations governing the acquisition, construction, licensing, and other aspects of cannabis real estate, it is strongly advised that you seek the advice of a cannabis real estate professional.

Leasing or buying?

Often, cannabis entrepreneurs will have to face the question of whether it would be better to lease or to buy cannabis real estate. Most states accept both for the issuance of a cannabis license.

“It depends,” is the response to this question. You must weigh the benefits and drawbacks of both buying and leasing before making your decision. In that regard, the following is a summary of advantages and disadvantages for both buying and leasing:

  • Buying:
    • Pros:
      • It’s the best way of build wealth.
      • If the business fails, you will retain the value of the property.
      • The building’s depreciation serves as a tax break.
      • You can rent the unused space if there’s any.
    • Cons:
      • It’s expensive.
      • If you have a limited budget, the property will most likely be in a less than desirable location.
      • It takes more time to get started.
    • Leasing:
      • Pros:
        • It’s cheaper.
        • Easier to get a good location.
        • You’re able to negotiate maintenance terms with your landlord.
      • Cons:
        • If the business fails, you will most likely be left with nothing.
        • There’s a limited market for leasing a green zone property.
        • You might be subject to a rent increase.

RELATED: Dispensary Financial Models

Your business needs models and ours are updated all the time for new states that are legalizing cannabis for social equity businesses and other entrepreneurs. 

Considerations

The method (purchasing or leasing) and type of property you choose to purchase is also determined by the sort of activity you want to conduct. To make a successful selection, you must evaluate the specific aspects of your organization. You must grasp the fundamentals: the most crucial aspect of each license is location; nevertheless, the features of each ideal site differ based on the sort of license you are seeking.

For a cultivation facility, you need to make sure you have high-quality soil and a stable water table; for a retail facility, high traffic and easy visibility is key; for manufacturing you would need to run a kitchen, and work with chemicals and equipment that may be seen as hazardous, you will also need stable electricity and a place that can handle the high demand for the entire kitchen.

Not just any location will suffice; you’ll need specialized items for your business, which is why you’ll almost certainly require experienced assistance when it comes to obtaining cannabis real estate.

Insurance?

Property insurance is required for cannabis dispensaries, cultivators, and laboratories to safeguard the security of their assets.

When calamity strikes, the right property insurance helps guarantee that your cannabis business is back up and running as soon as possible.

Companies in the cannabis sector must obtain real estate and property insurance alternatives that protect them against disasters such as fire, theft, vandalism, and flooding.

Because cannabis has not yet been authorized by the federal government, businesses in some states may find it difficult to get the property insurance they require to secure their operations. The industry, on the other hand, is rapidly evolving. Existing and new businesses now have more alternatives than ever before.

Some insurance firms will be enticed to collaborate with the cannabis and hemp sectors if there is a chance to increase earnings. Hundreds of firms currently provide a variety of insurance solutions for producers and retailers. However, the industry as a whole continues to struggle to secure credible coverage for places all across the country.

Several factors can influence the type of commercial insurance policy that your business needs.

For example, dispensaries and cultivators require various forms of insurance. Property damage, theft, and liability when someone is harmed in the business will all be covered by a dispensary’s insurance. Insect damage, floods, droughts, crop diseases, and devastating weather should all be covered by a farm or grow operation’s insurance policy.

Make sure insurance companies know whether you own or rent the property while you’re looking at choices.

How much does a cannabis real estate cost?

The importance of location cannot be overstated, although locations may be in short supply. There are normally tight restrictions on how close a dispensary may be to a school and, in certain cases, another dispensary. Finding a retail space that will enable a dispensary to operate on the premises is just half the fight; you also need to look for a location with good visibility and, preferably, a lot of foot traffic.

Being in the cannabis industry will almost certainly come at a cost. The cost of cannabis real estate might be $100,000 per year. Add in the one-time expense of redesigning the area to comply with standards, align with your brand’s identity, and improve sales flow. It’s possible that this may cost another $50,000 up front.

Marijuana shops operate in a murky area in the business world because they are officially illegal in the United States. As a result, many banks are hesitant to do business with dispensaries for both initial capital and day-to-day requirements.

To get around this, company owners will work with credit unions or even private cannabis banks if they are available in the region. Unfortunately, because these organizations recognize that you may have no other option, they can charge up to $2,000 each month in holding fees.

Where to find cannabis real estate?

You’re looking for cannabis real estate. However, with so much competition, finding the ideal property may be difficult.

Green zone real estate is property that is located in an area that permits cannabis-related enterprises to operate. These businesses may establish up shop and service the local population, making the properties more desirable.

But what distinguishes a “green zone” from another? Several elements come into play in this situation. State legislation is the most important factor.

For example, the state law may emphasize the fact that cannabis retail enterprises aren’t allowed in zones designated only for residential use. Alternatively, perhaps the operations must be at least 1,000 feet away from K-12 schools.

Local governments may, however, lessen this distance requirement in specific instances. Additional site criteria may be imposed by local governments if they think them essential. Some towns have gone so far as to limit or outright prohibit cannabis retail outlets in their area.

Finding the ideal real estate for a cannabis business, like any other business, entails securing property in a prime location. This is also one of the most important elements to consider when running a brick and mortar cannabis business.

The location should be acceptable for your company as well as comply with all applicable state and municipal laws. While many states, cities, and counties have restrictions on cannabis company real estate, this can be tough to come by. This is why cannabusiness owners contact us to function as their cannabis real estate advisors.

Zoning rules might often be difficult to understand. When it comes to scouring through green zone ads, it’s better to get guidance from specialists who are familiar with the rules.

If you are a cannabis license owner, or hopeful, I can help.

Thomas Howard was on the ball and got things done. Easy to work with, communicates very well, and I would recommend him anytime.

 

Call our law offices with your legal questions for help on:

  1. real estate contracts
  2. business contract disputes
  3. Shareholder litigation
  4. cannabis business
  5. fraud actions
  6. mechanic’s liens

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Call our law offices with your legal questions for help on:
  1. real estate contracts
  2. business contract disputes
  3. Shareholder litigation
  4. cannabis business
  5. fraud actions
  6. mechanic’s liens
 
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