With the legalization of cannabis, commercial growing operations have been popping up all over Canada. These operations are taking up a lot of space and there is a real shortage in industrial real estate supply.

Commercial cannabis growing operations are cutting into industrial real estate supply. 420 properties for lease are available now in the San Francisco Bay Area.

Commercial-cannabis-growing-operations-cut-into-industrial-real-estate-supply

 

In the towns that allow it, the flourishing and constantly congested industrial real estate market has lately had to accommodate a rising number of cannabis growing and processing facilities.

Cannabis cultivation, on the other hand, has resulted in the multi-million-dollar restoration of outdated industrial buildings in several of these towns.

Cresco Labs LLC, headquartered in Chicago, had its first harvest two weeks ago at its newly built 110,000-square-foot plant at 210 Oliver Drive in Marshall, which was formerly home to Win Schuler and Campbell Soup Co. 

“A lot goes into (choosing the location) because the building has to function as an indoor horticultural facility, so it’s unique in that it has to have facilities for horticulture, product manufacturing, a distribution hub with warehousing, and you need office space, too,” Charlie Bachtell, Cresco Labs CEO and co-founder, told MiBiz. 

Bachtell said it took almost four years and cooperation with local investors to secure the vertically integrated cannabis company’s first Michigan site. He said the Southwest Michigan site appealed to him in part because it is close to the company’s Chicago headquarters.

Cresco intends to enter the retail side of cannabis in Michigan at some time, whether by establishing its own dispensary or purchasing existing sites, according to Bachtell. 

“There are well-established companies that are taking up smaller (retail and industrial) sites that couldn’t make it,” said Stephanie Goodman, CEO and founder of Bricks + Mortar Group LLC, a real estate development firm headquartered in Waterford Township. “At certain places, we’re seeing bigger investment companies move in and leasebacks.”

Cloud Cannabis Co. purchased a 70,000-square-foot commercial grow facility in Kalamazoo Township from cannabis firm KKind in early September, making it one of the most recent cannabis M&A transactions. Cloud cannabis took the next step toward being completely vertical with the purchase. 

Rehabbing real estate

Larger operators are buying up properties with a building that can be redeveloped or existing cannabis businesses, according to Bill Bussey, senior broker for retail at Bradley Co. Long construction lead times and high materials costs are causing larger operators to buy up properties with a building that can be redeveloped or existing cannabis businesses, according to Bill Bussey, senior broker for retail at Bradley Co. 

“Building out a grow facility costs several million dollars,” Bussey added. “Finding one that is already up and running and has clients will get you up and going far faster than starting from scratch.”

In addition, municipalities are progressively zoning decrepit buildings and stretches of industrial land for cannabis-related purposes in order to repair the city’s infrastructure. 

“Muskegon approached it in the same way as cities approached opportunity zones,” Bussey said. “They chose places that they’ve been attempting to rehabilitate for years, and it’s paying off handsomely.” As a result, they’re rebuilding and revitalizing whole sections of the city.”

Grand Rapids has had six industrial sites in different phases of renovation for commercial cannabis growing operators during the last year. While increased tax income from retail sales attracts public attention, company leaders claim that industrial property rehabilitation is an often neglected beneficial element of the business.

“A lot of towns say ‘no’ at first, but once they realize that the sky doesn’t fall and that there are significant community, employment, and financial advantages, they become more comfortable with opting in,” Bachtell said.

When a new town opts in to enable recreational uses, Bricks + Mortar Group’s transaction rate tends to rise, according to Goodman. 

“Over the last couple of years, we’ve done approximately 140 transactions,” Goodman said. “As a city opts in, we’ll have a flurry of activity.”

Bricks + Mortar Group works on the bulk of transactions on the east side of the state, with just approximately 10 to 15 sales in West Michigan, according to Goodman. 

“The west side was slower to opt in,” Goodman said, “but towns are choosing in.” “The Detroit area is also more heavily inhabited.” We have more property available in Muskegon, but it’s selling at a slower pace, while when we post a home in Detroit, it sells in two days.” 

Goodman also wants to see a rise in the number of facilities that rent industrial space to cannabis farmers. These property owners may still charge more per square foot than normal industrial uses, but it may eliminate obstacles for businesses that cannot afford to construct their own.

“There is a huge demand for leased premises,” Goodman said, adding that “a lot of individuals may be forced out of the business because they can’t get into a facility.”

The 420 friendly warehouse for rent is a commercial cannabis growing operation that has been cut into an industrial real estate supply.

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