You’ve decided to open a cannabis business, but first thing is first. You need a piece of real estate to operate on.
Finding the perfect piece of real estate is usually the first step in applying for a cannabis business license, whether it is for a dispensary, a cultivation operation, an extraction lab, a consumption lounge or a distribution headquarters. No matter what aspect of the cannabis space you hope to work in, your property choices will be a huge factor in the success of your application – and your eventual business. Planning ahead to make the right choices on property can be the difference between colossal failure and a thriving business.
Not sure where to start? You aren’t the only one.
But don’t worry. John Valdez, Higher Yield Consulting’s top real estate broker and VP, is here to help with our best tips for finding the right cannabis real estate for you.
Read on to learn how to find your ideal property and set your cannabis business up for success:
The old saying about what’s most important in real estate “location, location, location” applies to cannabis as much as anything else. When you are choosing where to operate your business “the main thing is your location” explains Valdez.
Still, the considerations about location might differ depending on your business type. So think about what your business will need to thrive. For example, Valdez suggests that “if you are doing a cultivation facility, you want to build that close to transportation, where you can get your product out the door soon as you can.” On the other hand, Valdez says that “if you’re doing a dispensary, you want to make sure that you have good foot traffic, because you want a location where you’re clients are able to get to you easily.”
Your location will have a big impact on what you can really do with your business so make sure you find the right place to launch – with everything your business needs to succeed.
As you consider location, you should also learn about the local regulations for cannabis businesses in that area. It’s no good finding your perfect piece of real estate only to realize that it doesn’t have the right zoning for your business type. And these local regulations can be much more complicated than just zoning.
“Zoning is a key thing,” explains Valdez “but you want to make sure that the municipality is allowing that type of use.” There are so many aspects to these regulations, it can be easy to overlook something. “I’ve been working with consumption clubs lately” Valdez offers as an example, “and in Colorado setbacks are different for consumption clubs than they are for a dispensary.” Tiny errors on calculations for things like setbacks can be the difference between buying a usable or unusable property. So make sure you have experts on your team who can delve into the local laws and understand what you need.
When it comes to your real estate broker, make sure you find someone who you can trust to navigate the complicated task of finding your property. “A broker that’s in the cannabis industry is crucial to having a successful closing and start up to your company” explains Valdez. “If you have somebody that doesn’t know what they’re doing, you can tie your project up for a long time before you even start that application.”
For this reason, Valdez says “one of the biggest things that I would recommend to you when you’re looking at real estate for cannabis is hiring a professional, not only a professional broker but hiring a professional team.”
Cannabis specific real estate brokers understand the rules and regulations involved in using a property for cannabis and they already have contacts in the space. This is needed for finding the right property. Still this knowledge could be strengthened with the help of a good consultant. “Brokers should have a general idea of what the local restrictions are going to be, but having a consultant to verify it is also going to be key” says Valdez.
In addition to your broker and consultant, a good design expert is also a crucial member of the team. They can help assess what improvements might be needed to make a property functional, so you can make an informed purchase.
When considering a property, you should also look at the services available. Depending on your business, you may need particular services like access to enough electricity to power an indoor grow, or good internet access for a business headquarters. Whatever your service needs, you may want to find a property that already meets them. “What kind of service is on the property?” asks Valdez “Because your electrical service, your heating, your air conditioning service, those are things that you want to take a look at because those are high dollar items.”
You might plan to just upgrade your services when you move in, but in some areas upgrades aren’t possible or are extremely expensive. It’s best to plan and budget all of this before you make the final purchase. The last thing you want is to buy a property that you can’t make work.
This brings us to the last tip – consider retrofitting carefully. When you are deciding whether to build a new building, retrofit an old one, or just find a property that already has what you need, it might seem like retrofitting is the cost saving option. But that’s not always the case – so a cost/benefit analysis is key for this decision. “For retro-fitting you want to make sure to see what you’re going to be able to salvage and what the build is going to be on it” explains Valdez.
To figure this out you need to know how much are you going to have to spend on the build out for a retrofit or renovation on the property. “Sometimes you can look at it and say, ‘hey, it’s going to cost us an extra $800,000 to build this out.’ Let’s take a look at building a facility from dirt.”
Before buying your property, think carefully about what kind of site improvements will be required. When these improvements are ignored, something as simple as a sprinkler system could add hundreds of thousands of dollars to your costs.
Those are our best tips for finding your perfect property, but they just brush the surface of this complicated process. If you are still feeling confused on how to proceed, Higher Yields Cannabis Consulting can help. Our knowledgeable consultants have helped cannabis businesses in over 30 states to find the right property and successfully launch. We can help your business navigate the process as well.
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