By Laurie Holcomb
A lot has been written about the massive California cannabis industry and the challenges of entering what has been described as the largest market in the world. From locating a property within the designated cannabis zone, to working with various municipalities, to licensing, there are many hurdles to overcome… yet little has been mentioned about one of the single most important facets to successfully entering this burgeoning market – real estate.
California is ripe with opportunity. But it is also burdened by a myriad of regulations – made even more complicated by the many state, county, and local agencies that have their hand in the regulatory framework.
In fact, many start-ups have no concept of the challenges that loom ahead. For instance, some companies have leased space in a new “cannabis zone” only to find out that property had not obtained water rights or sufficient electrical capacity to operate a cultivation facility. And now, getting water to the facility is going to be very expensive and obtaining electricity could take years.
Others have found that there is an excessive local tax on their business that could have been avoided if they built in an adjacent city. And some entrepreneurs eagerly jumped into the California market without considering that power rates (one of the largest costs for operators) can vary greatly, not only from one region to the next, but sometimes from one side of the street to the other.
These are not just challenges. These items represent real costs that eat into the bottom line and collectively can make it nearly impossible to squeak out a profit.
However, there is a solution to these problems, or more accurately, a way to avoid these costly mistakes: Work with a professional real estate developer or land entitlement expert.
A real estate developer or land entitlement expert knows how to take a parcel of land and transform it into a community, a business park, or other use. They know how to pull the right permits, how to get environmental and traffic impact studies completed. They know the Endangered and Protected Species List and understand how to obtain permits that won’t get tied up in court for years over a protected Arroyo Toad. This is not to say that the Arroyo Toad is unimportant. It is vital that we respect nature and the environment. However, a business owner must make sure that they don’t start going down a road that will be blocked by litigation or a state agency, for any reason.
A real estate developer also knows how to negotiate a development agreement with the city so your land has recorded rights for years to come. Working in tandem with city officials is imperative in this business.
Additionally, a real estate developer knows how to get power (and the right amount) to a facility at a reasonable cost. If you are looking at a piece of land in California that doesn’t have the utilities properly in place, and an agent for the property says something to the effect of, “We’ll just string an electrical line over here to get the power in,” then run away. The actual process is quite complicated and requires vast expertise, experience, and time.
Furthermore, any building that houses a cannabis business in California must not only be licensed by the state, but also by the county and the city. Ignorance in these matters is not bliss, it is a recipe for disaster.
A cannabis-based business should also consider the advantages of leasing space with a cannabis-friendly landlord. Not only does this provide the proper foundation for a successful business, but also allows a company to get up and running quickly and scale up as needed, without a large outlay of capital tied up in real estate.
On top of obtaining all the correct licenses, navigating zoning and land-use issues, securing utilities at the best rates, conducting environmental impact studies, preparing traffic and parking forecasts, and having the expertise taking a project from concept to completion, a real estate developer also brings another important element to the table: Time savings.
Your time is valuable. A real estate developer knows how to get projects completed in the shortest time possible because they’ve done it many times before. Using a professional real estate developer provides the quickest pathway to getting a business up and running, and generating revenue.
If you are interested in entering the massive California cannabis market, do yourself a favor: Make the first call to a respected real estate developer that has experience not only in the complicated myriad of California building regulations and issues, but one that also has expertise in the cannabis market.
Find that person or company, and your pathway to success will be much easier to climb.