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How to Find Real Estate for Your Cannabis Business

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May 09, 2018

As we mentioned in our tips for submitting a strong cannabis permit application, real estate is a key factor in your application’s success. In fact, without a solid lease or property acquisition on the books, your application is virtually guaranteed to be rejected. So, how can you find real estate for your cannabis business and make sure you get licensed to open? Our experts weigh in.

Finding Real Estate for Your Cannabis Business

Looking for property is a tricky process. It’s a balancing act between timing and finding a needle in a haystack.

Because cities have different application windows (which are usually short – two to three weeks), it’s imperative that you find real estate for your business before the application window is open. Competition is simply too fierce to wait until the city announces they are ready to start approving business applications. Likewise, should you fail to obtain property for your business, your application will not be approved.

On the other hand, as a new business, you want to avoid spending a huge amount of money up front without knowing when a city will or will not open their cannabis permit applications. Here’s what we suggest you do first:

  1. Follow the city website, meeting calendar, and meeting agendas to see if and when the city intends to release cannabis business permit applications.
  2. Keep an eye on the city ordinances to understand where the so-called “green zones” are for cannabis real estate.
  3. Budget! By some accounts, cannabis-friendly properties often lease for two to three times the rate that “normal” businesses would pay in rent.

Next steps: Locking in Cannabis Real Estate

Many cities are still drafting their cannabis ordinances – it can take two to ten months for a city to pass an ordinance. While you’re keeping an eye on the city council’s activity, you should budget at least six to eight months of full-time searching to locate your property, according to our experts.

There are two types of city ordinances you should be paying attention to. The first is zoning. Many cities have their zoning ordinances related to cannabis already on the books. For those that don’t, these cities will release their ordinances one or two months before the cannabis permits are announced.

When they release their ordinances, it’s usually a three-step process. There will be a first, second (and sometimes third) reading before passing the final regulation. During the first ordinance is when the city outlines the zones, neighborhoods, rules, and restrictions around cannabis leasing and property ownership. This first reading should be the spark for your property search. By the final vote and passing of these ordinances, your property should be locked down.

What property is right for your cannabis business? 

Now that you understand the ideal timing for finding and committing to cannabis real estate, the tricky part is finding a space that meets your needs. Landlords are often wary of dealing with cannabis companies: but, buying a space is a huge risk in the unfortunate event you aren’t approved for a cannabis license. Either way, signing up for property can feel like a gamble.

There are ways to reduce your insecurity when seeking commercial cannabis property. First, if you’re working with a landlord, approach your tenant agreement with the same thoroughness that you would a business permit application. Show your business plan, financial projections, and anything else that makes it clear you aren’t a fly-by-night business. Demonstrate your security measures and how you will care for the property. Your landlords want to see that you are a good tenant.

Likewise, our experts suggest negotiating for a contingency clause should your cannabis application not get approved by the city. Some landlords will accept a larger up-front deposit with an agreement that if your permit isn’t approved, they keep your cash. This gets you out of paying a long-term lease, but can be costly! And remember the longer your lease agreement, the easier it will be on your business in the long-run (should you be approved). Prevent the need for looking for real estate in the future by signing as long a lease as possible.

If your plan is to purchase property, make sure you read the city ordinances carefully to be sure you can operate your business in the industrial zone. Consider looking for space where you can use the building for another use other than cannabis. For example, if you use it as a distributor you can distribute other goods or lease it out to companies in a different industry to help with the financial burden.

Be prepared for steep competition for available cannabis properties. This part of starting your business is going to be a struggle, but without property, you won’t have a business. Consult our experts for help in getting your cannabis company off the ground – we’re here to help!

Filed Under: Business