As the cannabis industry continues to grow, many entrepreneurs are looking to start a cannabis business. One of the biggest challenges facing those in the industry is finding suitable real estate. In this article, we'll explore the limitations and restrictions on cannabis business real estate that make it so difficult to find a good location.
Federal and State Regulations
One of the biggest challenges facing the cannabis industry is the conflict between federal and state regulations. While some states have legalized cannabis for medicinal or recreational use, it remains illegal at the federal level. This has led to a number of issues, including the inability to obtain loans from federally-insured banks, the inability to take tax deductions, and restrictions on interstate commerce.
From a real estate perspective, this conflict makes it difficult to find suitable properties. Landlords may be reluctant to lease to a cannabis business for fear of violating federal law or losing federal funding. Banks may also be hesitant to lend money for the purchase of real estate for a cannabis business, which can make it difficult for businesses to find financing.
Zoning Restrictions
Another challenge facing cannabis businesses is zoning restrictions. While some states have legalized cannabis, many have enacted zoning laws that restrict where cannabis businesses can operate. For example, businesses may only be permitted in industrial, manufacturing or commercial zoning, or businesses may be prohibited from operating within a certain distance from schools, parks, or residential areas.
These zoning restrictions can make it difficult for businesses to find suitable properties. Additionally, some landlords may be hesitant to lease to a cannabis business because they fear that it could violate zoning laws or upset other tenants in the building.
Limited Availability
Another factor that can make it difficult to find suitable real estate is the limited availability of properties that are suitable for cannabis businesses. Many landlords are hesitant to lease to cannabis businesses, and there are often only a limited number of properties that are zoned for cannabis use.
This limited availability can lead to increased competition for properties, which can drive up prices. Additionally, it can be difficult for businesses to find a property that meets all of their needs, such as size, location, and zoning requirements.
Security and Safety Concerns
Cannabis businesses also face security and safety concerns that can impact their ability to find suitable real estate. Because cannabis is still illegal at the federal level, businesses must take extra precautions to ensure that their products and facilities are secure.
This can include installing security systems, hiring security personnel, and implementing strict security protocols. Landlords may be hesitant to lease to a cannabis business if they believe that the business could pose a security risk to other tenants in the building, or to the building itself.
Additionally, some local governments require cannabis businesses to provide additional security measures as a condition of obtaining a license. These requirements can include security cameras, alarms, and secure storage areas, which can add to the cost of renting or purchasing real estate.
Higher Costs
Another challenge facing cannabis businesses is the higher cost of real estate. Because of the limited availability of properties and the restrictions on zoning, the cost of renting or purchasing real estate for a cannabis business can be significantly higher than for other types of businesses. This may sound ridiculous, but it's true. Many landlords take advantage of the sometimes desperate situation that cannabis businesses are in by increasing rent substantially.
Additionally, when cannabis companies are required to have real estate locked in before applying for licensure, companies often have to pay a "hold fee" for the option to lease or buy the location upon licensure, or pay rent for months without being able to utilize the building until licensure.
Availability of Qualified Brokers
In the cannabis industry, finding suitable real estate for business use can be a challenge. There are only a limited number of real estate agents and brokers who truly understand the cannabis regulations of their state. These individuals have the knowledge and expertise to find real estate that is suitable and will be approved by the state and local jurisdiction for cannabis business use.
Many real estate agents and brokers in legalized states will claim to be able to find cannabis business qualified locations, without truly understanding the needs of the business. This can put a business in a bad situation if their agent assures them that a location is suitable and it turns out not to be. Finding a truly vetted and qualified cannabis real estate expert is key.
Conclusion
While the cannabis industry continues to grow, finding suitable real estate remains a significant challenge. Federal and state regulations, zoning restrictions, limited availability, security and safety concerns, higher costs and availability of qualified real estate professionals can all make it difficult to find a good location for a cannabis business.
To overcome these challenges, it's important for cannabis entrepreneurs to work with experienced real estate professionals who understand the unique needs of the industry. By working with knowledgeable professionals and staying up-to-date on the latest regulations and trends, cannabis businesses can increase their chances of real estate that fits both the regulatory requirements and their business goals and needs (the ultimate achievement!)