With recreational cannabis now available in California, many have wondered what will happen to the already-saturated California real estate market. Legalization in Colorado, for instance, had a huge impact on real estate. Dispensaries in Colorado now outnumber Starbucks, 7-Eleven and McDonalds locations combined, and they even outnumber liquor stores by five percent. This change has led to a dramatic decrease in warehouse vacancies and storefronts, as well as an oversaturation of the market. And that hasn’t stopped people from moving to Colorado! For the last few years, Colorado has been one of the top ten states for growth—adding over 75,000 new residents last year, according to the U.S. Census Bureau.
Will this pattern hold for California? It seems likely. We spoke to Dr. Jonathan Vaught, Founder and CEO of Front Range Biosciences, to get his insight. Currently, Front Range Biosciences is headquartered in Boulder, Colorado, but Vaught sees California as their next step for expansion. So far, he’s found trying to acquire California property as a canna-business owner, an interesting experience, to say the least.
DOPE Magazine: What hoops have you had to jump through to find real estate in California?
Dr. Jonathan Vaught: Finding real estate for cannabis definitely has its challenges. With the massive wave of legalization across the world, there has been increased demand for commercial real estate in certain hotspots or major markets—California in particular. Given that many agricultural companies doing crop production and nursery operations have been moved overseas, these real estate assets have been left unused for well over a decade, sometimes more. Dilapidated old greenhouses and warehouses are now going for as much as ten times what they used to cost on a per-square-foot basis. Because of the poor state of many properties, significant capital investments are required, which is challenging for a startup company.
In addition, many landlords and property owners are more reluctant to rent to cannabis businesses, which further drives up prices and perpetuates the notion that cannabis companies should pay significantly higher rent. However, just like any other agricultural crop, this one will eventually get commoditized, and business owners will not be able to afford the astronomical prices currently seen. This is already starting to happen in certain markets where cannabis cultivators cannot afford their rent anymore, given the falling price per pound of product.
We have had to be extremely persistent and use our network to connect with property owners, real estate agents and consultants to help identify good properties. I think the biggest pitfalls are the uncertain local regulations. Many counties and municipalities in California are still working on their regulations, which can make a property either suitable or not for cannabis, depending on the type of license required. With the possibility that regulations could change, there is significant risk to investing heavily in a particular property until the local government has issued their final regulations. This has apparently happened to several groups that had built large operations that are [now] no longer permitted [to operate] under the latest version of local regulations.
What has been the hardest (and, alternatively, easiest) part of getting your business set up in California?
It’s a very competitive space, with the powerful agricultural companies that fuel much of California’s economy watching the industry very closely, lobbying at state and local levels, and even making investments. There is also significant competition from the traditional cannabis producers that have been operating in California for decades. However, given the state’s existing infrastructure to support agricultural companies, there are many reasons why setting up in California also has its advantages. Legislators, businesses and regulators are all very used to working together to support an agricultural-driven economy.
Why did you choose California?
California will be the largest legal cannabis market in the world. It will also be one of the largest producers of cannabis in the world, given its climate and infrastructure to support large-scale crop production. With our Clean Stock™ nursery program, it makes the most sense for our company to be right in the middle of the largest cannabis-producing region in the world, where demand for our product is highest.
Front Range Biosciences brings modern agriculture to high-value crops—such as cannabis—to improve reliability, efficiency and safety for cultivators and consumers. They use scientific tools such as tissue culture and market-assisted breeding to revolutionize agricultural companies—including marijuana grows—through quality control, integrity and innovation. Learn more at frontrangebio.com.