Commercial real estate and cannabis are steadily growing in Arizona. Since voters approved the use of medical marijuana in the state eight years ago, the cannabis industry has proved to be a boon to commercial real estate. The number of dispensaries alone, has jumped from 31 in 2016 to about 130 in 2018. Between growing and selling cannabis, the industry supports more than 4.680 full-time jobs. Not surprising, considering cultivators sold 43 tons of marijuana in Arizona last year.
Cannabis companies need land
But dispensaries are just a small part of the commercial real estate and cannabis picture. The marijuana industry can’t function without real estate. Growers need land and space, not to mention access to clean water, to cultivate this cash crop. Marijuana also has to be grown where it is sold. Under federal law, marijuana is still illegal, medical or otherwise, so it cannot be transported across state lines. The result is that cannabis companies need industrial properties on which to house their cultivation operations. Self-storage properties and factories are being repurposed for cultivation and manufacturing.
From cosmetics to cannabis
A prime example of repurposing urban industrial properties is True Harvest’s purchase of the abandoned Revlon factory in southwest Phoenix. The 888,000 square foot facility sat empty for more than 14 years. But with its access to power and clean water, True Harvest realized it would make a perfect facility to grow cannabis. Today, the company harvests 1000 pounds of cannabis every month. Kaylax, Huxton and Industrial Properties Inc. have all set up cultivation operations on industrial properties in Mesa. The growth extends beyond the Valley, with Zoned Properties, a Scottsdale development company, building a giant marijuana farm in Chino Valley. At more than 47 acres it will be the largest in the state. Even Wilcox, popular with Arizona wine growers, will now be home to a 350-thousand square foot greenhouse that will grow marijuana.
Cannabis regulations make commercial real estate more valuable
In states such as Arizona, where medical marijuana is legalized, growers are scrutinizing data centers, self-storage properties and factories as properties that could potentially be repurposed for the cultivation and manufacturing of marijuana. Strict regulations and zoning govern cultivation facilities and dispensaries. As we mentioned, there is also the requirement for clean water and power. Properties that meet the multitude of requirements, including zoning restrictions are challenging to find, which creates a potential windfall for land owners. If a property is zoned or can be zoned as a cannabis-related facility, land owners can get two to three times per square foot over what they could have made without such a designation. Real estate owners can also charge above market rents to dispensary operators, given the unique circumstances created by conflicting federal and state marijuana laws.
Cannabis, the sixth “C” of Arizona?
Cannabis has not been designated the newest “C” of Arizona yet. Climate, cattle, citrus, copper and cotton remain the official five C’s of the state. However, cannabis has surpassed cotton as a cash crop in Arizona, so you never know. Despite the growth, Arizona’s marijuana use will remain “medical” for now. A movement to get an initiative on the ballot to legalize recreational marijuana failed to get enough signatures to qualify for the next election.. That’s good news for the medical marijuana dispensaries and the land owners and commercial brokers leasing and selling to them.
At Landmark Title we offer personalized title and escrow services for both commercial and residential transactions. If you have questions about our services or need assistance with a real estate transaction, please call us at (602)768-2800 or visit our website.