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Five Steps to Finding Real Estate for Your Cannabis Business

Updated: Oct 6, 2021

Identifying and securing a location for a cannabis business is often one of the biggest challenges facing would-be operators. While there may be additional factors unique to each market, keep these five main steps in mind.

Look for a cannabis-friendly municipality

All cannabis is local. Even though cannabis legalization has been happening at the state the level, local jurisdictions still have a strong say on whether cannabis businesses are allowed to operate within their communities. The first step in procuring real estate for a commercial cannabis license is to find a local government that allows commercial cannabis operations and understanding the local regulations, including the licensing process. City and county governments process applications relating to property within their boundaries. In states where cannabis is legal, local governments vary widely in their cannabis regulations and what types of cannabis businesses are allowed to operate.

Pay close attention to cannabis zoning restrictions

Wherever cannabis businesses are allowed, local governing entities will almost always place restrictions on where these businesses can be located. They generally restrict cannabis business to specific zones and prohibit them from or near residential zones. Cannabis businesses are often relegated to industrial, manufacturing, or agricultural zones. In some cases, municipalities will allow retail operators to be in commercial zones. Many municipalities have cannabis-specific “green zones.”

The best way to understand zoning restrictions is to visit the city’s website, review their zoning ordinance, and contact city staff for any clarifications. Some cities provide additional mapping resources that demonstrate where cannabis businesses are allowed.

Understand the buffer distances

In addition to limitations on the zones where cannabis businesses can be located, local governments often place further restrictions on cannabis business via “buffer distances.” A buffer distance sets the minimum distance that a cannabis business has to be from any potential “sensitive use.” A local government’s buffer distance can be anywhere from 100 feet to 1,200 feet or more. Sensitive uses will always include schools and may include a range of other uses such as day care facilities, parks, and religious sites.

Find and verify an eligible property

To find eligible properties, you will need to create accurate maps and cross-reference them using Geographic Information System (GIS) software. GIS mapping software that can be used to account for local government zoning and buffer distance restrictions and identify potential properties for cannabis businesses. However, it’s likely that not all eligible properties will be publicly listed, and those won’t appear on a GIS map.

To capture all possible eligible properties, you can consult real estate listings and speak with property owners of eligible properties that are off the market to gauge their interest in selling or leasing their building to a cannabis operator. To navigate this multilayered process of property identification, consider hiring a qualified commercial real estate professional. Ideally, this professional will specialize in sourcing properties that are cannabis qualified and negotiating these types of transactions. These professionals can help find properties, verify that they are eligible, and help secure the property.

Secure the property

Once the property is verified as eligible, and you engage the property owner or the agent, there are some important things to consider. If the property is going to be leased, it is imperative that the property owner clearly acknowledge that they will allow a cannabis business to operate on the property, and a statement to that effect should be signed by them and notarized. The next steps in the process of securing the property depend on the ownership route, and a real estate broker and real estate attorney should be consulted.

Another careful consideration that is often overlooked is real estate holding costs - the cost of keeping the real estate during the cannabis license application, which can take months. If the property is vacant and generating no revenue, holding costs can add up very quickly and bankrupt the whole enterprise. So t is very important to have qualified and knowledgeable representation to help negotiate a reasonable deal that won’t sink the business before it even opens.

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