When beginning your search for marijuana real estate, there are many choices you are going to have to make. One major decision is regarding whether to build a brand new facility or retrofit an existing building. There are pros and cons to each, which we will analyze below, so you can make the decision that is right for you and your company.
Let’s begin by discussing the pros and cons of purchasing vacant land and building from scratch, instead of buying an existing building.
Vacant land is often easier to obtain, as it is generally less appealing to the average business operator. Managing a ground up development is often intimidating, and a lot of people will steer away from this when they are first starting out. This means you are more likely to find a piece of vacant land that suits your needs, in your desired location, than you are to find an available building in the same area. While vacant land may be on market for several months before the right buyer comes along, Green-Zoned buildings are being snatched up rapidly by cannabis business operators.
Depending on the location, you will probably have less competition with other buyers when submitting an offer for vacant land. The likelihood of a bidding war is lower with land than with an existing building, and you may get your dream property at a great price.
Many entrepreneurs prefer to buy land and build new due to the fact that they can customize their facilities completely. Ventilation and air filtration systems, insulated rooms, offices, retail spaces, heavy power, safes, and other security features can be built exactly where and how you want them. Your new vacant property is a blank slate, and you’ll be able to build your marijuana facility exactly as you visualize it.
Staying under budget is always a main concern when opening a new business, especially when making a large investment like building a facility from the ground up. The good news is, it is often easier to plan and follow a budget while building a new facility. It may cost less in the long run, as opposed to purchasing an existing building that is not retrofitted for your custom use. There aren’t as many surprise expenses, and nearly everything can be planned ahead of time, including construction costs. This allows for the creation of a very specific budget, while avoiding surprise expenses that are sometimes incurred after purchasing a building.
Most older buildings are less energy efficient, will need multiple upgrades, are not laid out to be used as any type of marijuana facility, and may have other issues that were not spotted during an inspection. A brand new building will not have these problems. Designing an energy efficient facility can save you a substantial amount of money in the long run, and typically provides a great return on investment.
Financing vacant land and the construction of a building is often more difficult than financing a building. This is true across the board for many different types of real estate, not just cannabis. A lender is going to want to see that you have experience in ground up development, and a solid game plan for getting the building constructed. If you have never built a new building, you may need to find somebody that has experience to work with.
Most banks are not eager to loan to marijuana businesses, and this can cause a hindrance in your project if you do not plan ahead. There are companies that specialize in financing marijuana projects, such as Copper Street Lending. Their team will present you with a variety of options by working with various private and hard money lenders, so you can make the best choice for yourself and your business.
After purchasing a vacant property, you may need to clear trees, level the ground, or alter the land in other ways in order to prepare for construction. As expected, there is much more planning involved when constructing a new building compared to retrofitting an existing building.
It is often a good idea to hire an experienced project manager, depending on your background in land development and construction knowledge. Various professionals will need to be involved in the planning construction process, including contractors, architects, engineers, and more. It can be much less stressful collaborating with a project manager, who deals with all the different professionals on your behalf.
Construction of a brand new cannabis facility typically takes much longer than purchasing and renovating a pre-existing building. From closing on the vacant lot, to clearing the land, then planning and construction, expect your new facility to take at least 6 – 12 months to complete, and often longer. Even with the best laid plans, external factors can affect your project. For example, Covid related supply chain issues have caused material delays on many projects, stay at home orders and quarantines have created staffing shortages, and municipality closures have extended permitting and approval times.
There is no doubt that buying land and building a brand new building can be expensive, and is often pricier than purchasing an existing building, but the investment comes with many advantages. The confidence of knowing that you have more control over the finished product and are able to precisely plan ahead can be invaluable.
Resale value is also a concern of many property owners. Specialty buildings, such as a marijuana grow facility, typically require a niche buyer who may be difficult to find. Property that is highly customized may not sell as quickly as a standard industrial building. Depending on your construction costs, it may be difficult to sell the property for the amount you have into the project. It is also difficult to predict how the property value will change over time, especially in an industry that changes as fast as this one. How long you plan to hold the property is often a deciding factor when considering whether to build new or retrofit an existing building.
While purchasing a pre-existing building may seem like the easiest option while looking for a marijuana facility when compared to building a new facility, it may not be the best choice for you. Be sure to consider both options before making an informed decision. Those who purchase an existing marijuana-approved building instead of a vacant lot, do so for many reasons.
Securing financing is usually easier with a building than vacant land. Lenders typically see less risk in lending against properties that already have structures on them. It is easier to appraise a building that is located in the middle of a bunch of other similar buildings with sales data available. The company loaning the money can make an educated prediction about how long the property would take to resell if they had to take it back, what the sales price would be, and other factors.
One crucial factor in determining whether to purchase a pre-existing building or build your own is the difference in timeline. Purchasing an existing building and renovating it into a marijuana facility is usually faster, depending on the condition of the building. But keep in mind, existing buildings will often need updates, improvements, and construction as well, which can lengthen the time until a building is operable. You should have your contractor or project manager give you a quote and timeline on renovating an existing building before you move forward with purchasing so you know what you are getting into.
On a positive note, while repairs and updates are being made, you can often use a little creativity to take advantage of features that are already on the property. Often, it is possible to reuse the building’s existing infrastructure, heavy power, and more. Working with what you have, like designing your cultivation facility to utilize the truck dock that is already installed, or setting up the employee kitchen adjacent to an existing bathroom to utilize existing sewer and water lines can often save you quite a bit of money.
There is always a chance that the building you purchased has underlying issues that were not discovered prior to closing. From sewer problems to roof leaks, there is always the possibility that items were missed during inspections and will force your renovation expenses higher than expected. This could mean an extended construction timeline, which may push back your opening timeline.
Older buildings are less energy efficient than new buildings, so you may want to consider upgrading to more energy efficient features. This will save your business money in the long run, as well as increase resale value.
Green Zoned buildings are in high demand. Entrepreneurs all over the country want to take advantage of Michigan’s Green Rush. Most of these entrepreneurs prefer to buy a building, as opposed to a vacant piece of land. There are often bidding wars that drive up building prices, and you will need to be ready to move quickly with an aggressive offer. This depends on the building location and is usually not the case with vacant land.
It is necessary to consider all of these factors before deciding whether to build a new facility or retrofit an existing building. Your budget, timeline, risk tolerance, and need for customization will all help you determine which option can best suit your needs. When you decide that you are ready to move forward, one of our team members is standing by to help!
Michigan’s green rush is on and if there is a time to get involved, it’s now. With the recent passing of recreational, Michigan’s marijuana market is about to boom. One of the most overlooked issues when entering the marijuana industry is finding a contractor that will be able to help you build your marijuana facility
It is important to find a contractor that understands the marijuana industry and has preferably been involved with marijuana facility construction in the past. Marijuana facilities require very unique specifications that not all contractors may be familiar with.
Specifically, marijuana grow facilities need heating and cooling units (HVAC) to regulate the temperature effectively in order to create the perfect grow environment. These special HVAC units may also require the roof to be reinforced. This is something you should have quoted with your marijuana facility contractor ahead of time to prepare for costs. Furthermore, marijuana facilities need to account for very high heat loads, mold protection, and special electrical requirements.
Something important to keep in mind is the fact that no two marijuana grow facilities function in the exact same way. This makes it crucial for you to be in constant communication with your contractor, so you are able to build the facility exactly how you like it. Variances can occur in:
These small details can make a big difference in the way you construct your facility. This makes it imperative for you to involve yourself every step of the way.
The design process can take anywhere from four to eight weeks. This depends on the complexity and size of your facility and how busy your architect is (a good architect is typically very busy, so if yours isn’t that is an issue). The design process comes in two parts: architectural drawings and Mechanical, Electrical, and Plumbing drawings (MEP). The MEP drawings must be completed by a licensed engineer to assure your space functions properly; mainly preventing electrical overload which is a major fire hazard.
Once both the architectural and MEP plans are complete, they need to be submitted to the local building department and fire department for permit review. In many municipalities, you may need to submit these plans to the water department as well because they rarely communicate efficiently. It is important to keep in mind that review times vary immensely depending on the municipality. Some cities are able to issue permits in two weeks, while others may take much longer. Additionally, these departments may come back to you with required revisions to either set of plans, which would force you to go back to the design phase. Many municipalities offer “simple” permits for smaller projects, and while you may think you are saving time, no marijuana facility will be simple in any way.
Once the design is finalized and all permits have been issued, any good marijuana contractor will give you a written schedule outlining major milestones along the journey of construction. These milestones include passing inspections, pouring back floors after plumbing completion, deliveries of major equipment, etc.
When reviewing the schedule with your contractor it is critical to outline any outside vendors that will be involved with the project, most commonly security. If you are able to put your security vendor in contact with your contractor early in the process, they will be able to work together to find the ideal time to install all security systems. Doing this late could seriously hurt the progress of your grow, which is something that should be avoided at all costs. Furthermore, if you are supplying outside equipment like grow lights, make sure you and your contractor are on the same page on when they should be installed.
Even if a contractor is well versed in marijuana facility construction, it is imperative that you never assume anything. Ask questions; over-communicate if you have to. If you want your marijuana facility to operate in the way you need it to, you must be involved in every step of the process and in every decision made. With proper communication between you and your contractor, you will be on your way to growing one of the most profitable plants around.