The latest hurdle in the cannabis industry is one of growth. As New Jersey works to legalize the recreational market in the coming months, state officials are estimating that nearly 100 cultivation sites will be needed to grow and supply The Garden State with cannabis. This estimate gets bigger when one considers the boom in the state’s medical marijuana market should adult-use be legalized by the end of May.
The New Jersey Department of Health anticipates enrollment in the state’s medical marijuana to double in size by 2020, calling for up to fifty more cultivation sites for the medical market alone. This comes out to about 1 million square feet in growing space, but with only twelve licenses issued so far, the likelihood of meeting that goal by May 30 is shrinking.
New Jersey is not alone. Finding space to cultivate and grow marijuana could hamper the growth of many American markets. Many states grow their own since shipping across state lines or importing from Europe or South America is out of the question, but finding available land and factory space is not getting any easier.
In California, the quest for cultivation space is altering property prices. According to the local North Bay Business Journal, prices have nearly tripled since 2017, with monthly rates skyrocketing to $225 per square foot in some places. This is due to the fact that location is critical. California laws restrict manufacturing and distribution to specific zones, and cultivating cannabis comes with even more restrictions.
Because of this, cannabis companies are reluctant to disclose to tenants or leasing agents what business they are actually in. Not only is cannabis still federally illegal in California, but there is also a mountain of red tape to go through in order to even lease a cultivation or distribution site. Cannabis growers need a license, and this license must be authorized by a landlord before the site can legally start growing, extracting, and distributing cannabis and cannabis products.
Los Angeles-based lawyers Gipson, Hoffman, & Pancione note that traditional lease forms do not apply to cannabis facilities, meaning that landlords need to have risk management strategies in place to protect themselves and their tenants.
Published: April 17, 2019
Founder & Interim Editor of L.A. Cannabis News