by Bryan McLaren
Since 2010, the legalized cannabis industry has been evolving on a state-by-state basis as constituents in each state debate on various cannabis regulatory structures. Each state acts as a case study on how best to approach the cannabis industry with significantly different regulatory structures that impact how cannabis projects can be designed, developed, and delivered.
The cannabis regulations that govern real estate and property development tend to fit into two categories of importance, which can greatly impact real estate professionals including AEC professionals, commercial owners, developers, facility managers, and university planners.
The first area of importance is very typical to all commercial real estate: location, location, location. However, in highly regulated and complex industries such as legalized cannabis, the location takes on a whole new meaning. Specifically, the 40,000 or so localities in our country are each debating and enacting localized zoning and permitting rules that work best for their respective communities. The paradigm related to how cannabis developments may impact our communities is shifting in real time. We may discover that decades of anti-cannabis propaganda are in fact false or uninformed, and that a well-regulated cannabis industry has the potential to bring meaningful prosperity and economic opportunity. This is the single most important factor that influences local governing of where and how legalized cannabis projects can be developed.
This leads us to the second area of importance: building development codes specific for the emerging cannabis industry. In addition to all the standard complexity that applies in the design and development of traditional commercial real estate, the evolving innovations and understanding of cannabis operations is influencing the way we require these developments to be designed and developed. For example, security requirements, odor mitigation, light pollution mitigation, and set-back requirements may seem like unique development requirements to the untrained eye. However, experienced development professionals will likely have come across most of these requirements before, but perhaps not combined in the specific capacity as may be required by various compliance authorities specific to the cannabis operator. As CRE professionals, we must adapt our knowledge base and refocus the lens in order to best approach the design and development of cannabis facilities.
In New England, we are seeing the emergence of several new state cannabis markets. While emerging markets in Maine and Massachusetts have now been legalized for several years, they are still finding their footing after years of legislative and regulatory delays. The democratic process is in action, but not always as fast as we may prefer. This reality can greatly impact a project’s critical path.
The funding and permitting that allows these projects to move forward are all beholden to state and local rules and regulations. It’s a domino effect, often with a lot of hurry up and wait involved. For example, a new multi-million-dollar cannabis cultivation project may go to bid and get preliminary approvals (having already selected and engaged a variety of AEC professionals with paid deposits), but any number of delays or unforeseen changes in state and local regulatory procedures could lead to a long-term pause or cancellation of project progress and delivery. These are the risks that can greatly impact our businesses as CRE professionals.
Connecticut and Rhode Island are new state markets currently laying the foundation for new cannabis programs. In Connecticut, the state laws allow municipalities to set restrictions on cannabis establishments’ proximity to religious institutions, schools, charitable institutions, hospitals, veterans’ homes, or certain military establishments. Cannabis operators won’t know exactly what these restrictions are without engaging directly with the localities.
While cannabis projects offer CRE professionals with a new frontier of interesting and innovative design and development possibilities, understanding the process and the risks involved will ultimately determine the delivery of a successful project, and the rewards that come with it.
Bryan McLaren is CEO of real estate development firm, Zoned Properties.