Earlier this summer, Illinois passed a bill making it the eleventh state in the U.S. to legalize the use of recreational marijuana. This legislation will not only bring new revenue to the state, but new opportunities to the real estate industry.
Englewood Construction’s experience working with clients on medicinal and recreational marijuana dispensary projects in other states provides firsthand knowledge about how this legislation will quickly lead to new activity in the local commercial real estate and construction landscape. In fact, the firm is already in discussions with clients about cannabis-related projects in Illinois.
Like any CRE sector, the cannabis industry comes with its own set of nuances for planning and executing construction projects—particularly since it is relatively new and highly regulated. Here are five tips for successfully navigating this arena.
Timing is everything
Englewood is no stranger to hitting a firm opening date for a new location, which is critical for cannabis companies opening in new markets. First of all, the time frame for leasing and building out a space—whether a dispensary or cultivation facility—is often dictated by when new laws around marijuana usage go into effect and the licensing process for operators.
Take Illinois, where recreational marijuana dispensaries can open for business as of January 1, 2020. That means companies that want to be among the first to open in the market need to start now to not only get licensed, but also negotiate lease deals, enlist their construction partner and start building out their facility.
Timing also comes into play because if a marijuana company does not complete its facility by its scheduled date, it stands to lose its state license—potentially an investment of several million dollars. As an example, Englewood was just asked to take over a dispensary build-out project in Ohio because the original contractor fell behind, leaving the operator in danger of losing its license.
Learning curve for municipalities
As states adopt new laws around the cannabis industry, there is certain to be a learning curve in the approval and permitting process for new facilities as municipalities work to fully understand state regulations as well as what additional guidelines they can apply at the local level.
That makes it exceedingly important that everyone on the project team—from the owner/developer/landlord to the architect and construction firm—be well-versed in the rules and requirements around marijuana dispensaries and cultivation facilities. Not only do we need to be able to build these facilities to both the client’s and the state’s specifications, but we also need to be able to assist and work with municipalities as they learn and implement the state regulation. It’s also helpful for partners on the project to have previous experience with similar projects in order to anticipate questions or issues that are likely to arise and head them off if possible.
Think nationally, build locally
As more states adopt laws legalizing recreational weed, marijuana companies are looking to get licensing and mobilize in those states quickly. Because of the staggered geography and timing at play, cannabis firms are realizing the advantages in hiring a national commercial construction partner with the capacity and resources to partner with them on multiple facility projects across the country—as well as expertise in understanding and adapting to differences in regulations and requirements in each local market.
This is similar to the national roll-outs Englewood has worked on with retail and restaurant brands, where there’s real value for the client in tapping one construction partner that understand their business in and out, can replicate their concept wherever they are opening new locations and has a roster of pre-qualified subcontractors nationwide to bring a project to fruition. All of this means the construction end of opening new locations becomes a well-oiled process—a level of efficiency that is equally beneficial to marijuana companies entering multiple new states in a short period.
Security, mechanicals and more
Any project might have unique construction considerations, but cannabis dispensaries have many similarities to storefront build-outs. That said, there are some additional layers to the nuts and bolts of these projects. Security, for one, is a major difference between a dispensary and a “typical” retail store. These facilities are designed to ensure a secure environment for everything from receiving deliveries to storing, displaying and selling the product.
In terms of cultivation facilities, contractors also need to understand and plan for the extensive mechanicals that go into these locations. Cultivation facilities are essentially large warehouses with specialty systems for artificial light, watering and humidification. They use an inordinate amount of water and power, and so the appropriate infrastructure must be in place to support them.
Good news for the local retail landscape
When it comes to filling vacant space or bringing new traffic to retail centers, most retail developers and landlords agree that nothing is off the table. As more states pass legislation legalizing recreational marijuana, much of the stigma associated with it should start to fade and, eventually, many CRE firms will consider cannabis companies a viable, profitable opportunity to fill space. Just as the retail sector has evolved with the effects of e-commerce and the exit of many major anchor stores and national brands, so too will it adjust to match the demand and opportunities with this new segment.
About the author
Chuck Taylor is director of operations with Lemont, Illinois-based Englewood Construction, a national commercial construction firm specializing in retail, restaurant, hospitality/entertainment, industrial, office, entertainment and senior living construction as well as facilities management.