AZRE Source: Commercial land may go up in ‘smoke’

One of the most talked about ballot initiatives this year has been the Arizona Marijuana Legislation Initiative. If it makes it onto the ballot and is approved by voters, the possession and consumption of marijuana would be legal for people 21 years old and older. A 15-percent tax would be levied on the sale of marijuana and revenue would go toward education and healthcare.

Passing of the initiative could impact school and marijuana enthusiasts, but there could also be an impact on Arizona’s real estate industry.

It’ll be a very specific type of property that can benefit from legalization of marijuana. Along with storefronts, cannabis start-ups could be looking for new spaces for their cultivation centers or greenhouses. Finding the right property for such a purpose could prove to be difficult.

Derek Peterson left a job on Wall Street to enter the cannabis industry in 2010. When it comes to real estate, he says the first thing his company will look at it is the legislation concerning zoning regulations for storefronts and cultivation centers.

“You can only be so close to schools,” says Peterson, president and CEO of Terra Tech. “Those zoning perimeters knock out a great deal of available real estate. You can only be so close to public parks. You can only be so close to residential areas.”

Under the proposed ballot measure, a new department, the Department of Marijuana Licenses and Control, would be charged with regulating the cultivation, manufacturing, testing, transportation and sale of marijuana. However, local governments would retain the power to regulate and limit the marijuana businesses. This means that zoning requirements for businesses would continue to vary from city to city.

In most Arizona cities, a dispensary isn’t allowed to be at least 500 feet from a school, church or residential area. Cultivation centers are not allowed to be on the same property as the dispensary itself. The real estate options get even more limited when you take into account the maximum and minimum square footage needed for the business to operate.

According to Peterson, a proper greenhouse should take be no less than one acre in size and a warehouse facility could need anywhere from 10,000 to 30,000 square feet. Despite their restrictions, storefronts will also need to look at the same factors as any other business, such as foot traffic and the demographics of the residents.

The lack of available real estate could lead to bidding wars between entrepreneurs who want to break into the industry. This could mean good news for some of the more open-minded owners of the industrial real estate.

However, the impact will only be made if Arizona businesses and residents choose to be supportive of the incoming cannabis entrepreneurs. If a large group of nearby residents speak out against a prospective dispensary or cultivation center, there is a chance that it won’t be allowed to open. Ryan Hurly, a partner and chair of Rose Law Group’s Medical Marijuana practice group, has worked cases where there has major disapproval of medical marijuana based business opening close by.

“Any of these are public hearings in front of public officials so if lots of neighbors show up to complain it can cause a real problem,” says Hurley. “We work to assure those neighbors that this is a normal use, and it’s not going to be problematic for them and we’ll be good neighbors.”

Hurley has been practicing in the field of medical cannabis law for five years and his medical marijuana practice group has worked with medical dispensaries and cultivation businesses around the country. They help with more than just law and also give advice for site selection and land use concern.