The legalization of recreational marijuana in California hasn’t just altered the minds of some of Stanislaus County’s residents – it’s also altered the real estate industry.
After passing a conservative allowance strategy permitting retail sales in the area, Stanislaus County received 265 Commercial Cannabis Activity permit requests in October, all from entrepreneurs vying for the opportunity to grow, distribute and sell marijuana in the Central Valley. The massive number of applicants all searching for a place to conduct retail sales has created a rat race for available real estate – whether agricultural land for cannabis grows or commercial properties for dispensary locations and distribution centers – inflating prices and creating competition between cannabis capitalists.
Central Valley Association of Realtors incoming president Mike Kelly said that California’s newest industry could be extremely beneficial for the real estate market and its agents, likening the surge in property value to the country’s Industrial Revolution.
“I think you have a lot of business people in California that see this as a ground floor opportunity to make a good amount of money, and to provide something that has so many different uses,” said Kelly. “I can say that yes, it’s definitely going to have a positive effect on the value of property.”
A prime example of just how much prices have inflated can be found in Riverbank at the city’s former cannery. The cluster of industrial buildings, totaling 360,947 square feet and located at 2906 Santa Fe St., is selling for around $10 million for those who would like to use the premises solely for non-cannabis activities, but those inquiring about the piece of real estate who wish to conduct a cannabis cultivation operation can expect to pay between $20-$30 million, according to the property’s listing broker.
The broker added that the owners of the property would likely only sell to those looking to grow cannabis in the buildings, as they are looking to get “top dollar” for the former cannery. The property’s online listing informs potential buyers that due to the Riverbank City Council approving an ordinance that allows commercial cannabis within City limits, the owner of the property reserves the right to increase the price depending on the potential buyer’s proposed use of the site.
Marijuana entrepreneur Neal Singh of Tree Life Farms owns several commercial cannabis operations in Stanislaus County and surrounding areas, including 17 locations in Stanislaus that are currently going through the permit process with the county. The competition between those hoping to cultivate cannabis within county limits – 265 total applications require 265 locations – has made it hard for those who may not have as much funding as larger operations and corporations.
Singh estimated that prices on real estate have inflated by 20 to 30 percent.
“It’s ridiculous. It’s not fair,” said Singh. “It really does suck because now, a guy like me has a lot of competition. Over 100 people have applied for permits, so now every single one of us are looking in the same area.”
The area provides some of the best conditions for cultivation, Singh added.
“Stanislaus is just a great place to grow. I don’t know if it’s where we fall on the equator or what, but the sunlight just hits perfect out here,” he said.
Singh’s 17 permit applications throughout Stanislaus County range from 1,200 square feet to 22,000 square feet sites. The latter, a full canopy grow on Patterson Road in Modesto, is already in the construction stages and when completed will boast 2,000 plants in six greenhouses. Each greenhouse will produce about 100 pounds of dried cannabis after harvest, and Singh hopes to eventually cover all 22,000 square feet of the project with a total of 12 greenhouses.
Singh was fortunate enough that his business partner already owned the land that his full canopy grow will call home, but while looking for other locations to house operations like dispensaries and distribution centers, he became aware of just how impacted the real estate industry had become thanks to marijuana.
At one commercial property, he was told the rent would be $3,500 per month for an “ordinary” business, but a cannabis dispensary could expect to pay $3 per square foot in rent, or about $21,000 per month.
“Properties used to be 50 cents per square foot, but now you’re seeing people doubling and almost tripling that,” said Singh.
Despite the substantial amount of competition in the area, Singh was still able to secure locations for all 17 of his commercial cannabis permit applications. His strategy?