Marijuana is a lucrative business. In California alone it is estimated to be in the region of $5 billion. And the next 5 to 10 years are going to see the biggest marijuana companiesestablished, with fortunes lost and gained. And most notably transferred, as money goes from alcohol, tobacco and pharmaceuticals towards marijuana industries. The first mover advantage is huge, as all businesses are clamoring to getting established as soon as possible.
The Great Pot Rush
There is a rush on at present, and it could be argued that some states are experiencing over supply. There are too many marijuana businesses and too much marijuana, and many are going to get crushed as the years go by, as there is too much supply and too little demand. Some have estimated that California has Eight times as much supply compared to demand at present. The fallout for this will be severe, as businesses lose money. The environment will also suffer, as the marijuana and operations have to be disposed of properly, which will not happen with bankrupt businesses. It is also a waste of effort and electricity to let marijuana go stale if it cannot be gotten rid of fast enough. This is what tends to happen when crazes set in. The flip side is that if all goes well, California stands to gain billions from an evolving industry.
Santa Rose Industrial Buildings Pot Rush
One point of recent interest is the Santa Rose Industrial Buildings for a number of reasons. Santa Rosa is viewed by many marijuana companies as the ideal location, and is a 10 million square foot industrial space. It is expected to be an industrial hotspot for California marijuana companies, the Silicon Valley of Marijuana innovation and development.
Seattle-based Privateer Holdings, which says it’s the first private equity firm exclusively focused on marijuana, had considered placing its state headquarters closer to the voracious Southern California consumer market. But the company selected Santa Rosa last year, leasing a 23,000-square-foot suite on Corporate Center Parkway off Sebastopol Road. Santa Rose has a good community and is strategically located. The rules and regulations surrounding growth, cultivation and distribution are relatively lax in the Santa Rose region.
The arrival of Privateer Holdings in Santa Rosa is part of an economic boom unleashed by the legalization of marijuana, one that is filling vacant warehouses in Santa Rosa and driving up both commercial rents and real estate values in areas allowing the newly regulated industry to take hold.Since last year, cannabis businesses have spurred at least 18 industrial property transactions in Santa Rosa worth more than $40 million. As the cannabis industry grows near daily, empty buildings are becoming more difficult to find in the city, where vacancy rates in industrial areas have dropped from 12 % to 5% in under 4 years. Properties, such as ones held by well-known entities like the Sonoma County Farm Bureau and T&B Sports, are changing hands with sellers who are sometimes getting double or more what they originally paid. Landlords previously unwilling to rent to cannabis businesses are now opening their doors to potential businesses, often at twice the average price. Some question whether the whole cannabis industry is a bubble, and that they are paying too much. Whether this is true or false remains to be seen.
One notable benefit of Santa Rosa Industrial estate is the lower taxation rate, as well as its location just two hours away from the cannabis-rich Emerald Triangle. The city stepped forward early last year when it began permitting all levels of the cannabis industry, from manufacturing and distribution to indoor cultivation. It’s astrategy that city leaders have described as an effort to root out black market operators rather than lay a welcome mat, but it made Santa Rosa a desirable place for cannabis enterprises to set up shop. The trick is getting in the door. Joe Rogoway, whose Santa Rosa firm Rogoway Law Group serves the cannabis industry, said he warns clients seeking space in Santa Rosa that there’s at least a $2 million barrier to entry. But that has not stopped eager marijuana investors, who are still happy to snap up the space at all costs. It could well be a brilliant play, as they are getting prime real estate in an industry that is most likely going to shoot skywards. If it does not, the companies that left can return and buy the properties at half of what they sold them for.
Marijuana the way it Should be
What we are witnessing in Santa Rosa and the surrounding area is setting the standard for administrative officials everywhere. Simple let it be and relax the laws. And then simply watch and observe as local prices skyrocket while companies try to get their foot in the door, fiercely competing and innovating to generate the best quality products around. This is what has actually happened and what is happening. And this strategy can be applied to pretty much any sector. From a business perspective, this was a masterstroke by the Santa Rosa officials. It has brought millions to the area and put Santa Rosa on the map as a marijuana hotspot. And it was done with simple incentives and loose regulations, and the city could be reaping the benefits of these policies for decades. The claim that it was done to eradicate black market sales was a neat and diplomatic cover by officials who wanted to see more business in the region.