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Why California Industrial Market Is 'On Fire'

Cannabis Industry is Heating Up the Market
December 28, 2017
With the new year will come new rules, among them the legalized selling of marijuana in the state of California.

Jan. 1 marks the statewide legalization date for marijuana. However, the city of Los Angeles will not begin accepting applications from cannabis businesses until Wednesday, Jan. 3, and is reportedly behind in processing permits.

While many are still learning the laws and permitting that are involved with cannabis sales, it is mandatory for cannabis businesses to have both a local permit and a license with the state of California in order to sell recreational marijuana.

Voters approved the sale of cannabis for recreational purposes in November of last year, and the industry is already having an impact on industrial real estate.

"You've got an industry that's just on fire," according to Jeff Puffer, Delphi Business Properties' senior vice president and a commercial real estate specialist on the San Fernando Valley, especially.

The San Fernando Valley represents 15 percent of all of the industrial space in buildings that are at least 10,000 square feet in Los Angeles, according to Colliers International research.

"The cannabis industry has really saturated the market under, I would say, 20,000 square feet, maybe 30,000 max," Puffer said earlier this month at RENTV’s San Fernando Valley/Tri-Cities State-of-the-Market Conference.

He said he had a client who was a manufacturer and lost out by $500,000 on an industrial building in that size range to a cannabis cultivator.

Many are also willing to pay a premium if the building already has amps, according to Puffer.

Max Kaizer, Rexford Industrial vice president of acquisitions, agreed the industry is one to watch where industrial is concerned.

He said it comes down to supply and demand especially in light of the upcoming legalization date.

"These users are leasing industrial spaces at rates that are sometimes double what a traditional industrial user would pay," Kaizer said.

Karen Jordan, Los Angeles Reporter  CoStar Group   

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