Green Rush: Cannabis Creates Opportunities for Retail Architects, Contractors
By Kristin Hiller
The design and construction of cannabis dispensaries and cultivation facilities are generating lucrative business opportunities for architects and contractors as more states legalize recreational marijuana. Recreational use is now permissible in 17 states plus Washington, D.C. About 55 million, or 16.9 percent, of Americans currently use marijuana, according to the National Center for Drug Abuse Statistics.
One contractor, Northbrook, Illinois-based Mosaic Construction, has created an entire division devoted to cannabis design-build services named Cannabis Facility Construction (CFC).
“We continue to see the impact of the Green Rush in our pipeline,” states Andy Poticha, principal of CFC, which builds dispensaries, cultivation facilities and processing centers. “As the cannabis industry expands nationwide, it is headed toward a legal market worth $41.5 billion annually by 2025.”
Cannabis accounts for approximately 65 percent of CFC’s total revenue and 47 percent of its project pipeline, according to Poticha.
Virginia Maggiore, vice president of store planning for architecture firm RDC, says she has noticed an uptick in cannabis projects in the last two years, as a growing number of municipalities have begun awarding licenses or raising their number of licenses available. Long Beach, California-based RDC currently works with eight cannabis brands, each with multiple store locations.
How to Stand Out
As the number of players in the space increases, so does the competition. Like much of the retail world, it comes down to the experience in terms of gaining customer satisfaction and loyalty. According to Poticha, a brand needs to prioritize smart and pleasing design, strong site selection and high-quality construction.
“Dispensary design in particular is a key factor in defining the customer experience,” he says. “Not only is it important for representing a company’s brand, but it is also crucial to driving retail sales volume and profitability.”
Maggiore echoes this sentiment, saying RDC’s dispensary design process always begins with identifying the customer experience objectives and operational goals for the brand.
One of RDC’s clients, The Artist Tree, took an art-forward approach to its dispensary design. The 5,000-square-foot space in West Hollywood features several large paintings throughout. The goal was to differentiate the brand through the exploration of the relationship between creativity and cannabis, according to RDC, which is currently working with The Artist Tree on two other locations.
While cannabis dispensaries are like traditional retail stores in many aspects, one of the notable differences involves the design of the space, says Margaret Cachel, director of cannabis for Vantage Builders Inc. The Waltham, Massachusetts-based contractor has completed roughly 20 dispensaries and each one features its own aesthetic, according to Cachel.
“Because many customers may be new not only to the particular store but also to cannabis as a whole, the spaces are always welcoming,” she says. “It’s really an immersive experience for the customer and one that’s designed very deliberately to make the customer feel at ease.”
Planet 13, which operates the largest cannabis dispensary near the Las Vegas Strip, is opening a second cannabis store in California’s Orange County. Construction is underway with the opening scheduled for this summer.
“We looked at dozens of potential locations from San Francisco to San Diego,” says Larry Scheffler, co-CEO of Planet 13. “We wanted the perfect site that checked all the boxes — near a large population center, major tourist attractions, major highway access, lots of parking and big enough for our SuperStore model.”
Once complete, the 55,000-square-foot facility will be comprised of 16,500 square feet of dispensary space with an additional area reserved for “ancillary stores and experiences,” reminiscent of the company’s Las Vegas SuperStore, which includes a restaurant, bar and retail store.
The California beach lifestyle inspired the design of Planet 13’s California store, according to Scheffler. An LED floor will illuminate both sand and crashing waves. Guests will also find a cascading digital waterfall and a 17-foot-tall octopus sculpture.
A Vegas-born brand, Planet 13 knows the importance of standing out in order to draw a crowd. “In Vegas, people expect to be entertained, so we have made our SuperStore experience interactive and fun,” he says.
The effort seems to be paying off. Scheffler points out that much of the brand’s new business comes from social media and customers who share and document their experiences with friends.
In a new industry like cannabis, speed to market is critical, sources say. But it’s important to have the mindset of a marathon, not a sprint, notes Poticha. “Carefully choosing the right site for operational success and ensuring that the architectural drawings are compliant [with building codes and municipal rules] will be time well spent,” he says. “Confirm that regulations are addressed, from cannabis-specific rules to unique building codes. Investing up-front will reduce delays and costs later in the process.”
The construction and development team takes into account local building codes, site conditions, operational needs, design aesthetics and the surrounding area of any given location, says Mat Burbary, construction manager at Lume Cannabis Co., a Michigan-based operator with 16 dispensaries throughout the state.
Each location requires local license approval, which in most cases is handled through a highly scrutinized selection process, says Burbary. This process helps ensure that each municipality that has opted into cannabis sales is awarding the licenses to “reputable and professional organizations,” according to Burbary.
Once a local license is received, the construction process can begin. Construction itself requires a litany of inspections from various state departments.
Security is one of the most important considerations for any cannabis project, and it goes beyond just cameras and technology installation, says Poticha. For instance, the building itself must offer secure and compliant points of entry.
“The process of bringing cannabis products in and out of the building is both operationally critical and externally controversial,” says Poticha. In other words, it’s imperative that a site is able to support the proper loading area for seamless transportation. Making changes later in the build-out process can be costly, or worse, a site may have to be completely abandoned if it is unable to alleviate safety or traffic concerns from the community.
While all retail stores may have some level of security, it’s usually just a camera or alarm system added on at the end of construction, says Cachel. In contrast, for cannabis dispensaries, security is a key component of the entire design and construction process. Cameras, biometric sensors, security card readers, storage vaults, alarms and onsite space for security personnel are incorporated into the overall build-out, she explains.
Accounting for Growth
Beyond security, there are several other features to consider for the build-out of a cannabis space. For instance, an advanced HVAC system will help regulate and measure air purity and mitigate odor. Additionally, brands typically maintain a vault in the back area for secure storage of product.
On average, dispensaries span between 2,500 and 10,000 square feet, according to Poticha. Retail floor space accounts for 30 percent of the total footprint, followed by receiving space (20 percent) and vault space (10 percent). The balance of the space is made up of offices, breakrooms, waiting rooms and restrooms.
Most of CFC’s cannabis projects have been build-outs of existing spaces as opposed to ground-up developments, says Poticha. But the firm is seeing more ground-up projects take shape, especially for the cultivation and processing facilities where the product is grown. CFC recently completed a 70,000-square-foot cultivation facility in South Central Illinois, a 30,000-square-foot cultivation facility in North Dakota and a 10,000-square-foot processing lab in northwest Ohio.
“There is a limited amount of available real estate that will work for industrial cannabis facilities due to zoning restraints and mandated setbacks from schools, daycares and religious institutions,” says Kyle Wilson, director of project development and virtual design and construction for Fenton, Missouri-based Kadean Construction. “Due to a tightening real estate market, we are starting to see more projects that are proposed as ground-up, including greenhouses.”
To date, however, all of Kadean’s cultivation and manufacturing projects have been build-outs of existing space. Clients are typically up against tight timelines and budgets, so utilizing existing buildings makes the most sense, says Wilson. The cultivation projects typically range in size from 10,000 to 60,000 square feet.
Cultivating plants indoors requires “incredibly robust electrical and mechanical systems,” says Wilson. These two categories alone can often account for nearly half of the overall project budget. The average construction cost for a cultivation facility is around $200 to $300 per square foot, adds Wilson.
“If you’re picturing a cultivation facility as a huge open space with a bunch of plants growing, a few lights and a garden hose, that’s not at all accurate,” says Cachel. “These are very sophisticated buildings, designed and purpose-built by each individual grower for his or her system of cultivation.”
In addition to heavy mechanical and electrical load requirements, there are fertigation systems for plant feeding and watering, air purification and filtration, climate control, lighting and security measures, explains Cachel.
Just as dispensaries require compliance and inspections from state and local authorities, so do the manufacturing facilities. “Often those requirements are above and beyond what is required by local building codes and must be met prior to completion,” says Wilson.
Many municipalities have a zero-tolerance policy for odors outside the facility, according to Wilson. These odors can be mitigated with activated charcoal filters in the mechanical systems scrubbing the air, he says. Projects often include a security room monitored by 24-hour armed guards as well as both exterior and interior cameras.
Kadean built a 60,000-square-foot cultivation facility for Proper Brands in St. Louis and is already working on a 30,000-square-foot expansion of the property. Proper Brands is a medical marijuana brand in Missouri.
Planet 13 grows its own product to supply both its SuperStore and its Medizin dispensary in Las Vegas. According to Scheffler, the company is pursuing cultivation capacity in California, but initially it will buy product wholesale from trusted partners in the state for its new location.
All Lume-branded product is hand-grown in the company’s cultivation facility in Evart, which is located in central Michigan. The property is currently undergoing a multi-phase expansion that will increase the footprint to 450,000 square feet, according to Burbary.
In addition to its 16 open and operating dispensaries, Lume currently has eight under construction and is always searching for new opportunities, says Burbary. As he puts it, there are “ever-expanding product needs.”
— This article originally appeared in the May 2021 issue of Heartland Real Estate Business magazine.