When it comes to constructing cultivation, manufacturing, and retail facilities, cannabis entrepreneurs must adhere to a very specific set of requirements. Oftentimes, that means working with experts who know the ins and outs of what it takes to get a facility up and running the right way.
From keeping your project on schedule to ensuring full compliance with sometimes-labyrinthine regulations, cannabis facility construction is not as straightforward as other commercial development. This guide to construction for cannabis cultivation, manufacturing, and retail facilities can help you best understand the challenges and solutions out there.
Key considerations for cannabis facility construction
A great deal of planning goes into the construction of a cannabis facility, regardless of which sector you plan to operate in. Understanding the key considerations to bear in mind before you select a site for your facility is critical to establishing a sensible business plan and timelines that are grounded in reality.
Andy Sack and Pete Hall of Palmer Construction Co. have years of experience in building out facilities for cannabis businesses. According to Sack and Hall, it’s best to break down the process into two stages: facility planning and design, and the construction itself.
Facility planning and design
Before you can actually start constructing your facility, you’ll need a site to build on, a concrete plan, and any required permits and licenses from your local, county, and state governments. Here are some of the key steps involved in this phase of the process, according to Sack and Hall.
Site selection
When choosing a site for your cannabis facility, there are a few major considerations to bear in mind. These include whether local zoning ordinances allow for your intended use of the site, your proximity to residential neighborhoods, and whether the utilities companies can meet your needs for water and electricity.
“We see a lot of cultivation applicants say they have a site readily available at an attractive price, but it turns out utility services are lacking,” Hall said. “Cultivators are huge consumers of electricity and almost no place has adequate power to support a grow — even the industrial areas you think would.”
Hall advised doing the upfront vetting work before acquiring a site to ensure that the utilities meet your needs. This is especially important for cultivators, which require immense amounts of electricity and water to support their grows. Retrofitting a site with additional power after the fact is expensive and time consuming, Sack said.
“Not only are there significant costs included with bringing in that additional power, but it’s usually a very lengthy project,” Sack said. “We see a lot of people tie the know on these sites and then find out later that it’ll be 24 to 36 months before they can get power there.”
Retail operations have very different considerations, of course, since they are catering to consumers rather than operating a B2B business like most cultivators and manufacturers. “From the dispensary and retail side, it’s much more about ensuring you’ll have the exposure you need,” Hall said.
Choosing a site that is close enough to residential neighborhoods to get attention and traffic is important, but finding one that is far enough away to avoid upsetting residents who are not so cannabis-friendly can also be a benefit. Finding that happy medium can be a challenge for cannabis retail businesses, but is often worth the hunting in the early stages.
Facility design
Before you can go before your local land use boards to secure the permits you’ll need to begin construction, you need to show them a detailed facility design plan. That doesn’t just mean drawing up a floor plan and calling it a day, though, it also means planning for the internal mechanical systems that a facility needs, including HVAC systems, plumbing, electrical, and more.
“The mechanical systems are really key, especially to the success of a grower,” Hall said. “If they don’t have the right systems in place, we see a lot of problems with sizing, lack of humidity control, lack of cooling capacity, and those types of things.”
“Everyone is really concerned with having pretty facilities, but they need to be more focused on having functional facilities,” Sack added. “Making sure that the environment is dialed in is the most important thing; it’s better to have a good mechanical engineer than it is to have a good architect.”
Of course, before you can move forward on implementing your facility design at all, you need to present your plans to the relevant governing bodies to make sure they sign off.
Permit acquisition
Once your site is selected and your facility design plans are in place, it’s time to schedule a hearing with the local land use boards. This could include a zoning board and a planning board, or a unified land-use board depending on your local government’s structure. Regardless, these hearings dig into your plans on a detailed level and allow officials and members of the public the chance to comment about its potential impact on the community.
Land-use boards have the right to request you make changes to your existing plans and reserve the right to deny your application, so it’s important you come prepared to meet their expectations. If possible, open a line of communication with the appropriate land-use board and officials during your site selection and facility design phases to learn as much as you can about their expectations ahead of time. That way, you can come to the hearing with as compliant a plan as possible to reduce the likelihood you’ll need to go back to the drawing board.
In addition to securing approval from the government, Hall said, it’s important to be sure that the landlord or lender involved in site acquisition are also aware you will be operating a cannabis business.
“There are conditions that might’ve been placed on that site by a landlord, other tenants, or lenders that could prevent applicants from occupying the facility,” Hall said. “So, that’s part of the due diligence stage — all parties who have a say in putting a cannabis operation of any sort in the building should sign off that they accept it.”
Construction
Once you’ve acquired a site, developed a plan, received government approval, and secured the sign-off of all other stakeholders, you’re ready to enter the construction phase. But it’s not so simple as starting to build on the spot, especially in today’s climate with the supply chain issues plaguing every industry. More planning is needed to understand the scope and timeline of your project, which is certainly not going to be completed overnight.
Materials acquisition
Ensuring supplies come on time is essential for staying on track and hitting deadlines. This became an even more urgent issue in light of global supply chain delays triggered by the COVID-19 pandemic. For operators, this challenge meant serious delays on critical components, making it important to place orders in a strategic way.
“It’s a real moving target,” Sack said. “Key components were extremely difficult to secure [during the COVID-19 related supply chain slowdowns]. Price protection is very difficult to provide. [In this case], there are certain systems you can’t promise to any type of operator for up to a year from the time you place an order.”
Whether faced with supply chain challenges or purchasing components when delivery is expected to be on time, planning ahead is crucial. Placing orders for major mechanical systems you’ll need in the final phase of construction during phase one, for example, is one way operators can hope to shorten the timeline to completion, Sack said.
“If you work with a good design team and a good construction team, they can help you identify the longest lead times and find ways to order packages of key equipment early to try and compress the schedule,” he said.
Security requirements
When establishing your facility, always keep in mind the security requirements mandated for cannabis operations and ensure you’re planning to implement the systems needed to monitor your facility in accordance with the law.
“We’ve had applicants who didn’t understand the security requirements and regulatory compliance,” Hall said. “It’s all really difficult to appreciate until you have been through the process once or twice.”
Hall recommended working with an experienced application consultant who can bring together knowledgeable contractors and designers to include security considerations from the beginning of the process. Once the facility is largely built out, it should already be suitable for a security company to easily implement the system you need and begin monitoring everything that happens on your site once operational.
Construction timeline
Construction occurs in phases, which can be planned with specific target dates in mind. However, it’s important for operators to remember that any number of things can cause delays, from late shipments of materials to inclement weather. Building in flexibility to the schedule and the business plan is highly recommended, Hall said.
In some cases, he added, it’s possible to establish facilities in phases that allow businesses to begin limited operations while the remaining construction is performed. This enables businesses to begin realizing revenue even though their full facility has not been built out. In the cannabis industry, this is a popular approach, as it can be extremely capital-intensive to launch a cultivation, manufacturing, or retail facility.
“There are often things that cause these projects to get delayed much longer than everybody wants,” Sack said. “Clients always want the construction done right away, but the truth is that’s just not possible, so they’re paying a lot of money with no cash flow coming in.
“If the local municipality and governing agency will allow it, though, we help them build out in stages so we can get one room online, then another room, so they can start growing,” he added. “A lot of places will allow that to happen and sign off on partial occupancy.”
Plan accordingly when it comes to cannabis facility construction
Building a facility is never an easy process, especially in the cannabis industry. Proper planning and design are a critical part of ensuring your business is able to open on time and start driving revenue in a way that makes sense for your business plan. Operators who are not familiar with construction are best served by partnering with an expert consultant and cannabis-experienced team of contractors, designers, attorneys, and professionals to make sure every aspect of their plan checks out. Otherwise, they could end up with massive delays, ballooning costs, and the possibility that their business never gets off the ground.
If you’re looking to meet the experts and professionals who will be part of your team and help you make your business a success, look no further than the Cannabis World Congress & Business Exposition. At the CWCBExpo, industry leaders offer their insights and experiences alongside the best networking opportunities to meet the valuable partners that will help you realize success in the rapidly growing cannabis industry.