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US (CA): Cannabis industry comes to find real estate tight in Southern California

If you're thinking there's plenty of warehouses to go around, you may be right — unless you're planning to set up shop in Los Angeles or Orange counties. Demand for industrial space in these areas nearly outpaces supply, and for cannabis-related tenants, finding a “for rent” sign is just the first hurdle in the bid to walk away with signed leases in hand.

There is more than 1 billion square feet, or more than 92.9 million square meters, of warehouses, distribution centers, and other industrial building types in the Los Angeles area, and most of that space is already occupied. At the close of 2018, the vacancy rate was just 1.6 percent in the City of Los Angeles, the lowest in the country, according to a report by global commercial real estate services firm Colliers International. And in the Greater Los Angeles area, which includes the metropolitan areas across Los Angeles, Orange, Riverside, San Bernardino and Ventura counties, the vacancy rate was a similarly challenging 2.5 percent. Orange County ended the year with a vacancy rate of only 2.8 percent. Thank or blame e-commerce for the tight squeeze; those online orders have to be stored and distributed from somewhere.

The low available inventory in these markets shrinks to an even less palatable size for marijuana tenants, which are restricted to setting up shop in areas zoned for cannabis-related activity, called “green zones.” Distributors, cultivators, and the like can only operate in properties located, for example, outside of a 600-foot, or 183-meter, radius of any school.


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