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How medical marijuana will impact real estate in Pennsylvania

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Since the legalization of medical marijuana in April, the Pennsylvania Department of Health has placed a lot of focus on developing a program that is expected to be operational by 2018.

In fact, temporary regulations were just rolled out to give growers and processors an idea of the rules they will need to follow.

All types of industries are anxiously anticipating the economic impact of legalized medical marijuana. For some businesses, it will be a major boost. For others, it will hardly move the needle.

It makes sense that growing, processing and dispensing will require new space, but how much will this really impact real estate? 

The potential impact

While it may seem like medical marijuana growers and processors will be filling up industrial real estate space all across the commonwealth, this isn't the case.

Strict regulations allow for limited growing permits based on factors such as population, access to transportation and the number of people who have qualifying conditions for medical marijuana.

In total, there are 50 dispensary permits (which include 3 locations per permit), 25 grower/processor permits and eight clinical research permits (which include grower/processor ability and six dispensary locations, but must be partnered with a medical research facility).

The 25 grower/processor permits plus the eight clinical research permits mean that just 33 growing locations are permitted. Spread out across Pennsylvania, this is not a huge impact on industrial real estate.

Growers and processors will be looking for warehouses of various sizes between 50,000 and 200,000 square feet in size. They may also be interested in a property with extra land to use for constructing greenhouses.

There are enough existing properties that fit this criteria that it is not expected that new warehouses will be built for the specific purpose of growing medical marijuana. Rather, vacant warehouses will be gutted and retrofitted with water systems, climate control and HVAC.

Additionally, regulations allow for 198 dispensary locations where medical marijuana can be purchased by people with qualifying conditions. Each will require real estate that's a mix between retail and office space.

"Dispensaries will be a combination of your local Rite Aid and a doctor's office," said Andrew Blasco, executive director of Pennsylvania Medical Cannabis Industry Group. "They will sell medical marijuana and related items like vaporizers in a secure and clinic-like environment."

The biggest impact won't be the sale of real estate. Rather, it's the 12,000 permanent jobs plus many more temporary jobs created by the 198 dispensaries and 33 growing and processing locations.

Biggest benefit

So if it's not real estate, then what industry really stands to benefit the most from the legalization of medical marijuana? The answer may surprise you.

Growing and processing requires a great deal of energy. Electric power companies will essentially gain a whole new industry of very loyal customers who rely upon energy use 24/7.

"Each growing and processing location will use about the same amount of electricity as a 16-story hotel. Combined, that's like Pennsylvania gaining 33 new hotels and fully powering them around the clock," Blasco said.

Additionally, there will be a niche market for architects, engineers and contractors who specialize in retrofitting warehouses to be used for growing medical marijuana. These facilities have very specific requirements, not only for climate control but for security purposes. Companies with this specialty would be highly sought after by permit holders.

While there is a lot we can anticipate, the full impact of the legalization of medical marijuana won't be felt until regulations are finalized and businesses are able to begin growing.

PAMCIG expects regulations for grower/processors to be done by mid-late September, while temporary regulations for the entire program can be expected to be completed by Christmas.

Mike Kushner is the owner of Lower Paxton Township-based Omni Realty Group.

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Write to the Editorial Department at editorial@cpbj.com

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