A New Market
The Inland Empire has long been home to one of the largest industrial markets in the country, based largely on the logistics industry. But in the last year a new market is emerging around Cannabis Cultivation as California continues to ease into into legalization.
The noteworthy trend that separates the cultivation market from the logistics market is the focus on second and third tier space as the location of the cultivation operations. The markets that have boomed the most as cultivation has emerged are generally markets that were at best after-thoughts for industrial tenants in the past.
Adelanto is a market we cover heavily and so we were interested to see how much total space has been permitted in that city. We’ve prepared this 36×48 PDF map of the projects which total over 2.2 million square feet.
Some of that space has been re-purposed from existing uses, while some of the space will be new construction. There is likely another two million square feet in pipeline projects in addition to the approved projects shown on the map.
A natural question to ask in any market is: how much total demand is there? California will no doubt be the largest single state marijuana market, and Southern California is likely home to the largest concentration of users who could all be reached within a short drive of any cannabis based business. So the market is in all likelihood massive.
A simple thought exercise might help get in the neighborhood of the total size of the market. Denver is reportedly home to about four million square feet of cannabis cultivation space. Southern California is roughly 10 times the population of the Denver MSA. So across Southern California maybe the market would be for roughly 40 million square feet of cultivation space. These are just back of the napkin numbers. The Southern California total industrial market is over 1.5 billion square feet. So that 40 million square feet of potential cultivation space is a very small number compared to the total industrial market. In fact only because the cultivation market seems like it is concentrating in certain cities and certain sub-types of space, is the cultivation market even worth “writing home about.” Otherwise the absorption would be more like a blip on the radar.
The cultivation market has generated a number of land sales for our firm, with more in the pipeline. So it’s something we’re watching closely. However, we’re also trying to pay attention to information that might tell us the total size of this industry that is just coming out of the shadows.