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Cannabis legalization has developers snapping up land

Grant Cameron
Cannabis legalization has developers snapping up land
PHOTO COURTESY AURORA CANNABIS — Aurora Sky is an 800,000-square-foot production hybrid greenhouse facility with a footprint larger than 16 football fields in Leduc County, Alta. Aurora Sky is capable of producing in excess of 100,000 kilograms of high-quality, low-cost cannabis per year.

The legalization of cannabis has created a lot of buzz in the real estate market in Western Canada, with investors and developers looking for industrial land and commercial office space in British Columbia and Alberta.

Developers are snapping up industrial and development properties, mainly in Edmonton and Medicine Hat for marijuana growing and production facilities, and commercial properties in Kelowna for dispensaries, says Elton Ash, regional executive vice-president of RE/MAX Western Canada.

“Overall, the commercial real estate industry, especially in British Columbia, has been doing very well,” he said. “We are seeing recovery in Alberta now and 2019 will likely be a year of better commercial markets throughout the province of Alberta and into Saskatchewan. Manitoba has been pretty balanced as well.

“There’s great opportunity from a landlord building developer point of view going forward for Western Canada.”

The City of Kelowna, noted Ash, has identified more than 900 possible locations for cannabis dispensaries. It’s expected the approval of licences will be extremely competitive, further driving prices in the region.

“That doesn’t mean there’s 900 empty spaces,” he said. “It means that there’s 900 potential locations and they’re going to be looking at approving 20 to 25 sites for licences.”

 

Both Kelowna and Edmonton are poised to become hot spots for Canada’s cannabis market

— RE/MAX Report

 

A report on development in the four western provinces that was prepared recently by RE/MAX indicates while there are other factors at play, like a rebounding economy and stabilizing oil prices, cannabis production is a major driving factor in boosting the commercial real estate market.

“Both Kelowna and Edmonton are poised to become hot spots for Canada’s cannabis market post-legalization with competing cannabis enterprises looking for operating space in both cities,” the report states.

Aurora Cannabis has built an 800,000-square-foot indoor production facility in Leduc near the Edmonton International Airport. Aurora Sky, as it’s been dubbed, is the largest licensed cannabis facility in the world. The company expects to produce more than 100,000 kilograms of cannabis per year at the facility.

“That’s a lot of space,” said Ash. “But, from what we’ve experienced in the last few weeks, there’s demand obviously and so they’re ahead of the curve in getting their facilities going compared to other companies.”

Aurora Cannabis also acquired office space in Edmonton’s downtown and plans to employ more than 400 people.

The RE/MAX report states the total dollar value of all commercial land and buildings sales in Edmonton is up 50 per cent compared to 2016 and topped $1 billion at the midway point this year for the second consecutive year. Industrial sales in Edmonton have also doubled year-over-year with sale prices continuing to rise.

In Medicine Hat, Alta., meanwhile, Aurora Cannabis intends to build a 1.2-million-square-foot, high-technology, hybrid greenhouse cannabis production facility on 71 acres of land in Box Springs Business Park. With a footprint of 21 football fields, the building will be nearly twice the size of Aurora’s facility in Edmonton.

The new facility, named Aurora Sun in recognition of Medicine Hat’s status as the sunniest city in Canada, was approved by city council. Prep work is now underway at the site and the building is expected to be open in late 2019. It will produce more than 150,000 kilograms of cannabis per year and employ 400.

Ash said producing weed in greenhouse-type operations requires a large amount of space and massive buildings.

“It’s like any hothouse operation,” he said. “You’ve got to have so much space under glass. It’s sort of like growing tomatoes and cucumbers.

“Different strains of marijuana need different growing conditions, but that doesn’t make it any more technologically different than growing a tomato. You need space and you need to have ideal growing conditions.”

Going forward, Ash said much of the real estate picture depends on how the cannabis industry shakes out.

“There’s certainly going to be a burgeoning demand and then a reaction to that. But, it’s like any business. There are going to be winners and there are going to be losers and it’s really going to be based on management skill and expertise and experience.

“This ultimately is a business and so those that have the better skill level, that meet the demand cycle and are first in with well-run operations, will obviously do better.”

Ash said he’s learned a lot about the cannabis industry lately and the anecdotal experience relayed from U.S. states like Washington, which in 2012 was the first state to legalize cannabis, and Colorado, which followed suit in 2014. He said demand for marijuana remained the same after it was made legal for recreational use.

“People didn’t start using cannabis if they hadn’t used it before. There might be some people who tried it, but generally speaking the demand was kind of static.

“We still don’t know what the overall demand will be,” said Ash. “We’re going to find out over the next 12 months, I would suggest.”

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