Commercial Marijuana Growers Buying Up Space In Sacramento At Unprecedented Rate

SACRAMENTO (CBS13) – It's only fitting the grass grows wild – and the weeds reach for the sun – in this mostly industrial south Sacramento neighborhood considered by real estate experts to be one of the hot zones for commercial marijuana "grows."

South of Highway 50, west of Watt Avenue, east of Power Inn Road –in the far southeast end of what's considered City Council District 6 – investors are buying-up space at a pace and a price never before seen. Some are paying three times the amount these buildings were going for prior to California's new law making recreational marijuana legal.

One recent transaction, according to a broker CBS13 spoke with, saw a 20,000 square foot building go from a $2 million asking price to a $6 million price tag.

Other monthly lease options have buildings in this area going for $2 dollars a square foot – with the before pot became legal price just $.40 a square foot.

"I'm not surprised because there's so much money to be made in this industry," said real estate appraiser Ryan Lundquist.

Lundquist is a local real estate appraiser and well-known market blogger. He's watching how the new "green light to grow" is changing the landscape.

And to be perfectly clear, Lundquist neither endorses nor turns his nose-up at the new marijuana laws. He is, however, posing tough questions to his Sacramento-area real estate colleagues working with potential home buyers who might unknowingly purchase a property close to a "grow" operation.

"I think real estate agents are going to be faced with what to disclose," Lundquist said. "Should smell be disclosed? Should it be disclosed if there's a grow operation next door?"

If that next door or even nearby grow is a commercial pot operation, chances are you might never know. These businesses will have no signage and, under city code, they aren't allowed to have any of their inside marijuana activity visible from the street.

CBS13 observed one operation in the works on the city's south side.

One of our sources told us a sizeable commercial marijuana grow is going "in" off Florin-Perkins Road.

The man who greeted us confirmed he's setting up the operation for an investor, but didn't want to talk on camera or be identified.

With the building's security fencing, cameras, enhanced lighting and "no trespassing" signs posted, it's clear they won't be hosting a neighborhood welcome party anytime soon.

And no, this southeast corner of the city is not the only commercial marijuana hot zone in Sacramento.

Here in the far northeast side – east of Dry Creek Road, near Raley Boulevard – the green light's been given to legally grow commercially.

And hundreds are lining up at that light to move forward.

The city permitting department tells CBS13 they're "getting calls on a daily basis from potential commercial marijuana growers."

Since recreational pot became legal in the state, 200 marijuana cultivators have registered with the city of Sacramento – a first-step in getting business moving.

Another 800 hopeful commercial pot growers have contacted city staff, asking "What do I need to do? And where am I allowed to do it?"

As the head of the Sacramento Cannabis Coalition told CBS13 right after Prop. 64 passed, the legalization of commercial grows will bring hundreds out of hiding.

"This stuff is being grown somewhere; we've been selling it in Sacramento for a long time," said Corey Travis with the coalition. "We need to allow people that want to be part of this industry and cultivation an opportunity to do so legitimately."

And they're coming from all over. Brokers tell CBS13 they're representing investors from as close as the Bay Area to as far away as New York.

Denver and Portland investors – where they know a thing or two about this kind of stuff – are tapping into their experience and swooping-in on the untapped Sacramento market, bringing high hopes and deep pockets.

"There's a reason why commercial property growers are paying all cash," Lundquist said.

That's because you can't lease to a cannabis company if you have a federally-insured mortgage. Remember, at the federal level, marijuana is still illegal. So cash is king – and non-cannabis related businesses looking to lease a large space could be left on the outside of some of these buildings looking in, priced-out of the area.

"It's just like in the residential market when investors come in the market: They gut everything, it squeezes out first time buyers, and I think we can see that dynamic in the commercial sector if there begins to be a scarcity of property," Lundquist said.

The bottom line: There are lots of "ifs" when it comes to the new marijuana laws because many of the rules and regulations won't be set in stone until 2018.

But for now, people are putting the pieces together – buying up land and property looking for their own pot of gold in California's new green rush.

There are restrictions for commercial pot businesses. They have to be at least 600 feet from schools, parks, churches and playgrounds.

And while the city will start accepting applications in April, it will take four to six months to get a conditional use permit. We're told commercial grow operations won't start to operate until the end of this year.