Arizona’s Potential for Medical Marijuana Cultivation is Over-Capacity

Data released by the Arizona’s Benchmark Commercial Real Estate (BMCRE) shows that the state has approved far more square footage than necessary for the cultivation of medical marijuana, Marijuana Business Daily reports.

In 2014, the state’s 60,000 medical marijuana patients bought just 20,000 pounds of cannabis, less than a fifth of the Arizona’s current yearly production capacity of 106,000 pounds. This production takes place on the current one million square feet of completed cultivation facilities, but the state has approved more than 26 million square feet of land for possible future cultivation sites.

Even if Arizona voters were to approve a recreational ballot measure next year, market demand would increase by only about 50%. If this were the case, producers could meet the demand with only an additional 500,000 square feet of facilities.

It’s likely that the the vast majority of the 26 million square feet approved for cannabis cultivation will not be used as such. The risk, however, is that cannabis industry investors may be tempted by the availability of land to build facilities that aren’t needed. Furthermore, Arizona’s Department of Health Services doesn’t release data regarding cannabis facility locations and square footage, making it difficult to get a good sense of the market.

Recent events in Washington State should serve as a warning regarding the downsides of flooding a market with unneeded supply: unpredictable prices and downticks in profitability harm investors, producers, retailers and buyers.

Sources:

http://mmjbusinessdaily.com/chart-week-arizonas-cannabis-cultivation-capacity/

Photo Credit: Mark

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