The advent of the legalized cannabis industry has driven up industrial real estate prices.

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Cannabis Industry in Sonoma County, Calif. Boon for Industrial Properties

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The industrial real estate market in Sonoma County, California is in a boom period thanks, in part, to the legal cannabis industry, according to a North Bay Business Journal report. Prices of industrial properties used for cannabis rose from full asking price or more in 2016, reaching 20 to 25 percent premiums above non-cannabis buildings; and that premium has risen to 50 percent so far this year.

One of the more notable transactions last year – and the largest – involved a 150,000-square-foot six-building deal to CannaCraft for nearly three times the previous price less than a year prior.

At year-end in 2016, the vacancy rate in the market was 5.8 percent which was unchanged from year-end 2015 figures; however the rate fell to 5 percent in the third-quarter of the year – representing a stable market.

Although most building owners have loans secured through a federally insured bank, the deals still come with a considerable amount of risk as cannabis remains a Schedule 1 narcotic under federal law – and the feds could seize the property if they decide to enforce those laws.

According to the report, Sonoma County is considering a proposal to move the cannabis industry indoors and away from rural-residential zones, which would only increase the demand for industrial properties located in cannabis-approved zones.

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