Technical guide
Cannabis site selection
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What matters most in cannabis site selection?
Cannabis site selection is decided by electrical capacity first. Verify existing service amperage, voltage and phase at the equipment, obtain a utility letter confirming available capacity and the upgrade path, then build a bottom-up load schedule and model peak demand at lights-on. HVAC is sized to latent load, not tonnage. Extraction space must be designed as classified C1D1/C1D2 space, not retrofitted.
Step 01
Power is what kills cannabis deals
More cannabis transactions die on electrical capacity than on zoning, price or financing combined.
Start with what is physically in the building: documented existing service — 400A, 800A, 1200A — with voltage and phase confirmed on the equipment, not on a listing sheet. Then establish upgrade feasibility with the utility: available capacity at the feeder, transformer siting, and who pays for what.
Then build a bottom-up load schedule from nameplate ratings with realistic diversity factors: lighting, HVAC, dehumidification, pumps, compressors, automation and controls, and process equipment. A cultivation load is not a warehouse load with a multiplier — it is a manufacturing load with a photoperiod.
Model the demand spikes. Lights-on transitions and extraction cycles set the peak the service has to carry, and that peak, not average consumption, determines the service size and the demand charge.
Assume transformer and service-upgrade lead times run parallel to the entire construction schedule. If the utility timeline is not on the critical path of your LOI, the LOI is wrong.
Diligence checklist
- Existing service: amperage, voltage, phase — verified at the equipment
- Utility letter confirming available capacity and upgrade path
- Bottom-up load schedule with diversity factors by equipment class
- Peak demand modeled at lights-on and extraction cycles
- Transformer and switchgear lead times mapped against construction schedule
Step 02
Latent load exceeds sensible load
You design for dehumidification, not tonnage.
Plant transpiration and process heat mean the moisture load, not the temperature load, governs the mechanical design. Sizing to tonnage produces a system that holds temperature and loses the room to humidity — and then to mildew.
Design for condensate handling as a plumbing problem with volume, not an afterthought drain. Build multi-stage redundancy so a single unit failure does not take a flowering room with it.
Carbon odor abatement is frequently a condition of municipal approval, not an operating preference. Confirm the ordinance language before you price the mechanical scope.
Diligence checklist
- Latent load calculated from canopy transpiration by growth stage
- Condensate volume, routing and treatment
- Redundancy strategy per room, not per building
- Carbon odor abatement scoped to the ordinance language
Step 03
Structure and envelope
The roof and the clear height decide whether the mechanical design is even buildable.
Clear height has to accommodate RTUs, dehumidifiers, ducting and lighting above canopy. Roof loading capacity has to carry the mechanical package you just designed — this is where a cheap building becomes an expensive one.
Vapor barriers and insulation are performance items in a cultivation envelope. A building that cannot hold a vapor boundary will fight the dehumidification system for the life of the lease.
Diligence checklist
- Clear height under structure and under any obstruction
- Roof loading analysis against final mechanical loads
- Vapor barrier continuity, wall and roof assemblies
- Insulation values appropriate to conditioned grow space
Step 04
Water, fertigation and drainage
Water is an infrastructure question, not a utility hookup.
Plan for storage volume, filtration, and a fertigation system sized to the canopy. Then plan for where the water goes: floor drains, trenching, and slope that a finished slab may not have.
Depending on the municipality and the discharge profile, pretreatment or recycling may be required before the sanitary connection is approved.
Diligence checklist
- Incoming service size and pressure; storage volume
- Filtration and fertigation design against canopy plan
- Floor drains, trenching and slab modifications
- Pretreatment or recycling requirements with the municipality
Step 05
Extraction and hazardous classification
C1D1/C1D2 space is a code condition, not a room type.
Hazardous classification requires ventilation designed to the classification, gas detection, and an emergency power-off system. These are inspected items, and retrofitting them into a building that was not designed for them is the most common source of budget failure in processing deals.
Solvent storage above threshold quantities triggers secondary containment and separate storage requirements. Establish the solvent inventory before you establish the building.
Diligence checklist
- Classified-space design documented by the mechanical and electrical engineers
- Gas detection and emergency power-off scoped and permitted
- Solvent inventory against threshold quantities
- Secondary containment and separated storage where triggered
Step 06
Zoning diligence
Permitted use and conditional use are different assets at different prices.
Determine whether cannabis is a permitted use or a conditional use in the district, and confirm how buffers are measured locally. The state rule for adult-use is parcel line to parcel line; local ordinances vary and some measure door to door.
Check density caps and how many licenses remain available per district. A permitted district with no remaining license capacity is not a site.
Expect a conditional use permit with public hearings, and price the schedule and the political risk into the contingency structure.
Diligence checklist
- Permitted vs conditional use in the specific district
- Buffer measurement method — parcel line or door to door
- Density caps and remaining license availability
- CUP process, hearing calendar and approval history
Step 07
Timeline
Sequence diligence against the utility, not against the closing date.
Weeks 2–6: zoning screen and utility diligence run in parallel. Nothing else should be spending money yet.
LOI with contingencies explicitly tied to utility capacity — not a generic feasibility period. The contingency has to name the deliverable: a utility capacity confirmation.
Weeks 10–24 and beyond: building permit and plan check, with the conditional use process and the Certificate of Occupancy sequenced ahead of CRA pre-licensure inspection.
Questions
Site selection questions
- What kills most cannabis real estate deals?
- Electrical capacity. More cannabis transactions fail on available power and utility upgrade timelines than on zoning, price and financing combined. Existing service should be verified at the equipment, and the utility should confirm feeder capacity and the upgrade path in writing before the feasibility period expires.
- How do you size HVAC for a cultivation facility?
- To latent load, not tonnage. Plant transpiration and process heat make moisture removal the governing design constraint, so dehumidification capacity, condensate volume and per-room redundancy drive the mechanical design. A system sized to temperature will hold temperature and lose the room to humidity.
- What does C1D1/C1D2 classification require?
- Ventilation designed to the hazardous classification, gas detection, and an emergency power-off system, all of which are inspected items. Solvent storage above threshold quantities additionally triggers secondary containment and separated storage. Retrofitting classification into an unclassified building is the most common source of processing-budget failure.
- How long does a cannabis site take to bring online?
- Sequence against the utility, not the closing date. Weeks 2 to 6 run the zoning screen and utility diligence in parallel; the LOI contingency should name a utility capacity confirmation as its deliverable; weeks 10 to 24 and beyond cover permitting, plan check, the conditional use process and the Certificate of Occupancy, which must precede CRA pre-licensure inspection.
- How much power does a cannabis grow facility need?
- Plan for 20–40+ watts per square foot of canopy for lighting alone — a 20,000 SF Class C indoor grow typically needs 800A to 1200A of three-phase service once HVAC and dehumidification are added. Lighting technology and canopy density drive the range. Build a bottom-up load schedule from nameplate ratings; never size off a listing sheet. Full answer →
- What ceiling height do I need for an indoor cannabis grow?
- Plan on 14–18 feet of clear height minimum for single-tier canopy once ducting, dehumidifiers, lighting and canopy depth are stacked, and 24 feet or more if the design uses multi-tier or vertical racking. Clear height under the lowest obstruction — not eave height on a listing sheet — is the number that matters. Full answer →
- What is C1D1 and do I need it for extraction?
- C1D1 (Class I, Division 1) is a hazardous-location electrical classification required where flammable solvent vapors are present continuously during normal operation, such as open-loop hydrocarbon extraction. It requires classification-rated ventilation, gas detection and an emergency power-off system, and is a code condition, not a room label — retrofitting it into an unsuited building is expensive. Full answer →
- What should I look for in a cannabis warehouse?
- Verify electrical service and utility upgrade capacity, clear height and roof loading against the mechanical design, water and drainage infrastructure, hazardous classification feasibility if extraction is planned, and zoning: permitted versus conditional use, buffer measurement method, and remaining license capacity in that district before treating any warehouse as a viable site. Full answer →
- How much does a dispensary build-out cost?
- A retail-ready shell with adequate electrical and restrooms typically builds out for $50,000–$150,000. A full renovation of a non-retail building — adding security vestibules, a vault, camera systems and code-compliant restrooms — commonly runs $200,000–$400,000 or more, depending on the municipality's specific security and signage ordinance requirements. Full answer →
- Should I buy or lease my cannabis property?
- Buy if the license and the real estate are meant to move together long-term and capital is available; lease if capital is scarcer, the license transfer market is uncertain, or the operator wants exit flexibility. Leasing also depends on finding a landlord willing to accept a cannabis tenant, which remains a limited pool. Full answer →
- What is a cannabis sale-leaseback and why do operators do them?
- A sale-leaseback lets a cannabis operator sell owned real estate to an investor and immediately lease it back, converting illiquid equity into cash for expansion, debt paydown or working capital while keeping full operational control of the building as a long-term tenant rather than an owner. Full answer →
- Why do cannabis properties trade at higher cap rates?
- Cannabis properties price at wider cap rates than comparable conventional buildings because the buyer pool is smaller, conventional bank financing is largely unavailable, and the asset's value is partly contingent on a license that can be revoked, non-renewed or non-transferable, all of which investors price as additional risk premium. Full answer →
- Will a bank finance a cannabis property?
- Rarely, and only through a small number of state-chartered or cannabis-specific lenders. Because marijuana remains federally Schedule I, most FDIC-insured banks avoid lending against cannabis-licensed real estate entirely, leaving private cannabis lenders, seller financing and equity partners to fill the gap that conventional commercial mortgages would otherwise cover. Full answer →
- What happens to a cannabis property if the tenant loses its license?
- The lease typically becomes unenforceable at the licensed use, rent usually stops, and the landlord must either find a new licensed tenant, convert the building to conventional industrial or retail use, or pursue the defaulting tenant's assets — often through receivership, as with TerrAscend Corp.'s May 2026 Michigan receivership across 20 dispensaries. Full answer →
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