Commercial Real Estate: ALR land should be made available for cannabis cultivation: Colliers

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The provincial government should make parts of Metro Vancouver’s agricultural land reserve (ALR) available for the soon-to-be-legalized cultivation of recreational cannabis, says Colliers International.

Using greenhouses on portions of the least-arable ALR land would provide a viable alternative to Metro Vancouver’s scant industrial land for cannabis production, the property brokerage said in a recent white paper.

Doing so would allow for a viable recreational cannabis production industry here without further squeezing the already-tight industrial market, Colliers said.

Greenhouse cultivation on ALR land would be cheaper than producing recreational pot in industrial spaces, it said, adding that it would also boost the flexibility and profitability of Metro farmland.

The provincial government, through the Agricultural Land Commission (ALC), currently permits the cultivation of medicinal marijuana on ALR land.

Recreational cannabis production should also be allowed on ALR land, otherwise those producers would have to compete for facilities in Metro Vancouver’s already constrained industrial zones, forcing up prices and choking business opportunities for all industrial users, the report said.

“We’re not particularly pro-cannabis or anti-cannabis,” said Andrew Rojek, Colliers’ market intelligence manager for Western Canada. “It’s up to the province to decide whether the recreational cannabis industry is something that we want to be participating in.”

He said the Metro Vancouver industrial vacancy rate is at 1.5 per cent. Bringing in an entirely new industry would only make matters more difficult for local businesses.

“It would be really difficult for these (potential recreational cannabis producers) to find space and compete for space,” he said.

Recent analysis by Deloitte projects that the retail sale of recreational cannabis in Canada could range from $4.9 billion to $8.7 billion in the first year.

“If the province wants to attract these big producers to B.C. then we need to be offering them a place to go and some flexibility around how they can grow here,” Rojek said. “If they’re forced to compete in the industrial market, we’ll potentially lose some of them to other provinces.”

The provincial government is working on a framework to establish where cannabis can be grown, how it will be distributed and how it will be retailed, said Kim Grout, the ALC’s chief executive officer.

“That’s not a decision the commission makes on its own,” she told Postmedia.

“There are still many decisions to be made which are dependent on having better clarity regarding federal legislation and regulation, including those regarding the production of recreational cannabis, both in and outside of the ALR,” a spokesman for the ministry of agriculture told Postmedia in an email.

The ministry had tasked an independent committee to lead a public engagement process to provide recommendations to the provincial government to revitalize the ALR.

That consultation is now complete and includes ideas from 2,300 respondents, the spokesperson said. Commentary on the use of cannabis within the ALR was included in the feedback, the spokesperson said.

The minister’s advisory committee will provide their report with recommendations to the minister this summer.

Gord Robson, a senior associate in Avison Young’s Vancouver office, said he has been working with several cannabis producers in Metro Vancouver.

He said the government should “absolutely” approve the use of ALR land for the recreational cannabis production — specifically lower quality farmland near urban boundaries.

“Production of cannabis for medical users is already an approved agricultural crop, and the thing is that the licensed medical producers will be the same guys supplying the recreational market,” he said. “The approval of cultivating cannabis on ALR land should not be determined by who is smoking it. Hops is allowed to be grown for adult consumption unregulated, why not cannabis?”

He said many of his clients are looking for light industrial space to make and distribute cannabis derivative products.

“One (company) purchased industrial land in the Fraser Valley a few years ago to develop a growing facility,” he said. “All the others are looking for ALR land.”

He said in many cases, zoning bylaws and building codes prohibit setting up cannabis grow operations in industrial buildings.

“Most landlords don’t want them as tenants. Marijuana grow operations wear heavily on a building, require significant alterations and can be a nuisance to neighbouring tenants,” Robson said.

“I don’t think marijuana producers can make sense of buying industrial land or buildings at today’s values when they can purchase agricultural land at prices that are 85 per cent to 95 per cent less in some areas,” he said.

Robson said cannabis producers would need lengthy conditional periods on lease deals in order to work through the licensing issues and due diligence to plan tenant improvements. “That makes them uncompetitive in a market that moves very quickly,” he said.

evan@evanduggan.com

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