Appraising Cannabis Grow Facilities

With the explosion of the cannabis businesses in this state (Nevada) and others there has come major investments in grow facilities.  Buildings used for this purpose are basically industrial in nature and there are often a number of specialty improvements made to the grow facilities and some of those improvements add to market value while others do not.  It's up to the appraiser to analyze the improvements and make determinations.

Many of the grow buildings that exist in the Las Vegas market were purchased by grow businesses, and some of the improvements made to them are specific to that business.  You don't need huge water tanks, light arrays and water distribution systems for most industrial uses.  Appraisers charged with appraising market value will face the fact that some cannabis grow improvements are specialty in nature.  They may be valuable to another grow business but not to the typical industrial building buyer. 

Things that often do add value to industrial buildings are improvements like; insulation, ceiling height, loading areas / docks, at-grade roll-up doors, evaporate coolers / heaters / air conditioners, finished mezzanines, upgraded electrical power, sprinkler systems, large lots for storage and proximity to rail services.  These are not the only items that add value but they are often sought for by buyers who are willing to pay more if they can find a property with the improvements in place.

In Las Vegas industrial buildings have sold in 2016 and 2017 with an average price of around $ 130 per square foot of gross building area (GBA).  Most of those buildings have an office or showroom build-out of between 10% and 30% of the total building area and most were built in the last 10 years.  That is a generalization that may or may not apply to the analysis of any specific grow facility, but it's a starting point.  Most grow facilities that I have found fall into the 15,000-square foot (SF) to 60,000 SF range, and most have been built or converted for that use in the last two years.

So, cannabis grow facilities are relatively new to the Las Vegas market and most are newly constructed.  There currently isn't a lot of market evidence (if any) that can be used to estimate how much the market would compensate a grow facility owner for their improvements.  It is likely however that a grower would want to restrict a similar use since few want to help their competitor by selling their building to them.

Since many owners of grow facilities have developed buildings without a thought for their market value they may have a somewhat different view of their value.  It may be the case that they had to put a great deal more money into a grow facility than is typical for a normal industrial building user.  It’s a problem for an appraiser since we have to look at improvements like a buyer would and not like a grow building owner would.

For more appraisal information contact Glenn J. Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada based appraiser who can be contacted via email or via his business website known as Appraiser Las Vegas  (http://www.appraiserlasvegas.com), or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/

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