A New Demand
Although recreational marijuana legislation is still in its infancy, Illinois lawmakers already released an outline of what a recreational marijuana industry could look like. In the proposal, possession of up to 30 grams of pot would be legal, local governments could opt out of the new law and landlords could restrict or ban the use or cultivation of marijuana on their properties.
Because the product cannot be transported over state lines, marijuana would have to be grown in-state. And it would have to be sold from dedicated retail storefronts. Where it can be grown and sold has yet to be determined, but that decision will play a huge role in a marijuana-related real estate market, sources said.
The Chicago-area industrial market is experiencing highs not seen in years. A new industry that needs ample room for growing and storing could contribute even more demand.
“I think there’s about to be a pretty big boom here,” said Tim McGraw, CEO of California-based Canna-hub, a development firm focused solely on the marijuana industry.
Industry players from around the country have taken notice.
McGraw founded Revolution Enterprises, one of the the first companies to receive a marijuana growing license for Illinois’ nascent medicinal program. He spent 38 years in the state, but left in 2016 for California, which legalized marijuana two years later. Property values have risen in some areas of Los Angeles County because of high demand from cannabis industry tenants and low supply of landlords willing to work with the industry.
McGraw saw an opening in the California market. There he has developed two “cannabis hubs,” or industrial parks specifically for marijuana growers. Canna-hub is one of only a few marijuana property developers in the country, he said.
Like California, Illinois has a large warehouse industry that will help determine where marijuana growers initially set up. Growers will likely be priced out of the hottest parts of the Chicago market, thanks to rent premiums, plus accessory costs like security and insurance.
In Denver, a third of the marijuana industry is within older Class B properties, white the rest is in the least in-demand Class C facilities, according to a 2017 CBRE study of the Denver market. None are in high-end, Class A buildings.
Chicago growers likely would put down roots outside the city to save money, market pros said. For his medical marijuana business, McGraw chose to open Revolution Enterprises’ grow facilities in Barry in southern Illinois, and a 75,000-square-foot growhouse just south of Peoria in Delavan, population 1,700. Cresco Labs, one of the biggest medical marijuana companies in the state, chose Joliet and Kankakee for its grow locations — towns much larger than Barry or Delevan but still a distance outside Chicago.
In addition to the high costs in a place like Chicago, McGraw added, “there’s typically more bureaucracy in a big city, so why would you want to deal with it?”