Cannabis real estate basics

Why is cannabis real estate different from other commercial property?

Because the licence follows the address, not the owner. A state regulator approves a specific premises, with a specific floor plan, and the city or county approves that same parcel. California is the strictest example: under 4 CCR 15023, a licence cannot be transferred to another premises, and moving means a new licence. Other states allow a move but only with prior approval. The process is covered in relocating a license.

Four filters shrink the supply of usable sites:

1. Local opt-in. The municipality must allow the licence type at all. See local control and municipal approvals.
2. Zoning and buffers. The parcel must sit in a permitted zone and outside every protected-use buffer.
3. Owner and lender consent. The landlord must agree in writing, and any mortgage on the building must not prohibit the use.
4. Physical fit. Power, HVAC, fire rating, and security layout must suit the licence type.

A parcel that clears all four is scarce. That scarcity is why site control carries so much weight in price, as explained in how real estate control affects value.

What buffer distances apply?

Every state sets a default distance from schools and, often, other youth-related uses. Many let the city shorten or lengthen it, so the local ordinance is the final word.

State	Default state buffer	Local change allowed?
California	600 feet from a K-12 school, daycare centre, or youth centre existing when the licence is issued	Yes, a different radius may be specified
Michigan	1,000 feet from a pre-existing K-12 school; not in an exclusively residential zone	Yes, by ordinance reducing the distance
Washington	1,000 feet from schools, playgrounds, parks, child care, transit centres, libraries, and some arcades	Down to 100 feet, except for schools and playgrounds
Massachusetts	500 feet, entrance to school entrance	Yes, by ordinance or bylaw

How distance is measured, and what happens when a school opens after you do, is covered in zoning, buffers, and conditional use permits.

Why do landlords and lenders treat cannabis as a risk?

Federal law. Adult-use marijuana remains in Schedule I, and 21 U.S.C. 881(a)(7) still permits forfeiture of real property used to facilitate a drug felony. Enforcement against state-compliant businesses has been rare, but the statute is on the books, and most commercial mortgages contain a covenant that the property will comply with all laws.

The practical results:

• Rent premium. Owners of compliant space charge for the risk and the scarcity.
• Protective lease terms. Holland & Knight’s November 2024 note advises landlords to reserve termination rights for federal investigations, licence loss, and legal violations. Buyers must read these clauses closely; see landlord consent and cannabis lease clauses.
• Thin bank lending. SBA loans are closed to marijuana businesses and most banks avoid the collateral, as covered in why SBA and banks are unavailable.

How is cannabis real estate financed?

Mostly without banks. Four sources do most of the work.

Source	How it works	What the public record shows
Sale-leaseback	Operator sells the building to an investor and leases it back long term	NewLake Capital Partners owned 34 properties in 12 states at 31 December 2025, single-tenant, triple-net, with parent or affiliate guarantees
Private mortgage debt	Specialty lenders take a first lien on real estate plus other collateral	Chicago Atlantic Real Estate Finance reported a 15.8% weighted average yield to maturity on $453.1 million of loans at 30 June 2026
Seller financing	Seller carries a note secured by a mortgage on the property	Deal-specific; see seller financing in cannabis deals
Cash or investor equity	Buyer or a separate property investor pays cash	Common where the building and business go to different owners

The trade-offs of the first row are in sale-leaseback with cannabis REITs and landlords.

Property needs by licence type

Licence type	What matters most in the building
Retail	Location, parking, buffer compliance, vault and camera layout. See retail build-out and security requirements
Cultivation	Power capacity, HVAC, water, ceiling height, odour control. See cultivation facility build-out costs
Manufacturing	Fire-code occupancy, classified extraction rooms, gas detection. See extraction facility requirements
Distribution and delivery	Secure loading, vehicle storage, vault space

What does this mean in a business sale?

Treat the site as its own deal item from day one.

1. Sellers who lease should read the assignment clause and talk to the landlord before going to market. A landlord with a veto can stall or reprice the deal.
2. Sellers who own hold two assets. Price the business after charging it a market rent, then price the building separately. The options are laid out in selling a cannabis business with real estate.
3. Buyers should confirm zoning, buffers, lease term, and landlord consent before spending money on anything else. Whether to take title is covered in buying the building with the license, and how the property itself is priced is in cannabis property values and cap rates.

This is general education, not legal, tax, or appraisal advice. If you want to talk through a specific site, you can book a confidential intro call.