Now that marijuana for recreational use has been legalized in the state of Colorado, producers are quickly snatching up warehouse space in the Denver area, making it more difficult for business owners to find warehouse space. For example, Steve Badgley, chief executive of Colorado Specialties Corp., a construction-supply business, has been searching for larger warehouse space for more than a year but has been unsuccessful.
In 2012, Colorado and the state of Washington legalized the recreational use of marijuana. Shortly after the law passed, growers and distributors began taking over all available warehouse space throughout the Denver area. Because Denver is the hub used by companies that move goods between the West Coast and the Midwest, this has created a nightmare for other business owners.
The marijuana industry is expanding fast. Last year alone, legal sales for both recreational and medical marijuana use were nearly $700 million. According to Colorado’s Marijuana Enforcement Division, during that same time, retail consumption for people with active licenses to grow marijuana jumped to 397, up from 204.
For business owners in Denver, this is a huge challenge. To grow, package, and store marijuana, producers require a significant amount of space, leaving few options for other businesses. Within the past 18 months, one-third of all warehouse space in Colorado has been gobbled up by growers and distributors.
Not only is the lack of warehouse space an issue for large corporations, it has hit small business owners hard. Badgley’s 7,500-square-foot showroom and warehouse is crammed. In fact, the number of bathroom fixtures, as well as other materials, is so great that getting around is almost impossible. To operate his business, three times the current space is needed. However, few choices coupled with high cost create a big problem.
Large industrial supply chains are also feeling the crunch. Because there is little available space, the cost for logistics and transportation providers is higher. Just last year, rents for warehouse space in Colorado climbed 10 percent. The cost to purchase space doubled to $80 per square foot.
Lack of Warehouse Inventory
Tom Glaspern, managing director for SEKO Logistics in Denver, said that almost all warehouses between 8,000 and 20,000 square feet are used to farm marijuana. Although 22 states and the District of Columbia legalized medical marijuana use in 2000, it was only after recreational use marijuana was legalized in Denver that the investment in industry gained serious speed.
The problem in Denver is the lack of industrial space outside the area, and because no there are no border states where recreational use marijuana is legalized, the majority of growing, processing, and consumption stays within Colorado. Generally, warehouses of 80,000 square feet or less are the target of marijuana growers, the same warehouses used by modest manufacturing companies.
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