A Marijuana Land Rush Is Underway in Northern California
The voter initiative that would legalize marijuana in California isn't even officially on the ballot yet, let alone approved by the voters, but the prospect of legal weed is already driving a real estate bubble from the San Francisco Bay on up to the state's pot cultivation heartland in Northern California's Emerald Triangle.
The Adult Use of Marijuana Act (AUMA) would open up the nation's single largest marijuana market, and investors with dollar signs in their eyes are moving fast to snap up rural properties up north, as well as Bay area warehouses and office space.
The boom is also driven in part by the state legislature's belated passage of statewide medical marijuana regulations, bringing clarity and new opportunities to what has been a chaotic, clouded, albeit highly profitable, medical marijuana industry.
And now it has long-time growers, conservationists and others worried that it could threaten the local culture and increase the environmental damage already being wrought by greedy growers who steal water, pollute streams, level off hill-tops, poison the soil with pesticides and chemical fertilizers, and otherwise trash the area in pursuit of pot profits.
That's especially true among the redwoods and the pot grows of the Triangle, consisting of rugged and sparsely populated Humboldt, Mendocino, and Trinity counties, the ancestral home of California's booming marijuana industry.
Pot's already big business up north: There were an estimated 8,000 to 10,000 pot growers in Humboldt County (pop. 134,000) in 2012—a number that has almost certainly increased since then—while in Mendocino County (pop. 88,000), a county commission report in 2010 estimated that marijuana accounted for an astounding two-thirds of the economy.
Now a lot of people think it's going to get a lot bigger, and they want in on the action. According to the San Francisco Chronicle, land speculators in Humboldt and, to a lesser degree, Mendocino, are snapping up every rural property that comes on the market, from old ranches to logging tracts and remote forested parcels.
"It’s like a gold rush," Kevin Sullivan, a Humboldt County real estate broker with several recent large ranch sales under his belt told the Chronicle. "People are coming from all over the place, from different states, and they’re all buying to grow or to split the land up for multiple people to grow. It’s pot on crack, and it’s driving prices up."
Big ranches are especially desirable properties, said real estate agent Jim Redd, who specializes in such sales in both counties. Those ranches, which can run to 5,000 acres or more, are attracting consortia of buyers, who seek to subdivide them into a dozen or more grow sites. The interest has driven prices up from $1,500 an acre to $4,000.
"There are not many large ranches that go on the market, but if they do they are gone within a week," Redd said. He cited one on the remote Humboldt coast that got 25 offers in a week. It went to a marijuana grower.
Humboldt is especially fertile country for pot growing. Not only is it by now home to multi-generational growing families, the county government was the first in the state to adopt a commercial marijuana cultivation ordinance. County officials have to a large degree embraced the local economic mainstay, but that doesn't mean everybody's happy with what's going on.
Robert Sutherland, founder of the Humboldt Mendocino Marijuana Advocacy Project, is one of them. His group has filed a lawsuit seeking to block the ordinance, claiming it will encourage environmental damage.
"We’re talking to a very large degree about absentee owners trying to get in on the ground floor," Sutherland said. "The county in their policies of non-enforcement and overly liberal allowances has waved a green flag at the world and said, ‘Come here.’ As a result, we’ve had a huge influx of people snapping up land and showing no respect for the environment, for the community or for the law."
"The way people are behaving is like multinational corporations in Third World countries," said Sunshine Johnston, 43, who runs a growers' cooperative called Sunboldt Grown that sells medicinal and "artisanal" weed. "There’s a feeling of a free-for-all and of people taking advantage of the local community."
And taking over the natural patrimony. The Wildlands Conservancy, which through years of work has bought 150,000 acres of forest and coastal wildlands, creating 15 nature preserves, told the Chronicle it had recently lost out to pot growers in an effort to buy a 6,500-acre ranch on the Eel River.
"It’s extremely unfortunate," said David Myers, the group's executive director. The Conservancy was ready to sign a purchase agreement for $15 million when the growers offered $20 million and got the property.
The Conservancy is trying to make a deal on another property, but it only has a month to raise $2.3 to finalize it, and the pressure is on.
"We have to close this deal, or else it goes to pot growers. That’s the sad truth," Myers. "We’re trying to make a last run at some of these properties before they’re split up and sold off to pot growers. I see it as the last chance to preserve some of these great spaces."
In between San Francisco and the Emerald Triangle lies Sonoma County, a land of vineyards and organic farms, but also a significant player in the pot industry. Its largest city, Santa Rosa (pop. 157,000) is the last urban outpost of the Bay Area megalopolis on the highway headed north.
It's seeing a pot-related real estate boom, too, with private equity firms, venture capitalists, and experienced industry operators are moving fast to gobble up commercial properties, although the North Bay Business Journal, credits it more to the coming into effect of statewide medical marijuana regulation than to looming legalization.
Marijuana industry buyers looking to grow or produce pot products such as edibles or oils have snapped up 200,000 square feet of industrial and commercial properties in southwest Santa Rosa recently. The light industrial vacancy rate is down to 3% and competition is getting tough, growers' advocates and real estate agents told the Journal. That's because the county's location makes it great potential hub for the industry.
"The scale of it is phenomenal," veteran Santa Rosa marijuana attorney Joe Rogoway told the industry newsletter. "It’s more dynamic climate than it ever has been. Cities and counties are working to permit these activities the quickest. Just for Santa Rosa, we’re seeing people who have always been here formalizing what they’re doing. By regulating what’s happening, then they can collect taxes."
"Sonoma County is set up to be the biggest player in producing the raw product in Northern California," said Tawny Logan, executive director of Sonoma County Growers Alliance.
Meanwhile, an hour's drive to the south, the big cities on the bay are already well into the bubble. As the San Francisco Chronicle reported last month, in Oakland, "bubble prices are already baked into the real estate values inside the city's waterfront industrial zone," where the city's first licensed marijuana grows are set for this year or next.
And in San Francisco, already one of the most expensive real estate markets in the country, one Financial District landlord is reportedly charging $1 million in application fees just to lease a small, licensed medical marijuana delivery "co-working space" for $15,000 a month.
The new gold rush is on.