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Growing Cannabis is Cheaper in Washington State

By in Bellingham Commercial Real Estate with 0 Comments

It’s no secret that the Washington State cannabis industry is flourishing since the passing of I-502 in 2012. With Washington State 2017 annual sales exceeding 1.48 Billion dollars for the entire sector, business owners and consumers have plenty to be excited about[1] .

With just over 600 licensed producer-processors working to fulfill demand for the 390 licensed retailers in Washington State, there is a wide variety of strategic visions for all companies involved in the sector[2]. Some producers are choosing the mass market approach, attempting to capitalize on economies of scale, while others are choosing to focus on small batches, emphasizing quality of product. Many are focusing on a specific market share with niche products like concentrates, edibles, tinctures, topicals, etc.; the sector as a whole appears to be moving into the future with confidence in future growth. 

Growing Cannabis Cheaper in Washington State

So, what exactly is the future of Cannabis in Washington State? For that answer, we should look to our neighbors up north. In August of 2018, Constellation Brands Inc. acquired a 38% stake in Canopy Growth Corporation, one of Canada’s largest vertically integrated cannabis companies for a whopping 5.08 billion Canadian dollars (US 3.88B)[3] . The company that brought you Corona, Modelo, and Svedka is betting on the future of Cannabis. This is bound to be the first domino to fall, as others are surely soon to follow. Whether it’s companies that have historically focused on alcohol, tobacco, or any other vice, clearly, the biggest players in the game believe that Cannabis is here to stay, and that it’s best and brightest days are ahead.

So what is it about Washington State that makes the industry so attractive? Is it the general acceptance of the Cannabis culture? Perhaps, but from a business perspective that’s not enough to drive the decision making process. We at North Sound Commercial speculate that Washington State has become, and will continue to become a hub for Cannabis production because of the competitive costs associated with the growing process, specifically, the discounted costs of energy.

Washington State has the 3rd cheapest costs of electricity in the entire country, falling only to Idaho and North Dakota[4]. The commercial costs of electricity in Washington State per kWh are 17% less than the national average, and the industrial costs are even cheaper, at 38% less than the national average[5]. Washington State “offers businesses the largest coordinated hydroelectric system in the world; nearly 75% of power is derived from the many rivers that flow through the state[6].” If you are looking for production location consider Blaine or Bellingham for an industrial building site. The commercial real estate in Bellingham is a strong market with a socially liberal population.

If producer-processors can decrease the costs of one of the largest inputs by upwards of 25% in a manner that is sustainable and environmentally friendly, it’s really a no-brainer for them. With the possibility of federal legalization in years to come, Washington State will continue to thrive as a focal point for production, perhaps one day fulfilling the needs of the entire country, if and when the time should come.

We are after all, the Evergreen state.

[1] https://www.topshelfdata.com/industry/wa
[2] https://www.topshelfdata.com/listing/any_license/state/wa
[3] https://www.wsj.com/articles/constellation-brands-expands-investment-in-cannabis-company-canopy-growth-1534332997
[4] https://www.npr.org/sections/money/2011/10/27/141766341/the-price-of-electricity-in-your-state
[5] http://choosewashingtonstate.com/why-washington/our-strengths/low-cost-energy/
[6] http://choosewashingtonstate.com/why-washington/our-strengths/low-cost-energy/

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