For many cultivators, future expansion is a vague plan to someday build a second facility or expand an existing facility. This is usually after some positive cash flow makes the round two investment more palatable. Still, there are other cases where expansion plans within a market are more specific and can be developed early on. For these businesses, it is possible for them to greatly reduce their capital expenditures and time to market. With that in mind, let’s discuss the variables involved in phased buildouts and expansions in commercial indoor cannabis cultivation.
Finding the perfect piece of real estate is usually fairly challenging for cultivators. In most markets, the state and local municipalities have very specific rules around where cultivators can build. This creates a limited pool of options. Furthermore, the availability of utilities (or cost of upgrading utilities) will vary considerably. Insufficient infrastructure can quickly eliminate an otherwise great location from consideration. Cannabis businesses often find themselves paying a premium when a piece of property lends itself well to their operation on all fronts.
When planning for phased expansions, whenever the budget allows, cultivators would do well to lock in land or square footage sufficient to support their eventual expansion during the initial search. While not always feasible, this strategy saves both time and money in the long run by eliminating the time spent searching for new real estate. It also allows for locking in the lease or purchase price based on current market conditions. As in most markets, this avoids experiencing a decrease in available inventory (and increase in real estate costs).
This strategy is more costly upfront. But it eliminates costs associated with moving existing operations, or managing cultivation operations at two different sites. Additionally, it ensures the availability of real estate in the long run.
Cultivators building their first facilities are unlikely to have a fully fleshed-out floor plan for their future expansions. The first grow is always a learning experience. But the second usually benefits from those lessons learned! (Consequently, cultivators benefit from working with design professionals that have a lot of experience in the space for this very reason). However, the more design work that can be done at the beginning of the project, the less costly and the faster each phase of the project will be.
This isn’t to say that every component must be fully fleshed out. There are a number of layers from concept to fully-formed architectural, civil, structural and mechanical, electrical, plumbing (MEP) plans. However, the more information that’s available about the ultimate plan for the facility or campus, the more allowances and pre-planning can be done during the early stages of site work and construction. This will allow for reduced costs and the smoothest possible project execution. Even a general sense of square footage for each stage of growth, lighting wattage, and other processes that may take place in the building can be very helpful for establishing certain infrastructure requirements.
Experienced cultivators (or growers working with experienced design teams) will also be privy to cost-saving approaches to well-planned phased buildouts. Some examples of such tactics include:
- Designing for larger footprints. This will usually drive down the cost per square foot of the design work.
- Understanding the phasing plan early on. As we’ve discussed, this will allow the design team to look for opportunities to make decisions that lower the overall long-term costs of construction.
- The design team may select a prefabricated metal building (when appropriate). This would easily tie-in to the existing building and can reduce building construction costs.
- On large campuses where chilled water is often selected as a climate control option, designing a central chiller plant to serve all phases of construction, as opposed to dedicated units for each phase, can significantly reduce overall HVAC costs and improve redundancies in parallel.
These are just a few examples as there are a number of ways to take advantage of economies of scale.
Availability of utilities, and the cost for upgrading, must be carefully considered for all phases of construction. It is ideal to have a cost established for all phases of work that will eventually take place. Ideally, the power upgrade for the entire campus (or phased building) can be purchased during phase one. This will result in the lowest ultimate cost and reduce unpleasant surprises down the road.
When this isn’t possible, cultivators should have a discussion with the utility provider about the additional costs associated with phasing the power upgrade. They should also fully assess any risk that an upgrade might be more expensive (or unavailable) down the road. Essentially, this means having at least an order of magnitude understanding of the power, water and sewer requirements for each phase of construction. This goes back to fleshing out building plans for future phases as much as possible. Doing so ensures that the utility requirements are at least somewhat understood ahead of time.
Apart from the design, pre-planning, and utility considerations for a phased build out, there are the practicalities of executing on the construction of facility or campus expansions. Whether building out additional square footage in existing structures, or adding buildings to a campus, allowances must be made for the construction process. This ensures that future phases of construction don’t negatively impact existing operations. It also helps to prevent existing operations from slowing down future phases of construction.
Workflows, processes within the existing operation, and access limitations must be well understood by the construction team so that there are no inadvertent disasters with an in-process crop. Existing operations must be completely isolated from construction operations to avoid crop damage or contamination. In some cases, utilities may be impacted by construction operations, which must be carefully planned and scheduled to avoid disruption. (And contingency plans are never a bad idea). Cultivators must also consider the safety of cultivation employees as they enter and exit the building and work areas. Conversely, access for the construction team must be as unencumbered as possible to minimize costs and delays. Such situations to take into account include cranes and large trucks entering a campus to deliver equipment and building materials. It could also include workers accessing the facility.
Regardless of how complete long term plans are at the beginning of construction, understanding requirements for construction access and doing everything possible to minimize conflicts between existing operations and construction activities will make life easier for all involved.
PHASED PLANNING WITH SURNA
Despite having hundreds of projects under our belts, Surna is always excited to hear about each of our clients’ unique approaches to tackling the industry. From small craft facilities to large big box style cultivation, and from sterile, cGMP compliant facilities to open air greenhouses, we’ve seen it all. However, with all the variances in approaches to business planning or cultivation methodology among our clients, there is one common strategy we hear from every new (and most mature) cultivation business. They are always planning to expand their cultivation operations down the road.
A design and construction team with experience in phased buildouts of cannabis facilities is an invaluable asset to the cultivator with aspirations for the future. Luckily if you are reading this, you have taken the first step to connecting with a group of MEP engineers that fit the bill. We can help to identify opportunities for cost savings in nearly every part of the process. (Especially if the long-term plans are well understood). And having curated climates for cannabis growers since 2006, we have an unparalleled appreciation for the varieties of methods and hurdles that accompany marijuana cultivation. If you are ready to discuss your future plans, contact us!