3 random commercial real estate thoughts – Orange County Register

Every few months, I purge my inbox with a post such as this — including random thoughts from my daily commercial real estate profession. I hope you appreciate the randomness.

Cannabis – California’s growth industry?

California voters legalized recreational cannabis sales in November 2016 via Proposition 64. Medicinal cannabis has been legal in California since 1996.

However, in Orange County, Santa Ana is the only city to enact a plan to create dispensaries for the legal sale and distribution – medicinal in 2015 and recreational this year. Included in Prop. 64 was a sunrise on the law for Jan. 1, 2018.

Basically, the state said, OK, recreational pot is now legal statewide but cities, counties, municipalities: you figure out how to regulate the sales through local zoning oversight. Hmmm. An interesting conundrum has resulted. It’s legal but only a few dispensaries in Santa Ana can legally sell it.

Oh and by the way, cannabis is still illegal federally. So, things such as banking and small business association loans for plant and equipment acquisition — all under federal purview — are prohibited. Plus, the current administration is adopting a more aggressive stance on the enforcement of the federal law than previous administrations.

Musical chairs

The new tax law should be great for businesses!

Pass-through corporations such as LLCs and Sub S corporations will reap gains from the 20 percent tax deduction and streamlined write-offs for equipment. Bigger companies will benefit from the reduction in corporate tax rates from 35 percent to 21 percent.

Businesses should grow — bolstered by the positive consumer confidence and robust stock market.

Great, right?

Unfortunately, our commercial real estate inventory cannot handle the expansion! Demand has outstripped supply for several years leaving a severe shortage of industrial space. The solution? Move out of state, figure out a way to produce more within existing physical plants, or charge more. Rents…

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