Higher Risks

The legal marijuana market is growing faster than a weed across the United States. It reached US$7 billion last year, according to an estimate by New Frontier and ArcView Market Research, and could bloom to US$30 billion by 2021 if all 50 states legalize marijuana in some capacity, according to GreenWave Advisors. Twenty-eight U.S. states and Washington, D.C.—which together contain about 60 percent of U.S. residents—now have legalized the drug in some capacity.

Pot shops are popping up to meet rising demand, but these construction projects aren't so mellow. Shifting requirements at the local and state level mean project managers have their work cut out for them.

The legal marijuana market in the United States could bloom to US$30 billion by 2021 if all 50 states legalize marijuana in some capacity.

Source: GreenWave Advisors

Requirements management proved one of the biggest challenges during a recent medical marijuana dispensary construction project, says Sean Lamontagne, director of business development, Nadeau Corporation Construction Development & Engineering, South Attle-boro, Massachusetts, USA. The state's regulations cover everything from video surveillance to security booth check-ins to medical marijuana card access. And last November's election delivered a plot twist: Massachusetts voters legalized recreational cannabis. “There's going to be a whole new rule book written for that,” Mr. Lamontagne says.

But it's not just the state-level playbook that can complicate dispensary projects. Enlighten Alaska, a retail store in Anchorage, Alaska, missed its opening deadline late last year in part due to the challenge of complying with the city's building codes.

In Massachusetts, Mr. Lamontagne and his team recently completed construction of two medical marijuana dispensaries for a client who also was building a cultivation facility. Local regulations called for a “dual ribbon-cutting,” which prevented the client from planting any seeds until the retail dispensaries were operational, “so the project schedules had to be running parallel,” he says. When a utility service provider failed to deliver enough power to the 63,000-square-foot (5,853-square-meter) cultivation facility on time, his team had to deal with an unexpected six-month delay. “These commercial agriculture grow operations demand an amazing amount of power for grow lights and cooling,” Mr. Lamontagne says.

The complications that come with dispensaries are one reason Karin Lazarus, founder of Sweet Mary Jane in Boulder, Colorado, USA, shelved project plans to expand her business into a brick-and-mortar shop. (The company's edible baked goods are sold at dispensaries across Colorado.) “The dispensary risks are just so high,” she says. For example, large amounts of cash must be kept on hand because many banks don't do business with marijuana industry businesses due to the drug's federal prohibition. (While banks seek to avoid violating federal anti-money-laundering laws, in recent years the U.S. government has chosen not to enforce laws prohibiting the sale and consumption of marijuana in states where it is now legal.)

Ms. Lazarus cautions project teams in the design phase to keep end users in mind from the start. In Colorado, for instance, marijuana is legal for both medical and recreational use—but dispensaries must have separate entrances for each group of customers. “So if you've built a recreational dispensary and decide to pursue a medical license, or vice versa, you'll have to renovate your facility with a separate entrance, as a recreational user may not enter the medical side,” she says.

Uruguay's Unique Approach

The United States isn't the only place where pot projects support retail sales. But Uruguay, where the drug was legalized in 2013, has taken a different regulatory approach: The national government is tightly regulating production and sales.

Last year, the world's first state-commissioned marijuana cultivation facility opened near Montevideo, Uruguay's capital. The government is allowing pharmacies around the country to stock the drug—but they can only sell to residents who have registered and submitted their fingerprints to a government database.

Knox Medical, a medical marijuana provider based in Winter Garden, Florida, USA, is forging ahead this year with projects to build at least five new storefronts. The construction projects are all retrofits, but each required a careful eye for detail. “We made an extra point of collaborating closely with the municipal government to meet and exceed the zoning and land use laws,” says Adam Sharon, a spokesperson for Knox Medical in Washington, D.C., USA. His team is also anticipating potential regulatory shifts: Some local stakeholders want to prohibit marijuana dispensaries from locating within a certain distance of schools and churches. Though the regulation doesn't yet exist, Mr. Sharon's team kept such land-use restrictions in mind when choosing project sites.

“We want these dispensaries to be a source of pride and an asset to the community.” —Kate Rockwood

“These commercial agriculture grow operations demand an amazing amount of power for grow lights and cooling.”

—Sean Lamontagne, Nadeau Corporation Construction Development & Engineering, South Attleboro, Massachusetts, USA

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