Appraisal Techniques in Cannabis Zoning

Pullman & Comley - For What It May Be Worth
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Pullman & Comley - For What It May Be Worth

Adult-use/recreational cannabis is a new frontier for Connecticut towns.  After recreational/adult use cannabis was passed by the State legislature and became effective July 1, 2021, towns were left to decide how to zone adult use cannabis cultivators, micro-cultivators and dispensaries.  Many towns opted for a moratorium and to revisit the concept in the next year or two.  Other towns opted to pass a zoning regulation which would allow these uses into certain commercial and industrial zones.  However, these uses are not typically allowed “as of right,” rather, most town’s zoning regulations usually contain some special-permit or certificate of location approval criteria which must be satisfied to ensure the siting of the cannabis use will have little to no impact on the surrounding community.

Pullman & Comley recently assisted a cannabis cultivation client to obtain zoning approval in a Connecticut city with a list of similar stylized criteria.  One specific criterion was that the “proposed use will not adversely impact neighborhood property values.”  We enlisted the assistance of a local, well respected, real property appraiser to perform this study and analysis.  The appraiser performed a “Neighborhood Impact Study,” (hereafter “Study”), to determine if the proposed cannabis cultivation use would impact neighboring property values.  The Study analyzed commercial real estate trends in three distinct ‘study areas’ in Connecticut of approximately one quarter to one half mile radius in size.  Each study area contained an existing medical cannabis cultivation and production facility. 

The analyses performed for each of these study areas included several forms of comparable lease analyses.  In one study, leases for commercial/industrial spaces within the study area were compared to comparable spaces outside of the study area, which were far removed from the cannabis facility.  Another study compared the industrial inventory within the entire study area versus the industrial inventory for the entire town.  That examination analyzed both vacancy rate and asking rent trends.  Data from this study allowed us to determine if any negative trends were due to impacts of the cannabis facility or were simply trends in a much larger segment of the market.  The data reported also included time periods prior to, and following, the entry of the cannabis cultivation and production facility into the study area- to determine if the facility impacted nearby vacancy rates or rents.  A few study areas contained nearby residential properties, including single-family homes and an apartment complex.  In those analyses median sales prices and rental rates, respectively, were studied in the control group versus the town-wide market. 

The appraiser concluded, based on the above analysis, and an examination of the buildings and uses in the neighborhood of our client’s proposed facility location, that the proposed cannabis cultivation and production facility would not negatively impact market values.  This case study proves that appraisal techniques can be effective tools, not just in real property valuation arenas like real property tax appeals, – but also in budding arenas like recreational cannabis facility zoning.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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