Economic & Planning Systems, Inc.T h e E c o n o m i c s o f L a n d U s e455 Capitol Mall, Suite 701 nSacramento, CA 95814916.649.8010 nwww.epsys.com SACRAMENTO COMPREHENSIVE CANNABIS STUDYLaw and Legislation Committee Study Session #2Land Use, Zoning, and Undue ConcentrationApril 5, 2022 Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 1 OVERVIEW1. Distribution of the industry throughout the City2. Neighborhood impacts3. Undue Concentration Law and Legislation Committee Study Session #2Land Use, Zoning, and Undue Concentration Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 2 CHIEF FINDINGS1.A short-lived spike in industrial rents following legalization appears to have eased.2.Cannabis businesses have not had a negative impact on other nearby retail or industrial uses.3.Cannabis businesses have not had a negative impact on nearby home values.4.Cannabis businesses have not created increases in crime beyond the levels generated by other businesses.5.The industry does not appear to produce negative economic effects on commercial and residential districts.6.Local areas of higher saturation include cultivation and delivery services in Districts 2 and 6.
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 3
0.0M sq ft0.5M sq ft1.0M sq ft1.5M sq ft2.0M sq ft2.5M sq ft2015201620172018201920202021CultivationManufacturingMicrobusinessTestingDistributionDeliveryDispensarySource: City of Sacramento Office of Cannabis Management, EPS.
CANNABIS ECONOMY IN SACRAMENTODispensary revenue has grown 30% per year since 2013Delivery revenue has grown 138% per year since 2018As cultivation space increased, the revenue per square foot decreased – coinciding with drop in prices City of Sacramento Occupied Square Footage by IFGDispensaryDeliveryDistributionTestingMicrobusinessManufacturingCultivation$0$500$1,000$1,500$2,000$2,500$3,0002015201620172018201920202021Source: City of Sacramento, EPS. City of Sacramento Gross Receipts per Square Foot by IFG Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 4
CANNABIS POLICY IN THE SACRAMENTO REGION
Yolo County:95 cultivation licenses 5 storefront dispensaries beginning October 2023El Dorado County:7 storefront dispensaries150 cultivation permits
GEOGRAPHIC DISTRIBUTION OF THE CANNABIS INDUSTRY IN SACRAMENTO Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 6
GEOGRAPHY OF CANNABIS IN SACRAMENTO
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 7
GEOGRAPHY OF CANNABIS IN SACRAMENTO
SECONDARY LAND USE REGULATIONSNot allowed within 600 feet of schoolsCUPs within 600 feet of park are heard at PDCIn C-2 zone, distribution cannot be a standalone useAdditional requirements within 1/2 –mile of light rail stationsStorefront requires PDC approval within 1,000 ft of tobacco retailers (not mapped) Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 8 GEOGRAPHY OF CANNABIS IN SACRAMENTOLicensed Cannabis Businesses by City Council DistrictCity Council District1 2 3 4 5 6 7 TotalIndustry Function Group Cultivation 1 19 0 2 4 63 089Distribution 0 7 0 2 5 21 035Manufacturing 0 6 1 1 4 15 027Transport 0 0 0 0 0 3 03Micro 0 3 0 0 1 2 06Subtotal Production 1 35 1 5 14 104 0 160Lab 0 3 0 0 0 1 04Delivery 0 10 0 11 3 34 058Storefront 0 7 1 10 3 8 130Total [1] 1 55 2 26 20 147 1 252Source: City of Sacramento Office of Cannabis Management, EPS. [1] Includes businesses with active licenses as of July 2021.
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 9 GEOGRAPHY OF CANNABIS IN SACRAMENTO8511225273020406080100120Light Industrial Zone Heavy Industrial Zone Heavy Commercial Zone General Commercial Zone Industrial and Transit-AreaZone Location of Cannabis Businesses by Zoning Designation
Source: City of Sacramento Office of Cannabis Management, City of Sacramento Open Data Portal, EPS.
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 10 GEOGRAPHY OF CANNABIS IN SACRAMENTO0 M5 M10 M15 M20 M25 M30 M1 2 3 4 5 6 7 8Floor Area (Millions of Square Feet)City Council DistrictIndustrial Floor Area (all uses) by Council District Source: City of Sacramento, Sacramento County Assessor's Office, EPS.Industry Functional GroupCannabis Business Floor Area (Square Feet) [1]Cannabis Business Floor Area (Square Feet) [1]Cannabis Business Floor Area (Square Feet) [1]Cannabis Business Floor Area (Square Feet) [1]Cannabis Business Floor Area (Square Feet) [1]Cannabis Business Floor Area (Square Feet) [1]Cannabis Business Floor Area (Square Feet) [1]Subtotal Production26,565 527,868 6,081 30,967 88,502 1,337,514 - Storefront - 27,305 4,000 34,394 9,811 29,265 3,232 Lab - 18,313 - - - 7,942 - Total26,565 540,497 10,081 53,719 92,007 1,320,906 3,232 Source: City of Sacramento Office of Cannabis Management, Sacramento County Assessor's Office, EPS.[1] Includes only the square footage of businesses with an active Cannabis Business Operating Permit[2] Includes properties categorized by the Sacramento County Assessor's office as Industrial, Retail/Commercial, Office.1 7Council District65432 Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 11 DISTRICT 2
55 total BOPs Approximately 1/5thof all cultivation licenses Clusters at:–El Camino and Auburn Blvd–Hwy 160 and Business 80–Arden and Del PasoNE corner of CD-2 has large area of industrial zoning Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 12 DISTRICT 4
10 storefront dispensariesSmall cluster of production uses north of Railyards Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 13 DISTRICT 5
Third-most production BOPs in CityClustered along 24thStreet and 47thAve/Otto Circle Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 14 DISTRICT 6
65% of all production uses in City50% of all industrial floor area in CityEast of Power Inn is zoned nearly all for industrial
COMMERCIAL REAL ESTATE IMPACTS
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 16 COMMERCIAL/INDUSTRIAL REAL ESTATE IMPACTSZones for commercial real estate analysis drawn around each cannabis business or cluster of businesses citywide.Analysis zones varied by type of location and number of cannabis businesses
METHODOLOGY
19thSt & S St - 500’Examples of Analysis ZonesPower Inn & 14thAve ZoneEl Monte & Colfax – 1200’Stockton Blvd – 700’
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 17
COMMERCIAL/INDUSTRIAL REAL ESTATE IMPACTS
Sacramento’s industrial market experienced a slow recovery from the Great Recession but began to see improvement ahead of legalization.Absorption trends highlight the effect of e-commerce with new large format structures dominating recent activity.
INDUSTRIAL MARKET
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 18
COMMERCIAL/INDUSTRIAL REAL ESTATE IMPACTS
Occupancy rates had been pushing higher in the years leading up to legalization, particularly in smaller class B & C buildings.Larger, class A buildings – not typically used by cannabis businesses –saw dramatic absorption spurts
INDUSTRIAL MARKET
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 19
COMMERCIAL/INDUSTRIAL REAL ESTATE IMPACTS
Building on the preceding tightening of the market, a dramatic uptick in rents coincided with legalization.Smaller buildings saw the highest asking rates in 2018, but the largest buildings also saw a dramatic increase in 2018.Following a post-legalization/pandemic decline, rents in smaller, older buildings increased again; however, the latest rent increases do not appear to be cannabis-driven as shown on the following slides.
INDUSTRIAL MARKET
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 20 IMPACTS ON NEARBY INDUSTRIAL SPACECOMMERCIAL/INDUSTRIAL REAL ESTATE IMPACTS93%96%97%96%97%94%97% $- $2.00 $4.00 $6.00 $8.00 $10.00 $12.000.0 M SF10.0 M SF20.0 M SF30.0 M SF40.0 M SF50.0 M SF60.0 M SF2015 2016 2017 2018 2019 2020 2021Citywide Industrial Occupancy & RentOccupiedVacantAsking RentInventory Rent (annual)Source: Costar; EPS.
93%95%97%97%96%91%95% $- $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.000.0 M SF5.0 M SF10.0 M SF15.0 M SF20.0 M SF25.0 M SF2015 2016 2017 2018 2019 2020 2021All Cannabis Zones Industrial Occupancy & RentOccupiedVacantAsking RentInventory Rent (annual)Source: Costar; EPS.
Industrial space near cannabis businesses experienced a surge in rental rates in 2018, which then abated. Citywide, recent rent increases outpace those of 2018.
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 21 D1 & D2 INDUSTRIAL – DISTRICTWIDE & CANNABIS ZONESCOMMERCIAL/INDUSTRIAL REAL ESTATE IMPACTS 90%95%97%92%96%96%97% $- $2.00 $4.00 $6.00 $8.00 $10.00 $12.000.0 M SF0.5 M SF1.0 M SF1.5 M SF2.0 M SF2.5 M SF3.0 M SF3.5 M SF2015 2016 2017 2018 2019 2020 2021Council District 1 Industrial Occupancy & RentOccupiedVacantAsking RentInventory Rent (annual)Source: Costar; EPS.
93%93%100%100%94%93%94% $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.00 $10.000.0 M SF0.1 M SF0.2 M SF0.3 M SF0.4 M SF0.5 M SF0.6 M SF0.7 M SF0.8 M SF0.9 M SF2015 2016 2017 2018 2019 2020 2021D1 Cannabis Zones Industrial Occupancy & RentOccupiedVacantAsking RentInventory Rent (annual)Source: Costar; EPS.
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 22 D4 & D5 INDUSTRIAL – DISTRICTWIDE & CANNABIS ZONESCOMMERCIAL/INDUSTRIAL REAL ESTATE IMPACTS94%97%97%98%99%95%94% $- $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 $9.000.0 M SF1.0 M SF2.0 M SF3.0 M SF4.0 M SF5.0 M SF6.0 M SF7.0 M SF8.0 M SF2015 2016 2017 2018 2019 2020 2021Council District 4 Industrial Occupancy & RentOccupiedVacantAsking RentInventory Rent (annual)Source: Costar; EPS.
94%97%95%100%100%98%98% $- $10.00 $20.00 $30.00 $40.00 $50.00 $60.000.0 M SF0.1 M SF0.2 M SF0.3 M SF0.4 M SF0.5 M SF0.6 M SF0.7 M SF0.8 M SF0.9 M SF2015 2016 2017 2018 2019 2020 2021D4 Cannabis Zones Industrial Occupancy & RentOccupiedVacantAsking RentInventory Rent (annual)Source: Costar; EPS.
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 23 D6 INDUSTRIAL – DISTRICTWIDE & CANNABIS ZONESCOMMERCIAL/INDUSTRIAL REAL ESTATE IMPACTS (Note: Limited industrial inventory with high occupancy levels in D7 result in a lack of asking rent data.) Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 24 RETAIL CITYWIDE & D4 – OVERALL & CANNABIS ZONESCOMMERCIAL/INDUSTRIAL REAL ESTATE IMPACTS 95%95%96%95%95%94%94% $- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.000.0 M SF1.0 M SF2.0 M SF3.0 M SF4.0 M SF5.0 M SF6.0 M SF7.0 M SF2015 2016 2017 2018 2019 2020 2021Council District 4 Retail Occupancy & RentOccupiedVacantAsking RentInventory Rent (annual)Source: Costar; EPS.
98%99%100%97%97%97%98% $- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.000.0 M SF0.2 M SF0.4 M SF0.6 M SF2015 2016 2017 2018 2019 2020 2021D4 Cannabis Zones Retail Occupancy & RentOccupiedVacantAsking RentInventory Rent (annual)Source: Costar; EPS.
RESIDENTIAL REAL ESTATE IMPACTS
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 26 HOME PRICES AND CANNABIS USESEvery arms-length single family home sale since Jan. 1, 2015. Home Sales Price PSF–Within ¼-mile of cannabis business–Control group between ¼ & ½-mile of cannabis businessCannabis production, dispensaries analyzed separately
METHODOLOGY
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 27 HOME PRICES AND CANNABIS USESRESULTS$200$240$280$320$360$4002015 2016 2017 2018 2019 2020 2021Average Price Per Square FootYear of SaleSingle-Family Home Sales Near DispensariesControlWithin 1/4-mileSource: City of Sacramento Office of Cannabis Management, Sacramento County Assessor's Office, EPS.$140$190$240$290$340$3902015 2016 2017 2018 2019 2020 2021Average Price Per Square FootYear of SaleSingle-Family Home Sales Near ProductionUsesControlWithin 1/4-mileSource: City of Sacramento Office of Cannabis Management, Sacramento County Assessor's Office, EPS.
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 28 HOME PRICES AND CANNABIS USESRESULTS$0$50$100$150$200$250$300$3502015 2016 2017 2018 2019 2020 2021Average Price Per Square FootYear of SaleSingle-Family Home Sales within 1/4 mile of Cannabis ProductionUses in Council District 2ControlWithin 1/4-mileSource: City of Sacramento Office of Cannabis Management, Sacramento County Assessor's Office, EPS.$140$190$240$290$340$3902015 2016 2017 2018 2019 2020 2021Average Price Per Square FootYear of SaleSingle-Family Home Sales within 1/4 mile of Cannabis ProductionUses in Council District 6ControlWithin 1/4-mileSource: City of Sacramento Office of Cannabis Management, Sacramento County Assessor's Office, EPS.
CRIME AND CANNABIS BUSINESSES
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 30 CRIME AND CANNABIS BUSINESSESKEY LITERATURE REVIEW FINDINGSOnly dispensaries are studiedLiterature is mixed on criminogenic effect of dispensaries on surrounding neighborhoodEvidence that enhanced security measures at dispensaries deters crimeLegal cannabis business disrupts existing criminal networks Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 31
CRIME AND CANNABIS BUSINESSESIN SACRAMENTO
318430864794206252050100150200250300
2018 2019 2020 2021Crimes at Cannabis BusinessesLicensed Cannabis Businesses Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 32 CRIME AND CANNABIS BUSINESSESIN SACRAMENTOYear 2018 2019 2020 2021TotalPer Licensed Business TotalPer Licensed Business TotalPer Licensed Business TotalPer Licensed BusinessAverage Annual Crimes per Licensed BusinessIndustry Function GroupCultivation 9 1.00 23 1.05 13 0.19 31 0.350.65Delivery 6 [1] 30 1.67 5 0.10 11 0.190.65Distribution 3 3.00 3 0.38 2 0.07 2 0.060.88Manufacturing 0 0.00 0 0.00 0 0.00 0 0.000.00Microbusiness 0 0.00 0 0.00 0 0.00 3 0.500.13Lab 1 0.25 2 0.50 0 0.00 0 0.000.19Storefront 9 0.30 22 0.73 10 0.33 5 0.170.38Total 28 0.60 80 0.85 30 0.15 52 0.21 0.45
KEY FINDINGS
Economic & Planning Systems, Inc. (EPS) Law and Legislation Committee Study Session #2 | 34 CHIEF FINDINGS1.A short-lived spike in industrial rents following legalization appears to have eased.2.Cannabis businesses have not had a negative impact on other nearby retail or industrial uses.3.Cannabis businesses have not had a negative impact on nearby home values.4.Cannabis businesses have not created increases in crime beyond the levels generated by other businesses.5.The industry does not appear to produce negative economic effects on commercial and residential districts.6.Local areas of higher saturation include cultivation and delivery services in Districts 2 and 6.
Economic & Planning Systems, Inc.T h e E c o n o m i c s o f L a n d U s e455 Capitol Mall, Suite 701 nSacramento, CA 95814916.649.8010 nwww.epsys.com