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Dispensary Construction: How Much Does It Cost?

If you're thinking about opening a retail pot shop, here's what to expect.

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This story originally appeared on Marijuana Venture

As a dispensary builder, one of the most common questions we’re asked is: How much does it cost to build a cannabis dispensary? We usually answer that question with about 20 questions of our own, because no two cannabis retail stores are the same.

Dana Neely | Getty Images

Even when we build dispensaries for national companies that specify the same design and finishes, we face unique circumstances in each state that affect overall project costs. Ultimately, that cost can range anywhere from $350,000 to $3.5 million.

RELATED: 5 Things You Need to Know Before Opening a Dispensary

Building Structure

The first factor in determining the construction cost of a cannabis dispensary is the type of building it is going into. We’ve built dispensaries in vacant strip malls, former pharmacies, old banks, newer banks, a former accounting firm and even a dental office. We’ve also built brand new buildings from the ground up.

– Strip malls: The most cost-efficient dispensary build-out option tends to be a vacant space or “vanilla box” in a strip mall because there are usually adequate mechanicals such as HVAC, plumbing and electrical services in place. The framing layout is usually limited to interior partition walls, and the exterior is already set in place. Unless the front-facing windows need to be changed to mitigate security risks, there’s typically not much exterior work that needs to be done in a strip mall unit.

One measure that could increase the cost of a strip mall build-out is odor mitigation. Some landlords (and municipalities) require tenants to install complex odor mitigation systems so that the cannabis odor doesn’t permeate throughout the other tenant spaces. At Grow America Builders, we’re partial to the smell of cannabis, but the adjoining Gymboree or Men’s Wearhouse may not be. We’ve investigated many different systems for odor mitigation, and have identified many options, most of which have been-value engineered to achieve maximum mitigation at minimal cost.

A dispensary built out in a strip mall typically costs between $500,000 and $850,000.

– Free-standing buildings: Many dispensaries are built out in a free-standing building such as a bank, a restaurant or another multi-use space. The construction costs on these are higher because in addition to the interior renovations and upgrading mechanicals, there will most likely be exterior renovations as well. Unnecessary windows are usually removed and infilled with masonry to reinforce security. New storefront doors and glass typically need to be installed, and many municipalities require “one way in and one way out” egresses with man traps.

An advantage of a free-standing building is much more flexibility with layouts and the ability to customize many aspects of the dispensary. This type of renovation also often requires parking lot improvements and landscaping. However, with this much flexibility the cannabis dispensary can be built with curb appeal in mind and include all the features the client desires.

Renovating an already existing free-standing building can run anywhere between $350,000 and $1 million.

– New construction: Typically, new construction is the most expensive build per square foot. However, when building a dispensary via new construction, there are two important advantages: New construction is the most time-efficient and it allows the client to lay out their dispensary exactly the way they want.

With new construction, there is less risk of encountering unanticipated issues and there are no landlord requirements to accommodate. But with the budget to cover it, the customer gets everything they want. Every aspect of the project is carefully considered and features such as the vault, the cannabis workroom, the point-of-sale area and the reception area are placed in the best possible locations. All aspects are laid out to ensure maximum efficiency at all levels.

Lastly, most new construction is built with an updated concept and modern aesthetic that increases curb appeal and consumer traffic.

A dispensary built from the ground up can cost between $900,000 and $3.5 million.

– Renovating an old building: Retrofitting a free-standing building that is old or historic is the least cost-efficient type of build-out and should generally be avoided. For instance, Grow America Builders was hired to renovate an 88-year-old bank into a new dispensary. After considering the cost of new mechanicals, retrofitting the exterior masonry walls, removing the old vault and asbestos, lead paint abatement, stripping the plaster walls, coring through old precast concrete flooring and considering myriad unanticipated challenges, it would have been more efficient and cost roughly the same amount to build a brand-new building from the ground up.

Why would someone do all this work on an old building? Unfortunately, state limitations and local zoning restrictions sometimes pigeonhole certain properties such that using an existing structure is the only option for a cannabis retailer.

There are so many variables with this option, but when figuring out the costs to renovate an existing building over 75 years old, we usually see the costs start at $600,000 — but regardless of where the construction cost estimates come in, we always advise our clients to budget an additional $100,000 contingency for unanticipated extras. Whether or not they have to dip into that contingency budget, it provides peace of mind to include it.

Size

Cannabis retail shops can be any size. The primary factor is building a dispensary that will accommodate local consumer and patient demand. However, most dispensaries usually fall between 2,500 square feet and 5,000 square feet. The larger the dispensary, the more expensive the build-out — but bigger doesn’t always mean better. A good design-build firm should maximize the layout so that even a space with limited square footage should have all the necessities while not feeling cramped. A smaller dispensary typically costs between $350,000 to $500,000 to build, while mid-size dispensaries will be between $500,000 and $750,000. Large dispensaries will exceed $750,000 and usually run over $1 million.

RELATED: Here's How to Reduce the Cost of Cannabis for Consumers

Finishes

After deciding on the type of structure and its size, the interior finishes will have the greatest impact on the construction cost. Finishes will determine the aesthetic the dispensary will convey. Will it be sleek and contemporary like an Apple store? Or warm and inviting like an apothecary?

– Flooring: Common options are polished concrete, vinyl plank, wood plank and porcelain. Again, as with most other items, there are many variables. With flooring, for instance, polished concrete is usually more expensive than vinyl plank. However, if the existing floor is in bad shape and needs to be ground to a level surface in order to properly lay the vinyl, it may be more cost effective to polish the concrete. We advise our clients to allow a budget of $25,000 for flooring.

– Custom millwork: For a cannabis dispensary, the millwork generally includes a reception desk, point-of-sale case work, bathroom vanities, wall coverings, display fixtures and more. Custom millwork is, as the name states, “custom,” so the overall cost of this item has a large price variance. Some dispensaries will have a limited amount of wall coverings and value-engineered cabinetry and can come in at under $15,000. Other dispensaries will want a “wow” factor with the interior millwork and have hanging displays, walnut wood coverings and high-gloss reception desks and can easily exceed $50,000. This is one of the more subjective categories of a dispensary and is up to the owners’ desires.

– Fixtures: Fixtures may include hanging light pendants, ceiling light fixtures and plumbing fixtures. Light fixtures typically fall within the $10,000 to $30,000 range, with the governing factor being the type of hanging fixtures and in-ceiling fixtures specified.

Plumbing fixtures are dependent upon how many bathrooms are included as well as the overall look desired, but this is not an expensive aspect of the dispensary and most dispensaries can be built with plumbing fixtures costing less than $20,000.

– Hardware: In designing a cannabis retail shop, door handles, closers, Americans with Disabilities Act-compliant grab bars and more must be selected. When working on the finishes, an important question is whether the dispensary is going to be an eye-catching destination that encourages consumers and patients to drive those few extra miles and spend extra time looking at products and accessories. Some companies have done research that shows that a cannabis consumer will assume the bigger, more dramatic dispensary will have better product than the smaller, more ordinary dispensary. If the goal is to have an efficient “in-and-out” dispensary with quick turnover, then there’s nothing wrong with keeping costs down and going with more common finishes. If the objective is a flagship store that will draw people in from neighboring towns with competing dispensaries, then those fixtures should trend toward higher-end, custom choices.

The devil is in the details. No matter what finishes are selected, there’s a level for all dispensary aesthetics.

Security

Every cannabis retail shop must include an alarm and surveillance system that comply with state regulations. Since most states require every inch of a dispensary — inside and out — to be covered by surveillance, security systems can easily cost more than $75,000. Some clients want upgrades that exceed the minimum requirements and may add reinforced doors, access control at every doorway, bomb-proof film on storefront glass, overhead security gates and a specialized vault door. While these added protections are more costly, they provide the dispensary owners with additional security.

The vault is one of the more expensive features when building a dispensary. Choosing the right vault takes careful consideration and planning. There are three main ways to build a vault, each with different costs: prefabricated vault panels, solid masonry block and metal stud framing sheathed with barrier mesh. If estimating all vaults at the same size, a prefabricated vault will be approximately $60,000, a masonry vault will cost approximately $40,000 and a metal stud/barrier mesh vault (if allowed) will run approximately $25,000.

Aside from the method of building the vault, the size of the vault is important. How many people are expected to purchase cannabis throughout the day? Is there an adjacent workroom and, if so, will product be stored there during the day? How much product will be stored on-site overnight? All these questions help determine the size of the vault and, ultimately, the total cost. But keep in mind, when building a new dispensary, the vault should be built for the future and not for the present. Many cannabis companies outgrow their vault within a few years and call us back to increase the vault size.

RELATED: 5 Steps for Dispensary Owners Thinking of Partnering With a Franchisor or Licensor

From Conception to Completion

There are many milestones when entering the cannabis industry, one of which is receiving that coveted retail or dispensary license. Usually, there’s only one chance to get it right. That’s why it’s important to ask the right questions when starting the construction quote process. Take time, be diligent and put together the best, most experienced and qualified team possible. After that, everything else will fall into place with a beautiful new retail space that will be filled wall to wall with happy customers for many years to come.

David Fettner is a managing partner of Grow America Builders, a national design-build construction company focused solely on the cannabis industry. Along with his partner, Mike Kaulentis, Grow America brings more than 20 years of versatile construction experience, offering customers an end-to-end experience from concept through architecture, design and turnkey construction.