Has the California Industrial Real Estate Cannabis ‘Green Wave’ Crashed?

Has the Green Wave Crashed?  Do I need to Convert My Cannabis Use Industrial Property for Non-Cannabis Tenants or Buyers?

California’s cannabis industry has seen dramatic changes over the past few years, the ‘green wave’ has gotten smaller, even flat, and many factors such as over regulation, high taxes, lack of available banking, illicit selling activity and an overall market correction have caused a significant slowdown for industrial real estate owner’s leasing & sales activity across California.  Quite a few commercial real estate owners across California are having to consider non-cannabis users again for their properties. From the Bay Area, to Central & Southern California, the cannabis real estate horizon is not clear.

Should the need arise, converting a cannabis-use industrial building to a non-cannabis use is very doable, but the process needs to be handled carefully to protect value, re-position quickly for marketing, and avoid regulatory or environmental issues. Below is a potential and practical roadmap summary with items to consider and further research with a real estate attorneys, contractors and brokers.

1. Research the Need for Regulatory & Compliance “De-Labeling”

Before anything physical, you might need to confirm the property is no longer legally tied to cannabis.  A good real estate attorney will also be helpful here!

Key actions

Terminate or confirm expiration of:

• Local cannabis permits
• State cannabis licenses (DCC in CA)

Obtain written confirmation from:

• City or county planning department
• Fire department (especially if volatile extraction was permitted)

Remove cannabis use from:

• Certificate of Occupancy (if noted)
• Business license records tied to the address

Why this matters:

Many traditional tenants (logistics, food, aerospace suppliers, light manufacturing) will walk away if the address still shows up as a cannabis facility.

2. Environmental & Odor Remediation – Critical 

This is often the biggest hidden issue.

Odor remediation

Replace or professionally clean:

• HVAC ducting
• Exhaust fans
• Carbon filtration systems

Clean or seal:

• Walls and ceilings since odor embeds in porous surfaces
• Insulation often needs replacement
• Environmental review
• Phase I Environmental Site Assessment (ESA)

Especially important if:

• Extraction used ethanol, butane, CO₂
• Nutrients, solvents, or chemicals were stored onsite
• If issues arise → targeted remediation, not necessarily a full Phase II

Providing a clean Phase I upfront makes your building financeable again and expands your buyer or tenant pool.

3. Remove Cannabis-Specific Infrastructure

Los Angeles & Orange County area industrial landlords should be prepared to take out quite a few cannabis related improvements – most non-cannabis users see this as negative value, not an upgrade.

Common removals

• Grow racks and trellis systems
• High-intensity lighting & extra electrical drops
• CO₂ injection systems
• Extraction rooms (or convert them—see below)

Security features that feel excessive:

• Mantraps
• Bullet-resistant glass
• Internal cages

What to selectively keep

• Upgraded power (a big plus if presented correctly)
• Robust HVAC (after odor remediation)
• Reinforced floors
• Fire suppression upgrades

These can be seen as “high-capacity industrial improvements”, not cannabis leftovers.

4. Consider a reconfigure for “Vanilla Industrial” Users

The space should become flexible again ready for non-cannabis users.

Grow rooms can easily be converted into:

• Warehouse
• Light assembly
• R&D or lab space (non-hazard)

Add or restore:

• Dock-high loading
• Grade-level doors
• Office build-out (10–20%)

Uses that typically lease fastest post-cannabis:

• Logistics or last-mile
• Medical device assembly
• Food packaging (after clearance)
• Aerospace / defense suppliers
• E-commerce fulfillment
• Contractor or trade services

5. Reset Fire & Life Safety Approvals

This step is often overlooked and delays leasing.

There might be a need to remove high occupancy & hazardous materials permits and receive fire department sign off.

A Few Items to Re-inspect:

• Electrical systems
• Fire sprinklers
• Ventilation

Here are a few ‘What Not to Do’ items to Consider:

❌ Leave odor remediation to the next tenant

❌ Assume upgraded power automatically adds value

❌ Market to cannabis users again unless zoning strongly favors it

❌ Ignore lender and insurer concerns

There are many more layers to consider when deciding to shift an industrial property to non-cannabis use, the above are just a few steps in the process.  At California Commercial Realty Advisors, we would be happy to assist with your decision making process and potentially re-position your industrial or commercial real estate.