Startup costs in the cannabis industry

The cannabis industry in the United States has been growing at a rapid pace in recent years, with sales exceeding $30 billion in 2022. As more states continue to legalize cannabis, the industry is expected to expand even further. With this growth comes a surge of entrepreneurs and investors eager to capitalize on the market by starting their own indoor cannabis grow operations.

However, starting an indoor cannabis grow operation requires significant planning and investment. One of the most pressing questions for anyone looking to enter the industry is: how much will it cost?

The average cost to start up an indoor cannabis grow operation typically ranges between $325–$650 per square foot. However, this figure can vary greatly depending on a number of factors, including the size of the facility, equipment, location, and more. In addition, operating costs will depend greatly on the decisions made during buildout and the day-to-day operations after the facility is up and running.

Before beginning to budget for an indoor cannabis grow operation, it’s important to consider the various variables that can impact costs. Coordination with a design team is crucial for developing an accurate budget and ensuring that expectations are aligned.

One major factor to consider is the scale of the facility. A larger space will generally cost more to build out, but there are certain aspects of construction that can become less expensive with increased size. For example, the cost per ton of HVAC can actually decrease with larger spaces, and certain building materials may be less expensive for larger structures.

Other important space utilization factors include the percentage of the facility dedicated to grow rooms and whether or not specialty rooms, such as extraction rooms, will be incorporated.

Design and engineering are also key considerations when starting an indoor cannabis grow operation. Even if an existing building is purchased for retrofitting, architects and engineers are necessary to ensure that the building is equipped for specific cultivation needs. This may involve creating an interior layout conducive to agriculture, completing utility upgrades, and designing an HVAC system that can support the specific environmental needs of cannabis cultivation.

Mechanical, electrical, and plumbing (MEP) engineering and architectural design costs can vary depending on factors such as the size of the operation, the chosen technology approach, and the firm selected. It’s important to compare not only pricing between bids, but also the lists of inclusions, exclusions, and qualifications.

Construction and building modifications are also major expenses that can vary widely depending on factors such as location, construction materials, and whether the building is new or existing. If an existing structure is being retrofitted, demolition and construction will still need to be completed to shape the building to the specific needs of the operation.

HVAC equipment is another significant cost that requires careful consideration. There are many options available, and the price of the system as well as the ongoing energy costs can vary greatly depending on the chosen approach. Knowing the specific temperature, humidity, and VPD ranges needed throughout the grow cycle is key for developing an accurate HVAC budget.

Overall, starting an indoor cannabis grow operation requires careful planning, coordination, and investment. However, with the continued growth of the cannabis industry, the potential for profitability is significant for those willing to take on the challenge.