As Bay City Flower Co. nears its final day of operation, much of the land it has occupied is up for sale. And property owners, who said they couldn’t afford to operate a floraculture business on the coast, could be in for a windfall.
The four properties combined could sell for as much as $80 million, and three of these properties are marketed as available for cannabis or hemp cultivation, according to listings on the commercial real estate listing site LoopNet.
As cannabis cultivation continues to raise land prices in some areas and affect the agricultural landscape across the state, counties are experimenting with ordinances to regulate the industry and protect existing agriculture.
The flower company’s executives declined to comment, but its initial published statement said company operations were too expensive to continue. As a result, hundreds of local people lost their jobs.
The closure of a floraculture business on the coast is nothing new. It follows with historical trends that have affected the flower industry for years. What has changed is the legal status of cannabis.
The Bay City Flower property listings say, “cannabis cultivation is permitted per San Mateo” and the property is “excellent for cannabis or hemp” or “this property is approved for use as a cannabis nursery and for hemp.”
Although the properties that lie outside city boundaries are designated as agricultural lands, any would-be grower would have to go through the county’s extensive licensing requirements to know for certain. San Mateo County Senior Planner Michael Schaller said some of Bay City’s parcels could be too close to residentially zoned properties or have issues with water sources. These are factors that would be considered in the licensing process. Schaller said he’s received general inquiries about one of the properties that is under contract at the time of this article.
“The first six months or so after the (cannabis) ordinance passed, there was a sense of ‘it’s a new gold rush,’” Schaller said. “It’s tapered out in the last six months.”
The county passed its ordinance in December 2017 allowing cannabis cultivation in areas designated “agriculture” in the general plan. Lands must be set back at least 1,000 feet from residential parcels, schools, youth centers, playgrounds and alcohol or drug treatment facilities, among other restrictions.
But a unique provision in the county’s ordinance is an “agricultural production protection” provision. It says cultivation cannot displace existing agricultural production that existed on or after June 1, 2017. The existing agricultural production can be moved to another area of the property to make room for cannabis cultivation.
“The whole intention was not (to) displace existing agriculture that might be ongoing within these greenhouses,” Schaller said.
Other counties have taken steps to prevent this in different ways. In Monterey County, as the cut-flower industry began to struggle against foreign competition, farms started closing leaving decrepit, empty greenhouses behind, Monterey County Farm Bureau Executive Director Norm Groot said.
To find a use for these greenhouses and protect existing farms, Monterey County limited commercial cannabis cultivation to indoor growing in existing properties, Groot said.
“We all wanted to look in a crystal ball and see what was going to be the outcome,” Groot said. “... Everyone thought they’d be competing for the same workers, but that’s not the case. We have not seen that cannibalization, so to speak, from regular crops to cannabis.”
According to Groot, this provision has largely prevented other crops from being pushed out even though values did rise for land with empty greenhouses.
“It didn’t impact other farmlands because greenhouse operations were completely different ... but that was a bit of the concern at the beginning,” he said.
In Sonoma County, farmers have seen this transition from one cash crop to another before. There are parallels between the county’s historical wine production and the new frontier cannabis presents to the region.
Until Prohibition, Sonoma County was the leading wine-producing county in California, according to a 1977 report in the California Geographer and Sonoma County’s historical resources. But Prohibition and the Great Depression caused wineries to shut down and a new cash crop emerged.
Prune orchards were the dominant crop leading up to the resurgence of grapes throughout the 1970s. William Crowley, who was a professor of geography at Sonoma State College, found the county lost 11,000 acres of prunes between 1965 and 1975, in addition to losses in apple and pear orchards.
University of California, Berkeley, Ph.D. candidate James LaChance published a report with California Agriculture featuring interviews with farmers in Sonoma, Humboldt and Mendocino counties. The transition from fruit orchards to grapes in the 1970s is still on the minds of some older Sonoma County farmers. However, the farmers he interviewed from Sonoma, Humboldt and Mendocino counties also acknowledged that transitions that occur within agriculture are a fact of farming life.
Sonoma County, which does allow for outdoor growing, imposed size limits on parcels that vary based on the type of cultivation, such as nursery indoor or nursery outdoor. This differs from what San Mateo County has done, which refers to the limits set by the state’s standards.
Ben Schwab, a professor in the department of agricultural economics at Kansas State University, has studied the effects of legalization in Humboldt County, one of the largest cannabis-producing regions in California.
The concerns are different in Humboldt County, where cannabis is a major crop. Schwab’s research in California Agriculture found that from 2012 to 2016 larger farms were more likely to go through the permitting process than smaller farms and newer farms.
In another research paper that is under review, Schwab found that land prices in Humboldt County have increased for properties that are eligible for cannabis cultivation.
“If you’re looking to get into ranching or farming and looking for undeveloped agricultural land, you’re going to be facing higher prices, certainly,” Schwab said regarding the potential implications of his findings. His working paper states that “other more traditional land uses, such as ranching or row crop agriculture,” could be priced out.
Whether these high prices will last is unknown, Schwab said, especially with the changing price of
“I think a big element of what
cannabis production looks like is going to hinge on local rules,” Schwab said.
For now, San Mateo County’s legal commercial cannabis cultivation industry is almost nonexistent with only two applications. Planner Schaller said most projects coming through his department are still single-family houses.