Tenant Improvements vs Ground-Up Construction for Dispensaries

• Tenant improvements and ground-up builds carry very different risks
• Timelines are driven more by approvals than construction type
• Existing buildings introduce hidden constraints
• Ground-up construction offers control but increases complexity

Dispensaries are typically built using one of two approaches. Either an existing retail space is converted through tenant improvements, or a new building is constructed from the ground up. Both options can succeed, but they introduce different timelines, costs, and regulatory considerations.

Tenant improvements adapt an existing space to meet dispensary requirements. While this approach can reduce upfront construction scope, it often introduces hidden constraints such as structural limits, outdated systems, and landlord restrictions.

Existing buildings were rarely designed for regulated cannabis retail. Ceiling heights, column placement, utilities, and access points can limit design options. These constraints often surface late in the process.

Ground-up construction allows full control over layout, security, and infrastructure. This flexibility can simplify compliance and reduce long-term operational friction. However, it introduces additional approvals and cost exposure.

Tenant improvements are often assumed to be faster, but permitting and inspection timelines can erase that advantage. Ground-up projects take longer upfront, but may encounter fewer midstream design revisions.

Tenant improvement projects carry discovery risk, where unknown conditions trigger changes. Ground-up projects carry execution risk, where scope and coordination drive outcomes. Understanding these risks informs better decisions.

The right build approach depends on location, timeline tolerance, capital structure, and long-term operational goals. There is no universal best option, only the option that aligns with your constraints.