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00000181-fa79-da89-a38d-fb7f2b600000Region of Boom is a reporting team at KUOW.We are tracking growth in metropolitan Seattle, which is being reshaped by the demands of a fast-growing technology sector led by Amazon. It’s a boom on a grand scale bestowing wealth and opportunity upon some and disruption and displacement upon others. Take a look at where development is happening now and make sure to tell us what is going on in your own neighborhood.Follow the ongoing discussion at #regionofboomThis project is edited by Carol Smith.

A tale of an artist, a pot grower, and Seattle's wild real estate market

When Washington voters legalized recreational pot five years ago, they paved the way for a new industry that includes everything from retail shops to big grow operations.

In Seattle, the new indoor farms and processing plants have set up shop in the city’s industrial areas, where artists have traditionally housed their studios. But contrary to common thinking about art and pot, at least one artist says cannabis businesses don’t make the best neighbors.

Sheryl Andrist runs She Metal, a high-end residential metal fabrication business.  Andrist’s 3,000-square-foot Georgetown studio houses the tools of her trade, including a gas-powered forge and the chemicals she needs for different patinas.

Five years ago, just after I-502’s passage, Andrist was settling into a studio on Harbor Island. At the same time, the city of Seattle set about complying with state law to determine where to locate cannabis-related businesses, including indoor growers.

Regulating the cannabis industry was new territory, says Bryan Stevens, a spokesperson for Seattle’s Department of Construction and Inspections.

“In industrial areas we had to weigh and balance out where these should go, and how big these should be,” says Stevens. “It’s not your traditional maritime or manufacturing business.”

Officials decided to classify marijuana growing operations as urban farms, which are allowed in certain commercial and industrial zones throughout the city. Andrist, the metal fabricator, says “that just happened to be where we were all fighting for space.”

Commercial rents hit a six-year high earlier this year. Vacancy rates, meanwhile, are at records lows around 2 percent, according to a recent study by Collier’s International.

[asset-images[{"caption": "Sheryl Andrist poses for a portrait on Wednesday, July 11, 2018, at She Metal, her business inside Equinox Studios, in Seattle.", "fid": "146254", "style": "placed_full", "uri": "public://201807/MF_Equinox03.jpg", "attribution": "Credit KUOW Photo/Megan Farmer"}]]At first, a small-scale grower moved into Andrist’s Harbor Island warehouse building. He was then replaced by a ‘tier-3’ grower, the largest allowed under city regulations. That’s when “all hell broke loose,” according to Andrist.

The odor from the flowering pot plants was often so overwhelming that Andrist didn’t want her upscale clients to visit the studio.

The last straw for Andrist was electricity. Indoor pot production is power-intensive, and the Harbor Island building wasn’t equipped to handle the demands.

“They were running 70,000-watt lights off a 110 lighting panel,” she says. “It’s like if you took all the Macy’s Christmas lights and plugged them into one outlet.”

One day, Seattle City Light officials showed up at her studio and informed her the power was running so hot that the power line insulation was melting. They shut off power to the building that day, forcing Andrist to stop operations temporarily.

[asset-images[{"caption": "The interior of She Metal is shown on Wednesday, July 11, 2018, at Equinox Studios in Seattle.", "fid": "146255", "style": "placed_wide", "uri": "public://201807/MF_Equinox07.jpg", "attribution": "Credit KUOW Photo/Megan Farmer"}]]By that point, Andrist had already decided to leave Harbor Island. She had signed the lease on her Georgetown studio, so she only lost a few months of business while she finished necessary renovations.

But cannabis growers aren’t necessarily the villains of this story. Their hunt for affordable Seattle workspace hasn’t been easy, either. Jason Hutto, founder and CEO of House of Cultivar, Seattle’s largest indoor cannabis grower, spent almost a year searching for warehouse space.

“There’s not a lot of supply and there’s a big demand,” he says. 

Just after I-502 passed, many landlords were leery about renting to cannabis-related businesses. Although pot is now legal in Washington, growth, processing and distribution are still federal crimes. Hutto says that grower owners who have federally-backed loans could put themselves in legal jeopardy.

To secure spaces, some of Hutto’s peers wound up paying above the asking price.

[asset-images[{"caption": "Sam Farrazaino poses for a portrait on Wednesday, July 11, 2018, at Equinox Studios in Seattle. ", "fid": "146256", "style": "placed_full", "uri": "public://201807/MF_Sam01.jpg", "attribution": "Credit KUOW Photo/Megan Farmer"}]]Artist and real-estate investor Sam Farrazaino, owner of Sheryl Andrist’s new Georgetown studio, has seen some of this play out first-hand. He says the day he signed a purchase agreement on an adjacent building, the owner got an above-asking-price cash offer.

The federal stance on marijuana extends to the banking industry. National banking chains won’t open accounts for cannabis-related businesses.

“So where do you put your money?” asks Farrazaino. “You take your suitcase of cash and you go buy real estate.”

Jason Hutto scoffs at the notion that pot growers like him are throwing “suitcases of cash” at warehouses around town and driving up the market.

“I don’t know a lot of cannabis folks with that level of cash,” says Hutto. “And cash you do generate, you’re spending on overhead and the cost of goods.”

Hutto signed the lease on his SODO warehouse in 2013, then invested thousands of dollars to upgrade electrical transformers, wiring and ventilation systems. He estimated those renovations would take six months; instead they took more than two years. Hutto won’t say if he’s recouped his investment yet.

[asset-images[{"caption": "Sami Elshafei walks through a grow room after trimming plants on Wednesday, July 18, 2018, at House of Cultivar in Seattle.", "fid": "146257", "style": "placed_full", "uri": "public://201807/MF_Marijuana04.jpg", "attribution": "Credit KUOW Photo/Megan Farmer"}]]Right now, Hutto is as nervous about Seattle real estate as every other small business person. He’s got a long-term lease on his SODO building, with options to renew, but he says he’d think twice before expanding in the city.

“If you handed me the money and the keys right next door,” he says, “I’m not sure that’s where I would build it.”

[asset-images[{"caption": "Marijuana plants are shown on Wednesday, July 18, 2018, at House of Cultivar in Seattle.", "fid": "146263", "style": "placed_wide", "uri": "public://201807/MF_Marijuana06.jpg", "attribution": "Credit KUOW Photo/Megan Farmer"}]]

[asset-images[{"caption": "Mike Kenion rolls and weights joints on Wednesday, July 18, 2018, at House of Cultivar in Seattle.", "fid": "146264", "style": "placed_wide", "uri": "public://201807/MF_Marijuana07.jpg", "attribution": "Credit KUOW Photo/Megan Farmer"}]]Hutto, along with all of his industrial neighbors south of the sports stadiums, believe it’s only a matter of time before Seattle’s relentless wave of gentrification moves their way, and buildings are snapped up for trendy brew pubs, gyms and cafes.

That’s already happening in Georgetown, where Sheryl Andrist has settled in. The rent she pays to her landlord, Farrazaino, earns her shares in his company, so Andrist can stay in her studio as long as she stays in business.

“This is my last move,” Andrist says, looking around her tidy studio with satisfaction. “I’m not doing this again.”