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Brokers, it’s time to be proactive about pot

Sep 27, 2016

150604101844-marijuana-store-780x439-097401-edited.jpgThere are two things you should know about me: I’ve spent a lot of time learning about commercial real estate and talking to brokers, and I grew up and still reside in Colorado.

These two facts give me a unique view into a new niche that’s growing (literally) around the country, though it has roots in my state. The legalization of medical and then recreational marijuana has created a lot of change and a brand new specialization for the commercial real estate industry.

A few weeks ago, I attended an event hosted through Bisnow for the Denver Industrial: Investment and Development Conference, which covered the impact of the cannabis industry on both the industrial and retail markets. For brokers, it’s time to be proactive to get a handle on what’s going on in this specialty niche.

First, scope the opportunity

There are currently five states (AZ, CA, ME, MA, NV) with legislation for recreational marijuana use on the ballot for November, and four states (AK, FL, MT, ND) looking to expand medical marijuana use.

Whether or not you live in one of those statesor a state that has already legalized usethe implications of this growing specialty affect everyone. If not now, it could be soon. Seeing how the details play out elsewhere can put you ahead of the game if and when some form of legalization comes to your state.

In commercial real estate, specialization can generate more referrals and therefore more revenue. But whether or not you are going to devote some or all of your time to trying to capture a new niche, it’s important to understand the positive (or negative) externalities that are created.

Take Colorado. Medical marijuana was legalized in 2010 and recreational in 2012, and today, according to a market report from CBRE, the “marijuana industry accounts for at least 3.7 million sq. ft. of occupied industrial space in Denver.” In addition, “average asking lease rates for lower-class warehouse space in key cultivation submarkets spiked 56 percent from $4.06 to $6.34 per sq. ft. triple net. Sale prices for suitable space have risen in a similar fashion. While traditionally used warehouse space sold for around $40-$50 per sq. ft. in 2014, marijuana investors paid upwards of $80 per sq. ft.

In other words, savvy brokers have the opportunity to capture a new niche for the short-term and long-term gains by building relationships before the saturation of brokers.

Then, seize the opportunity

To capitalize on the change of legislation, you need to understand what kind of space is appealing to your potential new clients. According to the CBRE report, “marijuana growers gravitate toward underutilized Class B & C warehouse space… and marijuana retail tenants tend to absorb Class B and C space.”

Of course, there’s no guarantee that the legislation will pass. And even if it does, there could be other laws and zoning considerations at play in your town. But as the trend spreads across the country, there’s an opportunity for you to capture new business if you take a proactive approach.

Next: Marijuana a high commercial real estate priority

Topics: Industry News

Paul Graham

Written by Paul Graham

Paul Graham is passionate about connecting real estate and technology. He’s been an entrepreneur since a young age (he started selling key chains to classmates in third grade), and now owns a condo and a motorcycle.

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