Since the legalization of marijuana in Colorado and Washington State in 2012, there’s been a lot of talk about the ramifications for commercial real estate. Those states benefit from the extra tax revenue they receive, and the industry is strongly regulated in both locales.
They’re not the only geographies affected by legalization, though. Here are the trends that began in the West but are already starting to spread.
Taking over industrial space in Denver
Denver is one of the hottest markets in the country right now, and a CBRE report found that marijuana accounts for 3.7 million square feet of industrial space in the metro area. That means one in 11 buildings in that property sector is used for the cultivation and warehousing of marijuana.
The brokerage firm also said that between 2009 and 2014, marijuana-growing facilities took up 35.8% of all industrial space leased during that period, and have helped boost rents for landlords due to increased demand. Some say legalization is attracting coveted millennials, who are also a big driver of commercial real estate values when it comes to multifamily and office leasing.
A growing specialty and influence
There are even real estate firms devoted to marijuana real estate. One of them is Seattle-based CannaMLS, which helps entrepreneurs in the business find suitable retail locations.
Speaking of Seattle, Microsoft, which is based in the city’s eastern suburb of Redmond, announced a partnership with Kind Financial’s Agrisoft Seed to Sale, an app that helps people know where marijuana is being produced and sold. States other than Washington that have proposed legislation for legalization are reportedly contacting the company about the app.
Pushing up real estate prices in Alaska and California
Meanwhile, Alaska, which passed laws allowing for legalization early this year, is seeing real estate prices spike as a result. Business applications were starting to be accepted by the state in February for industrial marijuana sites. The Alaska Journal of Commerce pointed out that lease rates for these forthcoming facilities are going to increase sharply in the area.
In California, where medical marijuana is legal, the industry is even pushing up commercial real estate prices in the already super-expensive Bay Area. The business is apparently worth $1.4 billion in the state, and even in Southern California’s desert areas some distributors are outpricing such hot businesses as drone-manufacturing firms.
Good news for brokers, with more on the way
All of these developments are good news for commercial real estate owners—and brokers. More states are proposing marijuana legalization, with a total of 25 that have marijuana legalization legislation on the books for approval for either medical or recreational purposes.
If demand continues to increase in both the industrial and retail marijuana segments, it means landlords and brokers will reap the benefits of this emerging industry, especially with all of the retail closures taking place right now across other sectors.