Marijuana Business May Boost Commercial Real Estate
As marijuana becomes legalized in more parts of the country and as an increasing number of states grow, harvest, store, sell and allow consumption, the nation’s real estate industry has felt the effects.
According to a new report from the National Association of Realtors, there has been a noticeable rise in demand for warehouses, land and store fronts used for marijuana.
A DEA agent in Montana concurred with that assessment, advising that one of the economic impacts that Billings will see is the buying up of large warehouses or other large open-spaced buildings which will be “gutted” and converted to the growing and production of marijuana.
The 2021 survey, Marijuana and Real Estate: A Budding Issue, examines the impacts of marijuana on real estate in terms of both “medical only” and legalized “medical and recreational” comparing data going back to before 2016.
More than one-third of respondents in states where marijuana has been legalized, said inventory is tight for multiple reasons and cited the marijuana industry as one of the factors. This is also true for those in areas where marijuana was more recently legalized, as 23 percent of Realtors also partially blamed the marijuana industry for the limited inventory.
“The dynamics of marijuana have been far-reaching over the past year, which is evident when you see how it has impacted real estate,” said Jessica Lautz, vice president of demographics and behavioral insights for NAR. “As the marijuana laws continue to evolve, Realtors have witnessed increased demand for commercial properties to store, grow and sell marijuana.”
Additionally, 29 percent of commercial members in states that legalized recreational marijuana during the past four years reported growth in property purchasing over leasing in the last year. Nearly half of those in states that legalized both medical and recreational marijuana before 2016, said that they have experienced addendums being added to residential leases that restrict tenants growing marijuana on properties, compared to one quarter or less in other states. Sixty-nine percent of commercial members in states, where only medical marijuana is lawful, said that no additional addendums were being seen in leases concerning marijuana plants. This compares to 45 to 55 percent, where both medical and recreational use are legal.
Possibly in an effort to steer clear of landlord addendums, some marijuana business investors outright bought property rather than leasing, which means they no longer had to adhere to marijuana rules or regulations that they may have considered burdensome. This trend was seen the most in states where marijuana is newly legal.
Among respondents in states where recreational marijuana is legal, they more often said that homeowner associations regularly had policies or restrictions in place pertaining to smoking and growing marijuana. Nearly half of homeowner associations were against smoking in common areas, while about two-fifths prohibited growing in mutual open areas, such as a private yard without fences.
“We saw that a number of property owners at some point in the past had difficulty leasing their property after a previous tenant consumed marijuana there over an extended period,” said Lautz. “To avoid repeats of those issues, landlords have implemented various guidelines that place numerous restrictions on the use of marijuana.”
Lautz says property owners who have imposed such constraints tend to reside or own property in states where marijuana has been legal the longest.
As the marijuana industry evolves, both commercial and residential landlords are balancing efforts to profit from it, while also ensuring that their property remains desirable and at a high value, Lautz said.