Real Estate Benefits From Cannabis
A Real Estate Boom, Powered by Pot
At the edge of an industrial park in this suburb south of Boston, past a used-car auction lot and a defunct cheese factory, is an unmarked warehouse bristling with security cameras and bustling with activity. Until recently, the cinder-block structure was home to a wholesale florist, a granite cutter and a screen printer. Today, it is home to just one tenant: a medical marijuana operation called Ermont.
Legalized marijuana has already upset societal norms, created a large legal gray area and generated a lucrative source of tax revenue. Now it is upending the real estate market, too.
In the more than two dozen states that have moved to legalize pot, factories, warehouses and self-storage facilities are being repurposed for the cultivation and processing of potent marijuana plants and products. Suburban strip malls and Beaux-Arts buildings have been reimagined as storefronts selling pre-rolled joints and edibles.
The Marijuana Business Is Really the Real Estate Business
Selling weed seems like a cash cow, but the real money these days is in the real estate that represents the most crucial part of the cannabis business.
In the unstable and risky marijuana industry anything can happen–your neighbor could wage a Racketeer Influenced and Corrupt Organizations Act suit against you, your bank can tell you to move your money to another institution, or you could lose your license for a small screwup. But in all of this uncertainty and risk, pot entrepreneurs are making one safe bet: buying real estate.
“With so many obstacles and regulations in our way, owning your real estate is the only thing we can control in this industry,” says Sally Vander Veer, co-founder and CFO of Denver-based marijuana cultivator and retailer Medicine Man. “It’s essential to long-term success.”
Aside from being a simple and time-tested investment, Vander Veer says owning your own real estate is also a smart way to safely store your money, as long as property values hold or increase. And surprisingly, property ownership is actually a flack jacket that protects your business from a frequent nightmare scenario in the pot business.
Since 2013, many cannabis entrepreneurs have seen their warehouse rents skyrocket after they’d spend tens of thousands of dollars to convert the space into a marijuana growing operation. Owning your real estate lets you avoid that financially crippling scenario entirely, says Patti Zanin, an independent real estate agent in Denver who serves weed clients.
What’s Next for Marijuana Warehouses?
Taking advantage of an impending boom in industrial space for marijuana growers — notably class-B and class-C warehouses — isn’t as simple as just snatching up properties and signing up tenants
Does the growing legalization of recreational and medical marijuana represent a pot of gold for industrial real estate? It could, experts say, but only if investors quickly and carefully pounce on opportunities.
The industrial real estate frenzy tied to legalized marijuana is subsiding in Colorado, which has been the country’s hottest market in that category, but it’s primed to take off in California and Massachusetts — two heavily populated states where growing, selling and using recreational marijuana will be fully legal by early 2018.
California, Massachusetts and other states that have recently legalized recreational marijuana, medical marijuana or both are potential hot spots for industrial real estate, yet investors who linger on the sidelines too long are likely to be shut out.
That being said, taking advantage of an impending boom in industrial space for marijuana growers — notably class-B and class-C warehouses — isn’t as simple as just snatching up properties and signing up tenants.
For investors aiming to capitalize on the current trends, speed to market is key, says Jason Thomas, founder and CEO of Avalon Realty Advisors, a Denver-based commercial real estate and business brokerage firm specializing in the marijuana and hemp sectors.
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