It seems that recently, tides have been turning when it comes to the legalization of marijuana in the US. Nowadays, 30 states have at least some form of marijuana legalization. Opinion polls echo this trend. Quinnipiac polls show 94% support for the legalization of medical marijuana across the US. This enthusiasm is sure to have far reaching effects on a variety of industries, from finance to healthcare. How will the real estate market fare?
Despite Strides, Widespread Disapproval
Marijuana occupies a curious space in the US. As stated above, it is legal to consume in many states. According to the federal government, however, the drug is illegal to sell or consume in any form. This put the legality of dispensaries in a grey area.
For this reason, any property rented to growers, dispensaries, or marijuana-safe spaces is a risk to the landlords. Even in the nine states where recreational use is legal, any property related to pot use is subject to police raids. Even if the federal government does not step in, those in the business must tread a fine line. Several licensed growers have been taken out of business and arrested for infractions like making a product appear child friendly.
Beyond official channels, the general public are often leery of marijuana. High end retail spaces do not want to engage in the discourse. Neighborhoods fear depreciation as dispensaries draw large groups of people. Finding the right retail space for marijuana distribution can be very difficult.
High Returns
All of the difficulties associated with situating marijuana operations might seem like reasons for landlords and investors to stay away. But the truth is, real estate markets stand to gain a great deal from marijuana operations.
Paradoxically, the dangers associated with weed is actually driving large profits for landlords. Growers are offering up to double or triple the rent that normal tenants would, mindful of the risks associated with their business. On top of that, those in the business can usually put their money where their mouth is. By 2027 spending on marijuana worldwide is supposed exceed US $57 billion. The largest spending will come from the US, but the fastest growing market is in the rest of the world. All of this means that the industry has money to spare, and a lot of it goes to real estate.
A profile on landlord Stephanie Smith by the LA Times depicts this phenomenon. She owns 2 million square feet of property, mostly in warehouse locations. This is prime real estate for growers but is in increasingly short supply, especially as marijuana becomes more popular. Prices in warehouses like hers rose from $107 per square foot in 2016 to more than $300 per square foot. The buildings do not have to be new, or updated; they simply need to be spacious, discrete, and have basic amenities like water and electricity.
Smith has felt the effects, however. Her home was raided by police following the arrest of some of her tenants. However, the tenants are still paying her rent and she suffered no long term effects. The incident was not enough to put her off renting to those in the business, considering the amount of money she has made.
Coming Soon to a Country Near You
If recent trends continue, marijuana may be legal across most US states in the near future. Furthermore, entire countries might follow the example of places like Uruguay, where the sale and use of marijuana is legal everywhere, as long as it is sold at a pharmacy and the user is registered. If this is the case, real estate markets across the world may be poised for incredibly high earnings.
It may be best to get in at the very beginning of legalization, and to purchase those spaces most in demand for marijuana production. Warehouses in particular can draw people willing to pay high rent. Furthermore, landlords should be aware that tenants may not be these exorbitant rents forever. As marijuana becomes more and more accepted, social stigma will mean that those in the marijuana business will have more options.
For now, for those landlords willing to assume high risk, tenants in the marijuana business can yield high reward.
Be sure to check us out at https://www.internationalrealestate.news/