Legal Marijuana Powers US Real Estate Boom
Societal, legal and tax revenue implications notwithstanding, marijuana is powering a real estate boom in the U.S. Prices are soaring for previously unoccupied warehouses and blighted strip malls to repurpose for marijuana growing and retail space in the states where it is legal in some way, reported The New York Times on Saturday.
As more and more empty buildings are retrofitted for growing or selling products, investors are taking note. This despite the “added baggage” attached to the marijuana industry, including that it is still federally illegal. For now, it is considered a “can’t-lose opportunity for everyone involved.”
“Building owners can charge above market rates, real estate groups can profit by subleasing to growers, and growers can make enough money to afford the steep rents,” the Times reported.
The costs, however, are high to retrofit buildings to accommodate cultivation needs. Electricity is expensive to power the lights to grow plants and mold can cause problems due to humidity. Also, since “the federal government considers marijuana illegal, most banks won’t provide mortgages to buildings used by the industry,” the article said.
Supply and demand is also at play that could create a bubble where “tenants and investors spending big money on such projects could soon find themselves underwater.”
Denver, which has emerged as “America’s de facto pot capital,” is already seeing the effects.
“Denver’s boom stands out, and marijuana has become such big business that an abundance of supply is starting to bring down retail prices, which could ultimately bring down real estate prices,” the Times said.
One large worry in the background is how the administration of President Donald Trump will address the industry. Attorney General Jeff Sessions has already expressed displeasure at the concept of ready access to marijuana.
“I reject the idea that America will be a better place if marijuana is sold in every corner store,” Mr. Sessions, said recently, adding that marijuana was “only slightly less awful” than heroin.
Even still, some on Wall Street want to participate in the industry.
“A few months ago, a real estate investment trust focused on leasing out warehouse space to growers started trading on the New York Stock Exchange,” the Times reported, noting that “other entrepreneurs are following suit.”
The opportunities are not limited to growing operations for marijuana, but also for specialty retail stores that offer items like cannabis-infused chocolates, olive oil, peanut butter and honey — even deodorant. One retail operation in Massachusetts operated by the New England Treatment Access (NETA) reportedly makes as much as $100,000 on a busy day that, for the present, can offset high operational costs.
“The holding costs there were significant,” said Norton Arbelaez, director of government affairs for NETA. But, he added, “we wanted to take this industry out of the shadows.”