Did you look twice when you read that title? But yes, of course marijuana real estate is a thing.
Anytime you have a market, in this case cannabis, that involves natural products that need somewhere to grow, there is a need and demand for speciality real estate. This becomes even more true when the crop in question comes with legal and social baggage.
In this post we’ll talk about what marijuana real estate is, why there is a need for marijuana real estate and expertise in this area, and provide a few insights into the topic.
What Is Marijuana Real Estate?
The move toward the legalization of marijuana is changing the real estate industry. In recreational cannabis states, cannabis plants are grown, harvested, processed, stored, packaged, sold, and consumed inside local and state lines. This generates increased demand for land, greenhouses, warehouses, and retail locations for marijuana businesses.
According to the National Association of Realtors, medical marijuana and recreational cannabis states which have been legal for more than three years have also experienced increases in commercial property demand: 42% for warehouses, 27% for storefronts, and 21% for land. Many of these states also saw increases in lease addendums addressing growing cannabis, selling cannabis, and related issues such as fire hazards from grow lights and moisture damage.
There has also been a ripple impact on residential real estate in several ways. Most real estate agent respondents reported that HOAs were often restricting cannabis use and growing in both common and in-home areas. Residential real estate agents also report similar lease restrictions as mentioned above.
Why Is There a Market for Marijuana Real Estate?
According to the National Institute for Cannabis Investors, cannabis sales across the United States will grow to about $100 billion by 2024. Marijuana real estate investors might expect great returns on investment (ROI), but these types of deals are also extremely complex. In fact, National Real Estate Investor survey respondents characterize the difficulty of cannabis transactions at 8 out of 10 compared with traditional industrial real estate deals on a scale of one to 10, with 10 being “most difficult.”
This is in part because moving a property through local entitlement and licensing processes before listing or leasing it could mean losing precious time. In any particular location, however, there are a limited number of opportunities thanks to an ongoing supply-demand imbalance. In the cannabis industry, the price of quality real estate is high, because there are only so many spaces and opportunities available.
For all of these reasons, a knowledgeable real estate agent that understands both markets is a true standout. A cannabis entrepreneur also knows that they can trust their agent bringing on a cannabis real estate team.
What Can a Marijuana Real Estate Agent Do?
Other than locating property that works for any kind of cannabis entrepreneur, a marijuana real estate agent can help investors. As an investor it might seem appealing to dive into the cannabis real estate market, particularly as legalization seems to march ahead. Isn’t it just common sense to invest in any kind of marijuana real estate?
Despite major political change and recent business gains, the marijuana real estate market remains volatile and cannabis remains illegal in the United States. Anytime you invest in stocks you should be cautious, and this is probably especially true for the marijuana real estate market. A marijuana real estate agent can help clarify which investments are really the smartest.
There are ongoing financial challenges for investors as well stemming from the illegal status of cannabis. Federally insured banks and institutional lenders cannot finance marijuana real estate projects, so all cannabis real estate deals demand private lending sources or cash upfront. Insurance is an additional challenge for cannabis businesses. An experienced marijuana real estate agent can help investors navigate these funding and insurance issues.
Finally, local jurisdictions may impose equity and zoning requirements for obtaining a marijuana real estate license. This may mean limitations to industrial areas and strict fire, security, and safety requirements. A marijuana real estate agent may be able to assist in clarifying language and ensuring a fair process.
Marijuana real estate is an exciting area! However, before you even start looking for your ideal cannabis property, find a team that can help you. Some ideas might be an attorney, a real estate broker, and a CPA—each with expertise in marijuana real estate and cannabis transactions local to your market.