The “pot-conomy” is here, and it’s affecting verticals across industries – including real estate. How will it affect local real estate markets across the US in the commercial and residential sectors? Denver would indicate that the answer is “pretty darn well”.
The industrial real estate that houses pot production is skyrocketing, positioning itself to become a great opportunity for investors to get in on the marijuana boom. Cannabis growers and suppliers have difficulty finding capital to start their businesses, since many states don’t have banks willing to extend credit or loans.
This has led to a strange new kind of investment scheme called the cannabis REIT (real estate investment trust) – the first of which filed to go public recently, seeking property in New York state for around $30 million. A newly formed corporation named Innovative Industrial Properties intends to purchase the properties of specialized industrial medical cannabis facilities, giving the cannabis growers and sellers capital while the REIT offers the cannabis companies lease-backs so they can remain in place.
Illinois-based PharmaCann, a medical cannabis producer licensed in Illinois and New York, had to finance everything through private equity, but is closing in on a deal to sell the cannabis REIT a 127,000-square-foot cannabis growing and manufacturing facility in Montgomery, New York. PharmaCann obtained the first of five licenses for cannabis production in New York.
Other states are getting in on the action. Alternative Solutions, a medical marijuana producer, is housed in a warehouse on a less traversed street not far from the White House – making it one of the few legal marijuana farms in D.C. In Colorado, where marijuana is legal for both medical and recreational use, warehouse space is in huge demand; vacancies in the sector have plummeted as rents have skyrocketed.
With more states legalizing cannabis in one form or another each month, the REIT possibilities continue to expand. Investors can make good money investing in properties for growing and processing, and those with commercial properties will benefit the most. However, the residential housing markets located near cannabis facilities may not fare as well, particularly in states with a strong religious objection to what can be considered “adult” recreational businesses moving into the area.
Some say cannabis is still a gateway drug, although research shows pot is no more harmful than nicotine. Many claim that allowing cannabis based businesses will lead to adult bookstores, sex shops, and more. The fact that mini markets on every corner sell drugs that change so quickly the FDA can’t keep up, which has been linked to more crime, addiction and death than pot is conveniently ignored.