Colliers: ‘No Stopping Cannabis Real Estate Behemoth’

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Photo: Michael Moloney / Shutterstock

TORONTO – Cannabis tenants revitalize struggling properties and attract complimentary businesses, according to a new report from international real estate services and investment management firm Colliers. Nevertheless, dispensaries and retail shops pay 25 percent to 50 percent more than their mainstream neighbors for similar commercial space.

The demand for commercial cannabis leases has exploded since 2016, when California was home to 261 dispensaries. Today, that number tops 500. In Colorado, dispensaries outnumber McDonald’s and Starbucks locations combined. Still, nine out ten California landlords and property managers refuse to deal with cannabis businesses because of regulatory, insurance, or banking concerns or because they harbor personal biases. Consequently, industrial spaces lease for roughly twice the going rate: $1.50 to $1.75 per square foot per month versus $0.78. Retail space rates can be even higher.

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Difficulties in acquiring leases push some companies to buy properties, though locations that satisfy zoning requirements may be difficult to find. Sellers reap premium prices when buyers are known to be cannabis-related: One 6,150-square-foot retail location in Sacramento, California, recently sold for $585 per square foot.

“Even with these roadblocks, there is no stopping the influx of capital coming into this behemoth,” the report advises commercial brokers. “No matter your position on cannabis, cannabusinesses are proliferating and may very well be your next new client looking for commercial space.”

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