CRE Brokers Have High Hopes for Dispensary Deals

A new survey of commercial real estate brokers who have done lease deals for space for marijuana businesses reveals that—despite the difficulty of negotiating such leases—they would try again. The survey comes after voters have approved the legalization of marijuana in three more states. Voters in Michigan legalized marijuana for recreational use, and voters in Missouri and Utah legalized the use of medical marijuana. Now, 33 states and the District of Columbia have some form of legal marijuana sales.

The commercial real estate software company Apto, which conducted the survey, found that 85 percent of brokers would do another cannabis real estate transaction. Brokers rated the difficulty of a cannabis deal compared with a conventional deal at 8 on a scale of 1 to 10, with 1 being less difficult and 10 being more difficult.

In terms of the balance of supply and demand, brokers on average said both retail and industrial space rated a 4, with 1 being “not in balance” and 10 being “in perfect balance.” The slow but steady legalization of marijuana across more states is beginning to have an impact on real estate markets as local jurisdictions grapple with zoning and other issues that affect the availability of sites, whether for cultivation and storage or for retail sales of cannabis.

The survey results suggest that there’s a shortage of sites, most likely because allowable zoning hasn’t caught up with demand. Asked about the pricing of cannabis leases and sales, 76 percent of the brokers surveyed said they are above market pricing; 21 percent said they are at market pricing; and 3 percent said they are below market pricing.

Another apparent issue is financing for businesses engaged in marijuana cultivation, distribution, and sales because of conflicting laws at the federal and state levels that create regulatory compliance confusion.