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What is the financial impact the legal cannabis market has had on the real estate market within the United States?
Hello! Thanks for your question about the financial impact the legal cannabis market has had on the real estate market within the United States. The short version is that the legal cannabis market has had a positive financial impact on the real estate market within the United States. Below you will find a deep dive of my findings.
METHODOLOGY
I have searched industry reports, government reports/databases, and trusted media sites to determine the impact that the legal cannabis market has on real estate prices. As you will see, the impact has been and continues to be positive for residential, commercial, and industrial real estate.
THE FINDINGS
INDUSTRIAL AND COMMERCIAL REAL ESTATE
As the marijuana trade boomed in California, there was a higher demand for warehouses. In Colorado, data showed that as marijuana sales rose, warehouse vacancy rates fell from 7.6% to 3.1%. It is thus logical to conclude that the trade is having a positive financial impact on industrial real estate, going by the principle that high demand versus low supply would lead to high prices; in this case in the leasing of warehouses. In fact, in some states where marijuana laws have been relaxed, there are actually warehouse shortages due to such a high demand. Of course, with high demand comes higher prices and Colorado has seen that warehouses that normally sell for $40 per square foot now receive $80 from marijuana businesses.
In Portland, most companies pay about $5 per square foot for warehouse space whereas marijuana companies will end up paying between $12-18.
Commercial property prices in Southern Oregon have skyrocketed, and the price of industrial land which used to sell for $50,000 an acre now sells for $300,000 an acre.
Commercial real estate in Denver, Seattle, and Portland have seen an increase by around 33% between 2014 and 2017. Compare this to rent in other cities that have not yet legalized marijuana; these states only saw a 20% increase.
This trend is expected to continue in Nevada, Maine and Massachusetts, states which are now legalizing marijuana.
RESIDENTIAL REAL ESTATE
Regarding residential real estate, the marijuana industry has provided many jobs which is leading to more people moving in to the area, also suggesting a strong financial impact as more people buy or rent confidently.
It is not just the exciting prospects of employment that are driving people to states with marijuana legalization but also the prospect of being able to self-medicate and enjoy the drug. More people moving to these cities has led to an increase in property prices.
It is also said that the new marijuana industry has reshaped neglected neighborhoods with property values on the rise because of the influx of cash and foot traffic into the areas. In other words, dispensaries are stimluating local economies.
In Colorado, there are "more marijuana dispensaries than Starbucks, McDonald’s and 7-Elevens combined." Every year, more and more dispesaries are being opened; there are currently over 600 physical dispensaries in Colorado alone. This trend is predicted to continue, and therefore, its positive impact on real estate is likely to continue as well.
Perhaps the best example to show how much real estate prices have soared in states legalizing marijuana is in the state of Denver. Denver's housing market is experiencing a three-year high; this boom is being attributed to marijuana. Many houses in Denver "have increased in double digits." Where there used to be around 24,000 listings on the Denver property market, the recent number has been about 4,000 — and even then, these properties are bought pretty quickly. Denver has seen a 30.4% increase in property sale prices, year-on-year. Colorado real estate prices have also benefited since the legalization in 2012.
An Ole Miss study showed that "areas in Colorado that adopted retail marijuana laws (RML) following state approval of recreational use enjoyed a 6 percent increase in housing value tied directly to that statute. The paper also shows a uniform effect on housing in all price ranges."
CONCLUSION
To wrap it up, it is clear to see that no matter where you stand on the marijuana legalization issue, it continues to have an impact across the country and throughout the real estate industry. Residential, commercial and industrial real estate properties have continued to experience an increase in prices due to marijuana legalization.
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