In the Weed(s) Part 2

October 17, 2017 • In September 2015, when we published our first In the Weed(s) post about cannabis-related real estate, medical marijuana had been legalized in 10 states (plus D.C.), five of which had also legalized it for recreational use. Fast forward to today, and 29 states (plus D.C.) have enacted laws legalizing marijuana.

States that have legalized some form of marijuana use. Source: mpp.org

In each of these jurisdictions, real estate is a necessary common denominator for cannabis cultivation, transformation, and retail distribution, currently a $7B industry. Bloomberg Markets estimates that number will be $50B by 2026.

Beware of the Feds

If you’re thinking this would be a great value creation opportunity for your property, keep in mind what hasn't changed since 2015: the use, possession, cultivation, and transportation of marijuana is illegal under federal law, along with a wide range of related activities, including knowingly leasing, renting, maintaining, managing or controlling a place where marijuana is grown, transformed or sold.

What Has Changed

Notwithstanding the lingering risk of federal criminal prosecution, the shield of favorable state laws has enabled cannabis-related facilities to emerge from the shadows. Industrial premises used for indoor cultivation and transformation are seemingly as 'state-of-the art' as those found in the more traditional, similarly highly regulated pharma industry. Retail dispensaries are no longer relegated to dilapidated buildings in fringe locations.

Minimize Risk

To strike the right balance between the enormous opportunities this industry represents for landlords and tenants and the risks of owning, leasing, and occupying cannabis-related real estate, a collaborative landlord/tenant approach to strict regulatory compliance and conflicting real estate needs is key. That way, neither party gets stuck with the whole bill but none of the benefits.