When it comes to commercial real estate, green evidently means go.
A new survey from the National Association of Realtors (NAR) found that states with legalized medical and recreational marijuana use have seen higher demand for commercial properties. More than one-third of respondents in these states said they observed an increase in requests for warehouses or storage properties, while up to one-quarter said demand for storefronts is up. One-fifth of respondents said that there was increased demand for land.
“When the business of marijuana is discussed, some have a tendency to focus on only the buyers and sellers of the product,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. “However, these numbers show that marijuana has been a boon to commercial real estate.”
And commercial-property demand has consistently trended upward since legalization in these states. In states where medical and recreational cannabis have been legal for at least three years, each year saw an increase in commercial real estate demand compared to the one prior. Additionally, in states where marijuana is legal, more than one in five respondents noted that commercial properties near marijuana dispensaries increased in value.
Interestingly, legalized marijuana also has had a growing impact on residential real estate, NAR concluded. In states where cannabis is legal in some form, between 9% and 23% of respondents indicated that they believe inventory is scarce for multiple reasons, including all-cash purchases from the nascent marijuana sector. Additionally, the all-cash nature of the cannabis industry has had an impact on landlords in states where the business is legal — in these areas, 40% of landlords said they would accept cash for rent.
Of course, there are myriad adjustments that landlords and homeowners associations have had to make to account for residents legally consuming marijuana on their premises.
“Residential practitioners are getting used to the new normal of having marijuana legally used within rental properties, while homeowner associations are tasked with setting new rules to address consumption and growth,” Lautz said.
Lastly, while a nearby dispensary seems to be a boon for commercial-property values, the same isn’t true for residences. The majority of those polled noted that they haven’t seen the needle move for home values near marijuana retail locations, although between 8% and 27% reported seeing a decrease in values. Only 7% to 12%, on the other hand, have observed an increase.
“As more states legalize marijuana, the real estate market will progressively have to adjust,” Lautz said. “From property owners to manufacturers, to those who simply want to engage for leisure, it all touches real estate in some form.”