Since the legalization of recreational marijuana in the state of Colorado, the real estate has faced a sudden boom of businesses looking for storefronts and growing warehouses. Colorado law requires all growth to take place indoors, making the value of these hard-to-find grow properties skyrocket. While banks and other financial institutions are reluctant to assist growers, cannabis-specific realtors have an advantage in the current market, where there may be additional property and legal risks due to the current nature of the industry.
Marijuana Real Estate Agents
Compared to traditional realtors, real estate agents who specialize in finding and renting space dedicated to the growth and retail of recreational or medical marijuana, have a more difficult time finding appropriate spaces. Due the reluctance of financing agencies to back federally illegal businesses, many cannabis-dependent businesses have had to deal in a cash-only atmosphere where finding and renting grow space commands a higher price. This reluctance, and sometimes refusal, often means a higher profit margin for a realtor who is able to secure a rental property. This also includes residential properties, as inquiries for “marijuana-friendly” housing has grown exponentially.
Due to the legalization of marijuana at a state-only level, the conflicting federal laws make it challenging to navigate the appropriate channels without facing future legal ramifications. These conflicts leave many property managers afraid that if they provide commercial space to future “cannabusinesses” the federal government may step in and seize their real estate. Owners of these industrial properties could face civil asset forfeiture, in which the federal government is able to seize property used to conduct illegal activity. This law also extends to property purchased or rented with the proceeds of any illegal activity. Due to this, owners may prohibit the growth or use of marijuana on the property to avoid the possibility altogether.
“From the perspective of property managers,” said Fred Prassas, the past president of the Institute of Real Estate Management, “The challenge we have is trying to come up with the best practices for operating properties in an environment where we don’t have clarity about the enforcement or the interpretation of the laws.”
The Cannabis Stigma
Even if a property manager is willing to accept the risk of forfeiture, there has been some backlash from the neighbors of marijuana-involved tenants. Some of the concerns expressed by fellow business owners and homeowners near these places involve long-time social stigmas attached to the use and growth of marijuana.
Although support for marijuana use has risen in the last decade – with 52% of Americans in 2014 saying use should be legal, up from 12% in 1969 – that doesn’t mean the same majority supports it entering their neighborhood or setting up shop next door. This stigma has helped create a shortage of available spaces for cannabis-related businesses.
“Nobody is growing enough marijuana,” said Jason Thomas, a real estate agent from Denver who specializes in renting industrial space to cannabis growers. “Activity is off the charts, but we’re still not meeting demand.”
Realtors who cater to potential cannabis-friendly clients, are finding a surprising new niche market which has more need than properties. The interest generated by the incoming marijuana industry has sparked a revival of Denver’s available real estate. In the marijuana-friendly capitol, there is more support for legal marijuana operations and many investors have come to rely on realtors who are able and willing to tackle the risks associated in this uncertain environment. With cannabis clients paying an estimated 30 to 40% more for real estate than other businesses, for the agents willing to traverse the legal shades of gray associated with cannabis, the potential for profit is staggering.