Cannabis Fuels Denver’s Real Estate Revival

Real Estate Sign

Real estate is one of the oldest forms of investing; and probably one of the most sound as well. All other things being equal, the value of a real estate property tends to go up more often than it goes down. This is never truer than it is now in Denver. Legalized cannabis has single-handedly rejuvenated the industrial real estate market, creating huge profits for some and unforeseen consequences for others.

Currently in Colorado, demand for cannabis is far out pacing the supply. This inadequate supply is creating somewhat of an arms race for real estate property as entrepreneurs scramble to fill the gap. If you are the owner of industrial property in Denver, this is a seller’s market for you.

T.J. Smith, principal at Colliers, spoke with the Denver Business Journal about the unprecedented demand for industrial property in Denver.  “Investment demand is as high as it’s ever been for industrial properties,” Smith said. “Even the vanilla warehouse market is on fire.” According to Smith, the high demand is being fueled by the cannabis industry.

Sometimes it is hard to conceptualize the scope of a market unless you are actually in the middle of it, but since many of us are not actively involved in the Colorado real estate market, let us look at the property numbers. Per the Denver Post, “Commercial real estate tracker Xceligent Inc. estimates that marijuana cultivation and manufacturing facilities in the city occupy about 4.5 million square feet — the equivalent of 78 football fields.”

According to the same Post article, the average price per square foot for industrial real estate is roughly $4.50. Taking that into account, one could estimate that the total real estate value of the cannabis cultivation and manufacturing industry is at or around $20,250,000. That is a conservative estimate considering the fact that cannabis industry tenants often pay 30-40 percent more than other buyers and renters.

There is no denying that the cannabis industry is fueling a real estate revival in Denver, but on the other side of the economic boom, many local businesses not affiliated with the cannabis industry run the risk of be squeezed out of business.

David Strano is the owner of P&L Printing, a Denver print shop that operates as a worker-owned collective. Strano spoke to Vice News about how the cannabis industry has crowded the industrial districts, forcing his business to pay double the rent for half the space.

“There’s a lot of retail locations that marijuana businesses can’t use, because of proximity to schools and things like that,” said Strano. “So a lot of them have to end up in industrial areas, and we have to compete with them.” Denver may be booming, but not for everyone.

The pain being felt by non-cannabis businesses getting priced out of the real estate market is very real, but that stands to change in the coming years. Currently, there is a gold-rush mentality, cash is flowing like a river, and people are drunk on profit.

Given time, as the cannabis industry opens up more, the fervent market will begin to slow down and prices will once again stabilize. Supply in real estate is driving up the price of real estate just like supply in cannabis is driving up the price of cannabis.

That being said, now is still the best time to invest in cannabis-related real estate. The market in Denver is near saturation, but there are plenty of states that have yet to open up to cannabis. Hopeful herbal entrepreneurs would be well served to position themselves properly for when cannabis comes to their state.

William Sumner is a freelance writer and marijuana journalist located in Panama City, FL. Passionate about writing, William is dedicated to journalistic integrity and providing quality insight on current events. You can follow him on Twitter @W_Sumner.

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