How Marijuana Legalization is Changing the Real Estate Industry

Learn how the cannabis industry is impacting California’s commercial real estate sector.

Following its legalization with Proposition 64, the cannabis industry is impacting California’s commercial real estate sector in some very significant ways. Due to limits imposed by local laws, facilities that grow and store marijuana have been relegated to certain areas in the state of California. Within these legal limits, industrial warehouse owners have seen significant rental spikes. For instance, a property owner in Santa Barbara recently received an offer of $1 million for his 2.5-acre property. This is a considerable increase from the $360,000 he paid to purchase the land just a year prior. The landowner happily explains, “If you have the right parcel with utilities in the right jurisdiction, your land will definitely appreciate as a result of Prop 64.”

While land values within legalized areas have increased considerably, warehouses in these areas have become one of the most valuable asset types. As warehouses are large enough to hold thousands of marijuana plants and can be easily upgraded for climate control, they are particularly well-suited for being converted to marijuana cultivation and manufacturing facilities. However, the influence of the emerging cannabis industry isn’t limited to industrial properties. It is also having an impact on the retail real estate market as distributors look to open new dispensary locations all across the state. The introduction of new dispensary sites is playing a significant role in the revival of suburban strip malls.

While high rental and real estate costs can be chalked up to high demand from the cannabis industry, this is only half of the story. Many property owners are charging above-market rental rates due to legal concerns. While the state of California has formally legalized marijuana, federal laws still prohibit its manufacture and use. This divide makes real estate transactions with marijuana companies more risky and expensive for property owners.

These are some of the ways in which the cannabis industry is impacting California’s commercial real estate sector. Interested in learning more about commercial real estate trends or looking for assistance with your own industrial or real estate needs? If so, contact the experts at California Commercial Realty Advisors, Inc. We are ready to offer you our expertise today.

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