ABOVE MARKET VALUE: High Demand Created by Cannabis Companies

Investors are betting legal weed is going to be a boon for industrial spaces.

by Polly Mosendz @PollyMore stories by Polly Mosendz and

Patrick Clark @pat_clarkMore stories by Patrick Clark

‎30‎ ‎November‎, ‎2016‎ ‎6‎:‎00‎ ‎AM

Opportunity knockin' here in Mesa? ...mebbe if there is less regulation. And remember that loose regulatory environment in Arizona - could be an issue of states' rights too >>> Open for Innovation or what?  

In the Portland area, most companies can rent industrial space for about $5 a square foot annually. Cannabis companies, however, pay a premium ranging from $12 to $18 a square foot. 

"We were willing to pay above market value to have a space there," Abbott said. "I see the biggest barrier to entry in Oregon as getting real estate." . . .

The short history of legalized marijuana in the U.S. is rife with tales of tight supply and above-market leases. Local rules on where cannabis businesses can operate, combined with restrictions that prevent them from using bank financing, have limited the property available to entrepreneurs such as Abbott. Warehouse owners, on the other hand, are cashing in.  In November, voters approved ballot measures legalizing recreational marijuana in California, Nevada, Massachusetts, and tentatively, Maine.

A handful of other states approved marijuana for medical uses.

It didn’t take long for those votes to ripple through industrial real estate markets. Last year, the Santa Barbara, Calif.-based cultivator Canndescent paid $360,000 for a 2.5-acre parcel in Desert Hot Springs. Someone recently offered the company $1 million for the same lot, owner Adrian Sedrin said.

A comparable rush could shortly be under way in Maine, where the state is currently recounting votes after a recreational marijuana ballot measure narrowly passed.

There are good reasons for landlords to charge growers a premium. They must be willing to take on the increased security and neighborhood scrutiny that comes with leasing to a cannabis business. There's a hodgepodge of rules governing where cannabis operations can be located. Growers require high-end power, water, and HVAC systems. And while non-cannabis tenants can rent from just about anyone, cannabis tenants are typically forced to rent from landlords who own their buildings outright. Landlords who finance their buildings through a federally insured bank could be in legally murky water if they choose to rent to a cannabis tenant because the plant is still illegal under federal law. As a result, landlords demand higher rent from a cannabis venture than from, say, a paper company. 
The short supply of viable real estate has been a boon for investors who can pay cash and tolerate the risk. In Oregon, all-cash investors rushed into buy 10,000- to 30,000-square-foot buildings in 2014, Brooks said, with the plan of renting them to cannabis companies upon legalization. Investors did the same in Colorado, said Paul Kluck, first vice president at CBRE, where growers paid up to 10 times the going market rate for first-rate industrial spaces.
The scarcity of space has led some marijuana businesses to plow profits back into real estate, said Amanda Gonzalez, chief executive officer of Kaya Cannabis in Denver. "Owning your real estate is crucial," she said. "I think it's more crucial because the laws change so frequently. You feel particularly vulnerable."
The National Cannabis Industry Association quickly issued a statement reminding Sessions that while he is anti marijuana, he is pro states rights.
National Cannabis Industry Association go here >> http://thecannabisindustry.org/

Advocacy. Education. Community.

---

NCIA is the only national trade association advancing the interests of the legitimate and responsible cannabis industry. Our industry supports tens of thousands of jobs, tens of millions in tax revenue, and billions in economic activity in the United States. NCIA is leading the unified and coordinated campaign to ensure this emerging sector is treated fairly under federal law.

Excerpts of some text copy  from Bloomberg