NAR: Warehouse, land and storefront demand rose since 2021 but resulted in fewer CRE purchases. Where legal, landlords report fewer addendums banning use.
WASHINGTON – Realtors® are seeing a decline in commercial property purchases by marijuana industry-related businesses and a corresponding increase in leasing activity, according to a new study from the National Association of Realtors® (NAR).
The 2023 Marijuana and Real Estate: A Budding Issue report examines the effects of marijuana legality on various aspects of the real estate industry. The survey, which polled NAR members, divided the responses by states that have legalized medical marijuana only and states that have legalized marijuana for medical and recreational use both before and after 2018.
In states that legalized recreational marijuana within the past five years, 18% of NAR commercial brokers reported an increase in property purchasing over leasing in the past year by marijuana businesses, a decline from 29% in 2021. For states that legalized cannabis more than five years ago, only 14% saw an increase (20% in 2021). In states where only medical marijuana is legal, 4% saw an increase – a significant drop from 21% in 2021.
“State laws have evolved to legalize the use of prescription and recreational marijuana,” says Jessica Lautz, NAR deputy chief economist and vice president of research. “As more states adopt cannabis laws, Realtors are … working with clients to find land, warehouses and storefronts for this growing business.”
Commercial practitioners also find an increased demand for warehouses, land and storefronts for marijuana businesses. In states where only prescription use is legal, 23% saw an increased demand in storefronts, 14% in warehouses and 7% in land. In states where prescription and recreational use is legal, 25% to 29% of members saw an increased demand in warehouses, 18% in storefronts and 13% to 15% in land.
Of residential Realtors surveyed, 15% in states that legalized recreational marijuana more than five years ago had sold a grow house in the past. In those same states, 45% said commercial landlords are willing to take cash for rent, up slightly from 42% in 2021.
May I smoke it? May I grow it?
The report also found that fewer Realtors see lease addendums that restrict growing cannabis on properties – only one in four (27%) in states that legalized both medical and recreational marijuana prior to 2018, down from 44% in 2021.
Addendums related to smoking are also on the decline in legal states. In states where recreational marijuana has been legal for more than five years, 65% of residential property managers saw addendums added to leases restricting smoking on properties, down from 76% two years earlier. For states that legalized within the past five years, 56% saw smoking addendums, down from 59% in 2021.
In contrast, prescription-only states saw an increase in addendums added to leases that restrict smoking on properties, jumping from 40% to 62% in the past two years.
Lautz says Realtors are learning new ways to navigate the residential market as state laws continue to change.
“These findings speak to our members continued efforts to stay informed about how to best advise their clients on the latest developments in the marijuana industry,” Lautz says. “This includes educating clients about lease addendums related to growing and smoking on rental properties, as well as understanding the regulations in each state and unique community rules at the local level.”
© 2023 Florida Realtors®