Marijuana Warehouses

While speaking with a colleague who compiles NAR Library’s weekly Commercial Reports, our conversation turned to trends she was noticing in commercial real estate news. Overwhelmingly, the topic of marijuana or cannabis properties keeps popping up. Pennsylvania recently became the 23rd state to pass medical marijuana laws, and as states continue to legalize marijuana use, properties will continue to be sought out for production, storage, and sale of the product.

 Chuck Coker 2009

Chuck Coker/flickr/2009

Not everyone is jumping on the cannabis bandwagon. Marijuana remains a Schedule I illegal controlled substance federally, which prevents some property owners from leasing to cannabis companies for a number of reasons including banking limitations, commercial loans prohibiting marijuana use, high insurance costs, and the risk of federal prosecution even though the business is state-authorized. Given this, it’s still not entirely clear if landlords can preclude marijuana from their properties. To attempt prevention of use, NAR counsel Lesley Walker was quoted saying, “…the lease should directly address this and state such prohibition. For existing lease agreements, a landlord could consider having tenants sign an addendum that specifically addresses the presence and use of marijuana on the property.” Beyond warehouses, landlords and property managers might also want to address legal marijuana use in lease agreements. Addendum clauses can be included to frame allowable cannabis use on the premises.

Once marijuana businesses find a landlord that isn’t restricted by fiscal or moral restraint, zoning becomes a huge issue. States have guidelines, but it’s ultimately up to the county to zone for cannabis. Most states prohibit the sale of marijuana within 1,000 feet of a school, park, or daycare, adding to the difficulty of finding a property zoned for cannabis. Warehouse inventory can be very tight in areas that have legalized marijuana in some way. The majority of property owners don’t want to lease to marijuana growers, most because federally insured loans won’t allow them to, and those willing to lease are hard to find. Add to those hurdles the possibility of property damage due to the humidity levels required to grow marijuana, and even less property owners are interested. This leads to dispensaries willing to pay a premium for warehouse space, which means the value of a property zoned for cannabis is 125-200% over fair market value. Not all properties are zoned alike; “each type of use is also subject to local zoning requirements, and the land use classification…is one which may generate confusion at the municipal level.

 Brett Levin 2013

Brett Levin/flickr/2013

Enter the niche brokerage. Some brokerages are capitalizing on this emerging specialty market. They will help to guide companies through the intricacies of the system to find them the right property for their particular business. There are also new web tools intended to guide interested parties through zoning issues, cannabis-friendly real estate listings, and popular cannabis markets, such as HerbFront.

NAR Librarians are doing their part to keep members informed on the commercial real estate market geared toward marijuana use by curating the Field Guide to the Warehouse Market, which covers types of warehouse, market data and stats, brokerage and investment, and marijuana warehouses specifically, as well as the Field Guide to the Impact of Legalized Marijuana, which addresses property management issues, real estate opportunities, medical marijuana use in the workplace, and grow houses.

Have you dealt with these types of properties yet?

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Abby Creitz

Manager, NAR Library & REALTOR® University Librarian

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