Real Estate Prices & Marijuana. In 2018, Canada will become the first country in the world to legalize pot use for recreational purposes. I can only imagine what that day will look like. Something like this I’d imagine:
There has been a lot of discussion around legalization, and a lot of kinks have yet to be ironed out regarding the sale and use of the green plant. Legalization has got me thinking a lot about its potential impact on our country. Im not against it personally (Im all for it actually), and I think that we only have to gain from pot legalization. Increased revenues from taxation will be good for cities to invest in infrastructure and transportation, increases to health care/mental health funding, and more.
As a Realtor, I’m always thinking about the future, and what trends will impact sales, pricing and the like. So, when 2018 arrives I wonder how real estate prices will be affected? We’re already living through a HOT market today, especially in communities of the Golden-Horse Shoe and Vancouver, and generally right across the country. But, could legalization inflate prices even more? I’m of the belief that prices, especially in Canada’s major urban centers (Toronto/Montreal/Vancouver), and even major cottage/vacation areas (Kawartha Lakes/Banff/Okanagan/Niagara-on-the-lake) will also rise as money floods in from investors, and everyday folk from over seas and from down South (follks that are closer to Canada then a State which has legalized).
What makes me think prices will increase? Let’s look at some case studies, but Denver, Co. in particular.
In States like Colorado and Oregon and in more than two dozen states where pot legalization has already occurred,
‘factories, warehouses and self-storage facilities are being repurposed for the cultivation and processing of potent marijuana plants and products. Suburban strip malls and Beaux-Arts buildings have been reimagined as storefronts selling pre-rolled joints and edibles.’
In many areas of the U.S. where buildings and lots were decrepit and dilapidated, investment from new businesses has reimagined these areas and in some Denver neighbourhoods, the average asking lease price for warehouse space jumped by more than 50 percent from 2010 to 2015.
Residential real estate, while likely to feel the effects of an improved economy. the more significant improvement in values will be in commercial real estate which will see the most gains, where new buildings will need to be built/repurposed for warehousing, storage, R&D and the like. And, if there is a shortage of supply, as there currently is in the Toronto housing market, then expect leasing prices to jump.
In Denver, commercial real estate has seen significant increases in prices and occupancy. From 2009 to 2014, 36 percent of new industrial tenants were marijuana businesses, according to the report on Denver from CBRE Research, a commercial real estate company. Nearly four million square feet of industrial space was being used for cultivation in 2015, according to the report, about 3 percent of the city’s warehouse space. Warehouse vacancy rates in Denver fell to just 3.7 percent in 2015, down from 7.5 percent in 2010.
Realizing the opportunities, companies like Innovative Industrial Properties, have emerged (in the U.S.) which is a real estate investment trust that buys buildings, renovates them and leases out space to medical marijuana growers. Other real estate professionals are using this as a lucrative business opportunity, launching sites like 420MLS, dedicated to helping people find and post marijuana business opportunities and commercial spaces.
Below is a graph from Trulia which shows Median Sales Prices for residential properties in Denver that have been on the rise since 2012, when marijuana was legalized. Just within the last year, Denver median sales prices increased $32,500 (11%), while average price per square foot for this same period rose to $308, up from $276.
So, lots of information here. But it should get you thinking about the potential in your area. Living in Toronto, I know Ill be looking for ‘under’ appreciated areas, following companies and retail shops as they develop and set up shop. You too can inquire about these pot based businesses and see where they intend to set up their locations, where the city may be rezoning to accommodate warehousing and the like.
If you’re interest in learning more, comment below and Ill be sure to keep the info flowing.
x The People’s Realtor x