Considering at least some form of cannabis use is legalized in most of the United States, commercial property owners are increasingly presented with opportunities to lease to cannabis-related businesses. Unfortunately, the industry remains in a state of regulatory uncertainty, which exposes them to far more risk than most companies are willing to accept.
Many risks specific to the industry can affect a property’s condition and value. The obvious upside of leasing a space to the industry is that property and asset managers who approach the situation with eyes wide open have the opportunity to reap the benefits of record profits.
The potential lows are real and in many cases very serious. Fear not as there are many resources to help commercial realtors navigate through the process. The eruption of the medical marijuana industry in states that have legalized it has generated a plethora of professionals dedicated to the commercial real estate industry to assist in navigating the hurdles of compliance and risk mitigation.
Dealing with uncertainty
With legal medical marijuana existing in a constant state of regulatory limbo that could collapse at any time, there are risks involved. Each cannabis company must navigate a maze of compliance issues, and commercial realtors who lease or sell real estate to these companies must understand exactly how cannabis companies differ from other tenants or buyers.
Financing obstacles
The vast majority of banks are unwilling to take on the risks involved with loans to cannabis business owners because of the federal reporting requirements. Because of this, most medical marijuana businesses must conduct all business in cash. This can be difficult for commercial landlords, who generally do not accept cash payments. It also makes them a target for crime, which means they may require heightened security – a fact that could potentially alienate other tenants. On the other hand, heightened security could encourage other tenants for the protection of their own businesses.
Are there any upsides?
After property managers and owners have weighed the risks and haven’t walked away at the thought of working with cannabis business owners, there are incentives to consider. The legal medical marijuana industry was at $7 billion and growing at last count. Rents could be 20- 40 percent more per square foot for medical marijuana businesses. The benefits are crystal clear, but they are also intertwined with huge risks.
If medical marijuana supporters are correct and the momentum toward legalization continues, we can expect the risks to decrease and rent premiums to decrease along with them. Those who decide to work with medical marijuana businesses, will most likely see large revenues and few will likely face real consequences.
The Cannabis Age and Commercial Leasing
Considering at least some form of cannabis use is legalized in most of the United States, commercial property owners are increasingly presented with opportunities to lease to cannabis-related businesses. Unfortunately, the industry remains in a state of regulatory uncertainty, which exposes them to far more risk than most companies are willing to accept.
Many risks specific to the industry can affect a property’s condition and value. The obvious upside of leasing a space to the industry is that property and asset managers who approach the situation with eyes wide open have the opportunity to reap the benefits of record profits.
The potential lows are real and in many cases very serious. Fear not as there are many resources to help commercial realtors navigate through the process. The eruption of the medical marijuana industry in states that have legalized it has generated a plethora of professionals dedicated to the commercial real estate industry to assist in navigating the hurdles of compliance and risk mitigation.
Dealing with uncertainty
With legal medical marijuana existing in a constant state of regulatory limbo that could collapse at any time, there are risks involved. Each cannabis company must navigate a maze of compliance issues, and commercial realtors who lease or sell real estate to these companies must understand exactly how cannabis companies differ from other tenants or buyers.
Financing obstacles
The vast majority of banks are unwilling to take on the risks involved with loans to cannabis business owners because of the federal reporting requirements. Because of this, most medical marijuana businesses must conduct all business in cash. This can be difficult for commercial landlords, who generally do not accept cash payments. It also makes them a target for crime, which means they may require heightened security – a fact that could potentially alienate other tenants. On the other hand, heightened security could encourage other tenants for the protection of their own businesses.
Are there any upsides?
After property managers and owners have weighed the risks and haven’t walked away at the thought of working with cannabis business owners, there are incentives to consider. The legal medical marijuana industry was at $7 billion and growing at last count. Rents could be 20- 40 percent more per square foot for medical marijuana businesses. The benefits are crystal clear, but they are also intertwined with huge risks.
If medical marijuana supporters are correct and the momentum toward legalization continues, we can expect the risks to decrease and rent premiums to decrease along with them. Those who decide to work with medical marijuana businesses, will most likely see large revenues and few will likely face real consequences.