The Impact of Marijuana Legalization on Commercial Real Estate

Three-quarters of US states have already legalized cannabis in one form or another. Thirty-eight states have legalized medical marijuana, while nineteen states have approved sales and possession of cannabis for recreational purposes. With more states legalizing recreational marijuana, 44% of Americans now have legal access. In 2021, weed sales reached $25 billion as 50% of cannabis users increased their consumption since the pandemic. And with only 8% of surveyed adults against the legalization of both medical and recreational cannabis, the cannabis market is expected to reach $32 billion in 2022 and $57 billion by 2030.

When we think about the legalization of cannabis, we don’t immediately recognize how marijuana legalization affects commercial real estate. However, medical and recreational marijuana legalization has more of a direct impact on real estate than you may realize.

A survey by the National Association of REALTORS covering the last three years, shows that states where medical and recreational marijuana have been legalized, have seen an increase in demand for commercial properties. Here are some interesting statistics:

• 35% to 36% of commercial members in states where medical and recreational marijuana is legal have seen an increased demand in warehouses

• 23% of commercial members in states where medical and recreational marijuana is legal have seen an increased demand in storefronts

• 18% to 28% of commercial members in states where medical and recreational marijuana is legal have seen an increased demand in land

The survey revealed that there had been an increased demand for warehouses and land. The report further revealed that thirteen to twenty-two percent of commercial members had seen an increase in commercial property values near dispensaries. The uptick in demand and value can be explained by a rising number of entrepreneurs that are looking for opportunities in marijuana-related businesses.

However, it’s also important to mention that 5% to 14% of commercial members from states that have legalized medical and recreational marijuana use have seen a decrease in commercial property values near dispensaries. It’s important to remember that marijuana, despite its legalization, still has a negative perception for some consumers. And not everyone is rushing to open a store or live in an establishment that sells cannabis, regardless of whether it’s legal. The most common issue that some people have is the smell, followed by a fear that the business will be more prone to fire hazards and crime.

Time will tell whether more states will legalize both medical and recreational marijuana. And how that will lead to an even bigger marijuana industry. For those interested in the cannabis space, it’s important to remember that municipalities regulate cannabis real estate, overseeing zoning and permitting regulations. Because the marijuana industry is highly regulated and complex, success in cannabis real estate will rely on the experience of the commercial real estate team you work with.

For more information on the impact of different tenant types to commercial real estate, please contact us at info@cbicommercial.com