Legalized Pot = Industrial Real Estate Boon

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As California nears legalizing marijuana for medical use, expect to see significant impacts on the industrial real estate sector.  In Colorado, where marijuana has already been legalized, 1 in 11 of Denver’s industrial buildings is used for marijuana.  The cannabis industry occupies over 3.7 million square feet of industrial space in Denver, mostly in areas with older warehouses, according to a recent study by a commercial real estate firm.  In the 5-year period between 2009 and 2014, marijuana cultivators absorbed almost 36% of all industrial space leased in Denver, leading to near-record-high rents and low vacancy rates.  This demand will likely increase if Denver lifts a moratorium that allows only medical marijuana businesses existing prior to October 2013, to apply for recreational marijuana licenses. Still, many property owners refuse to lease to marijuana growers due to lender restrictions and conflicting federal laws, as well as the often high cost of the electrical and HVAC upgrades required for growers.  As for those owners willing and able to lease to growers, they can typically charge 2-3 times the average rent of other businesses, according to the study.