April 19, 2023 Impact of Legalized Marijuana By: Melissa Dittmann Tracey
As marijuana becomes more mainstream, pot businesses are clamoring for storefronts, warehouse space and land, according to a new NAR report.
As more states legalize marijuana for medical and recreational use, cannabis businesses are turning to real estate pros to help them find more space to expand their operations. While these businesses aren’t necessarily purchasing more property, they’re increasing their leasing activity, according to a new report from the National Association of REALTORS®. And as marijuana becomes more mainstream, there are fewer lease addendums restricting growing on the premises, finds the report 2023 Marijuana and Real Estate: A Budding Issue.
“State laws have evolved to legalize the use of prescription and recreational marijuana,” says Jessica Lautz, NAR’s deputy chief economist and vice president of research. “As more states adopt cannabis laws, REALTORS® are at the forefront of commercial real estate activity and are working with clients to find land, warehouses and storefronts for this growing business.”
In states where marijuana is legal only for medical use, real estate pros say they’ve seen demand jump 23% for cannabis storefronts, 14% for warehouse space and 7% for land to accommodate growing operations. In states where marijuana is legal for both medical and recreational use, real estate pros say they’ve seen demand spike 29% for warehouse space, 18% for storefronts and 15% for land, according to NAR’s report.
More residential real estate pros—though still a small number—may find themselves selling or leasing a grow house. Fifteen percent of residential real estate practitioners say they have sold a grow house in the last five years, according to NAR’s report. But stigmas around these properties are fading: Only three in 10 pros who have sold a grow house in states where recreational marijuana is legal say they had a hard time selling the home, according to the survey. More than half of real estate pros report having no issues leasing a property that had previously been used as a grow house; those who did report issues cited the smell and moisture on the property as the two main culprits.
Residential property managers in states where marijuana is legal in some form report fewer lease addendums that restrict growing cannabis. Only 27% of residential property managers say they add these addendums to their leases, down from 44% in 2021. Addendums often restrict smoking pot on the property, NAR’s report notes. Still, some homeowner associations have enacted rules around marijuana consumption and growth. HOAs may restrict smoking and growing cannabis in common or exposed areas of a community. Title issues also may arise when selling a home where marijuana has been grown and consumed, although this is less common. Few real estate pros—only 1% to 4%—are aware of their MLS containing a specific marijuana field to indicate its use in a property, according to the survey.
REALTORS® are learning new ways to navigate the residential market as state laws evolve regarding marijuana use, Lautz says. The study’s findings “speak to our members’ continued efforts to stay informed about how to best advise their clients on the latest developments in the marijuana industry,” she says. “This includes educating clients about lease addendums related to growing and smoking on rental properties, as well as understanding the regulations in each state and unique community rules at the local level.”