Your brain isn’t the only thing that’s going to get lifted once recreational nugs and gooey grams become legal later this year in major markets like California, Maine, Massachusetts and Nevada. Rent prices, too, are projected to get higher than your state of mind after a triple weed brownie sundae.
Los Angeles, Boston, and other cities with newly-minted legal recreational weed are expected to go the way of Denver and Seattle before them. According to CoStar Group Inc., a firm which tracks commercial property data, cities with legal marijuana tend to see rents rise significantly faster than in cities without it.
Denver saw its rent increase 33 percent in the last three years since legalization, as reported by The Cannabist. Industrial rents in Portland and Seattle both rose by 27 percent in the same period, when both Washington and Oregon implemented legal cannabis sales. Rents in all three states rose significantly more than the 19 percent rent increase seen in other major US cities.
CoStar believes Boston and Los Angeles are about to experience the same kind of accelerated rent hikes. “It’s had a tremendous, positive impact on rents and property values for the markets where this has been legalized,” said CoStar’s director of industrial research Rene Circ. “Taking the experiences from the markets that have been at this for a few years, the suggestion is this will have a positive impact in these new markets.”
“Positive” for landlords and real estate professionals anyway. Maybe not as much for people who pay rent, and maybe especially not for cannabis cultivators.
The reason for the rent hike after legalization, CoStar says, is that cannabis growers not only need to buy up a lot of property, they also tend to buy up property that isn’t particularly valuable to other businesses. Ganjapreneurs like to buy up smaller spaces that are less desirable to other industries, partly because of the need to control the environment and safeguard against fires.
There’s also the risk factor which sometimes hurts cannabis business people. Even where marijuana is locally legal, many businesses are squeamish about lending services like renting property or doing banking with people in the marijuana industry because the plant is still banned at the federal level. Those companies that will work with marijuana businesses then are in a privileged position. “We have factors that limit supply, with a lot of demand,” Circ said. “So the rent growth is being pushed from both ends of the spectrum.”
Photo via Flickr user Mark