New Market for Commercial Real Estate

There is a new and challenging niche in the commercial real estate market…space for marijuana related businesses.    The legalization of marijuana for both medicinal and recreation use is leading many businesses to seek out commercial real estate services to help locate and secure property.  However, it is very challenging to find the appropriate commercial space for these businesses for a number of reasons:

  1. There are strict zoning regulations and location specifications.  Marijuana dispensaries are restricted to operate within a certain distance from schools, parks, churches and public venues.
  2. Since marijuana is still illegal under federal law, traditional banks and lenders turn down loans for these types of businesses.
  3. Building owners are reluctant to lease their space for marijuana businesses because there are potential dangers, fire hazards, neighboring tenant unrest, etc. associated with the plant cultivation process or simply because they do not agree with the legalization of marijuana.

In some states, the demand for marijuana dispensaries has driven the price per square foot for warehouse space up approximately 60% for this specific use.  It has been reported that properties in Colorado were leasing at two to three times the rate after the use of marijuana was legalized. Arizona was an early convert to medical marijuana and has recently been legalized for recreational use.  It is important for Arizona commercial landlords to be aware of any violations of local and federal law by obtaining copies of records and documentation (permits, licenses etc) of businesses that they plan to lease to. It is also advisable to contact an Arizona Real Estate Attorney to cover specific lease provisions and to ensure any property transactions run smoothly.