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How Marijuana Legalization Will Impact California Real Estate Markets


This past November, voters in California approved Proposition 64, which legalized the recreational use of marijuana. This law allows Californians who are 21 and older to possess, transport and use up to an ounce of cannabis for recreational purposes and allows individuals to grow as many as six plants. The measure will also allow retail sales of marijuana and impose a 15 percent tax.

According to Forbes, “Legalized marijuana doesn’t just benefit cannabis advocates, though. It can also be good stuff for commercial real estate players — specifically, those who get in on the action in the industrial sector early enough to buy, finance or lease out warehouses that can be used for marijuana.”

“With so many obstacles and regulations in our way, owning your real estate is the only thing we can control in this industry,” Sally Vander Veer, CFO of marijuana dispensary Medicine Man, told Inc.com. “It’s essential to long-term success.”

Inc.com also reported that warehouse rents have gone up drastically in Colorado: “Since 2013, many cannabis entrepreneurs have seen their warehouse rents skyrocket after they’d spend tens of thousands of dollars to convert the space into a marijuana growing operation. Owning your real estate lets you avoid that financially crippling scenario entirely, says Patti Zanin, an independent real estate agent in Denver who serves weed clients.”

The legalization of marijuana in Colorado has already made waves in the real estate markets. The Denver Post reported that the cannabis industry uses one in 11 buildings in central Denver and uses about 3.7 million square feet of space in the Denver area. Since sales began in 2014, companies have begun to specialize in listing commercial property that can be used for the cannabis industry according to Entrepreneur:

“Because large facilities are needed to grow and store marijuana — and because local laws often limit where such businesses can be located — industrial warehouse owners have seen rental rates spike in areas where medical and recreational marijuana is legal.”

In December, Lynwood became the first city in Los Angeles to permit commercial marijuana cultivation and manufacturing. According to The Cannifornian, “For now, the businesses would be allowed to grow only medical marijuana. But the ordinance – which was in the works long before Californians legalized marijuana for all adults under Proposition 64 – states the city council can amend it to include recreational pot.”

There are still many regulations that are being sorted out by various cities in California. In San Jose, for example, local governments have completely banned the sale of recreational marijuana. Other cities are working out regulations such as the cannabis businesses must be a specified distance from schools. Still, industrial real estate property prices have been increasing according to Aaron Johnson. Johnson is a real estate lawyer in Monterey County, a big agricultural region.

“Literally within a period of two weeks I saw the prices go from $50,000 an acre for undeveloped industrial land to about $300,000 an acre,” Johnson said.

According to a report from the research firm Arcview Group, it is estimated that California’s cannabis industry could grow to $6.5 billion by 2020, making California by far the largest market for legal marijuana in the world.

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