According to a new study from the National Association of Realtors, there has been a decline in commercial property purchases by marijuana industry-related businesses and a corresponding increase in leasing activity.
The 2023 Marijuana and Real Estate: A Budding Issue report examines the effects of marijuana legality on various aspects of real estate. The survey, which polled NAR members, divided the responses by states that have legalized medical marijuana only and states that have legalized marijuana for medical and recreational use both before and after 2018.
In states that have legalized recreational marijuana in the past five years, 18% of NAR's commercial members reported an increase in property purchasing over leasing in the past year by marijuana businesses. This figure is down from 29% in 2021. For states that legalized cannabis more than five years ago, just 14% saw an increase (20% in 2021). In states where only medical marijuana is legal, only 4% saw an increase, a significant drop from 21% in 2021.
"State laws have evolved to legalize the use of prescription and recreational marijuana," said Jessica Lautz, NAR 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."
Commercial practitioners are also finding increased demand for warehouses, land and storefronts for marijuana businesses. In states where only prescription use is legal, 23% had seen an increased demand in storefronts, 14% in warehouses and 7% in land. In states where prescription and recreational use is legal, 25% to 29% of members had seen an increased demand in warehouses, 18% in storefronts and 13% to 15% in land.
Fifteen percent of residential members in states that legalized recreational marijuana more than five years ago had sold a grow house in the past. In those same states, 45% said commercial landlords are willing to take cash for rent, up slightly from 42% in 2021.
The report also found that fewer Realtors are seeing lease addendums that restrict growing cannabis on properties. Twenty-seven percent of Realtors in states that legalized both medical and recreational marijuana prior to 2018 have seen addendums added to leases that restrict growing on properties, down from 44% in 2021.
Addendums related to smoking are on the decline in legal states. In states where recreational marijuana has been legal for more than five years, 65% of residential property managers have seen addendums added to leases restricting smoking on properties, down from 76% two years ago. For states that legalized within the past five years, 56% saw smoking addendums, down slightly from 59% in 2021.
In contrast, prescription-only states saw an increase in addendums added to leases that restrict smoking on properties, jumping from 40% to 62% in the past two years.
Lautz noted that as state laws continue to change, Realtors are learning new ways to navigate the residential market.
"These 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," Lautz added. "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."