Commercial Property Purchases Decline as Cannabis Businesses Turn to Leasing

A new study from the National Association of Realtors showed a notable decrease in commercial property purchases by marijuana industry-related businesses, accompanied by a rise in leasing activity.

The report, “2023 Marijuana and Real Estate: A Budding Issue,” analyzed the impact of cannabis legalization on the real estate market. NAR members’ responses were grouped by states that have legalized only medical marijuana and those that have legalized marijuana for both medical and recreational use before and after 2018.

In states that legalized recreational marijuana within the past five years, 18% of NAR’s commercial members reported an increase in property purchasing over leasing by marijuana businesses in the past year, down from 29% in 2021.

Of those that legalized cannabis more than five years ago, the figure dropped to 14% (20% in 2021). For states where only medical marijuana is legal, the number fell dramatically from 21% in 2021 to just 4%.

“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,” said Jessica Lautz, NAR deputy chief economist and vice president of research.

The study also revealed an increased demand for warehouses, land, and storefronts for marijuana businesses.

• In states with medical-only legalization, 23% saw a rise in demand for storefronts, 14% for warehouses, and 7% for land.
• In states where both medical and recreational use is legal, 25%-29% of members reported increased demand for warehouses, 18% for storefronts, and 13%-15% for land.

Lease addendums restricting cannabis growth and smoking have declined in states where recreational marijuana is legal, while medical-only states have seen an increase in smoking-related addendums.

Lautz highlighted that as state laws continue to change, realtors are learning new ways to navigate the residential market, advising clients on the latest industry developments.

Last month, the survey was emailed to a random sample of 75,000 NAR members practicing residential real estate and 53,000 members practicing commercial real estate. The survey received 3,291 responses, yielding an overall response rate of 2.6%.

The National Association of Realtors is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.