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What Is the Impact of Marijuana on Real Estate?

Posted by GCAR on June 2, 2021

by The CE Shop Team

Marijuana and Real Estate: A Budding Relationship
As of now, 15 states and D.C. have legalized recreational and medicinal marijuana. There are 36 more that allow for medicinal weed. Other states, such as South Dakota, legalized marijuana in the November election and are set to join the ganja party relatively soon.

For an industry that goes through constant ups and downs, the influx of cannabis could provide a small boon to real estate. The numbers indicate that legalization won’t slow down anytime soon, either. But how has the legalization of weed impacted real estate?

It’s one of the more fascinating questions in the real estate industry right now. Before we get into that impact, it’s important to look back on how the perception of marijuana has changed.

Evolution of How We Perceive Weed
Prior to the legalization of recreational weed in Colorado and Washington, there was concern it would lead to a spike in crime and have a negative impact on children. To an extent, those worries are still present but not at the level they were prior to 2012, when media like Alex Berenson’s book, Tell Your Children, inspired bouts of fear and pearl clutching.

Perceptions have evolved as the perks of marijuana legalization have become more apparent, especially when it comes to the taxable income marijuana sales generate for their communities. Take Colorado, for example. Since recreational weed shops started selling in 2014, Colorado retailers hit over $10 billion in marijuana sales, according to the Colorado Department of Revenue in February. As the Colorado Sun points out, tax and fee revenue collected since 2014 now totals about $1.63 billion. That provides a nice chunk of change for education, which is one of the tax benefactors stipulated by Amendment 64 as approved by voters in 2012.

Marijuana and Real Estate
Now that we have covered the basics on how we got to this stage and the high-level impact legal marijuana has on states, we can tackle the main issue: weed and real estate. Namely, the impact that pot has on specific real estate markets where it’s legal.

Based on reports and stories by multiple outlets, weed actually helps the real estate markets where it’s legalized. In a recent story by Forbes, real estate markets with fully legalized recreational marijuana may attract more homebuyers, including marijuana consumers, entrepreneurs, and job seekers. That’s great news if you practice real estate in those markets – but let’s break things down further.

Impact on Commercial Real Estate
A recent survey by the National Association of REALTORSⓇ indicates that “states where medical and recreational marijuana have been legalized for more than three years have seen more increases in demand for commercial properties.” As the NAR report indicates, 42% of those states have seen an increase in demand for warehouses while managing a 27% increase in demand for storefronts and a 21% increase in demand for land. The report adds that of the states that have had legalized recreational and medical marijuana the longest, 32% have seen commercial lease addendums addressing the growth, and 30% have seen lease addendums addressing sales of marijuana.

Impact on Residential Real Estate Near Dispensaries
Back in 2016 as California prepared to become the first state to legalize marijuana usage, many worried that dispensaries would tank the home values of nearby properties. After years of observation, that same NAR report found that 60% of REALTORS® reported no change in property values while 8% reported a slight increase, and 4% reported a significant increase. Between 8-27% of members polled did see a decrease in residential property values near dispensaries, but these results do not comprise the majority opinion.

Grow Houses
How many real estate agents had pot grow houses on their 2021 real estate bingo card? Grow houses, or properties dedicated to the growth and cultivation of marijuana plants, also add a new subsect to the real estate industry.

The aforementioned NAR survey found that nearly 25% of REALTORS® sold a grow house in states that legalized marijuana usage more than three years ago. Of that number, 75% reported that the grow house was not hard to sell, and 85% had no title issues.

A New Era of Weed in Real Estate
At this point, it’s not a question of whether this budding relationship between weed and real estate will last; now experts are wondering how much bigger the marijuana industry can grow and the future impact it will have on real estate as a whole. As more states join the legalization party, the demand for commercial real estate and residential real estate within those markets will only grow. For an industry prone to fluctuation, this is a big development that could leave everyone feeling pretty good.

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