Market High: Legal Marijuana Sets Local Real Estate Market Ablaze

The marijuana industry tends to set economies ablaze. Central Denver's now occupies one in 11 of its industrial buildings, CBRE research says. That's at least 3.7M SF, with a growing warehouse averaging around 10k to 20k SF.

From 2009 to 2014, the industry took over more than one-third of all industrial space, CBRE director of research and analysis in Denver Jessica Ostermick tells the Denver Post. "It really kick-started the recovery of the industrial market in Denver."

The city now sees near-record high rents (a 5% year-over-year increase) and low vacancy rates. Marijuana tenants tend to pay a premium of two to three times the average.

The potential property pool for growers is actually quite small—being mostly C properties locked in decade-long leases—since many property owners refuse to lease to growers because of loan constraints and other issues with federal law.

But there's been a moratorium that allows only those medical marijuana businesses started before Oct. 1, 2013, to sell recreationally. That rule expires Jan. 1, 2016, but could be extended. If it does expire, then the demand for new grow facilities will go crazy.

"It's a new and disruptive industry," Avalon Realty Advisors' Jason Thomas says. "One that's making a huge impact, some positive, some negative, to mainstream businesses[DP]

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