Commercial real estate might be the last thing on the minds of Florida voters on Election Day, but when they cast their ballots and vote on the state's Amendment 3 referendum, which would legalize recreational marijuana, the outcome will have direct impacts on the industry.

Amendment 3 needs 60% approval to pass, at which point state lawmakers, many of whom oppose legalization, would have to create rules to govern the drug's legal sale.

The choices made in Tallahassee will have profound impacts on the marijuana industry's growth in Florida, but whichever direction they choose, it is likely to provide a small but lasting boost to industrial and retail demand across the state.

“Based on our research, you can expect increased demand for commercial spaces across the board right away,” said Matt Christopherson, National Association of Realtors director of business and consumer research. “It even increases after a few years.”

In states where recreational marijuana has been legalized since before 2018, 29% of Realtors saw an increase in demand for warehouse space and 18% saw an uptick in storefront demand, according to a 2023 survey of nearly 3,300 National Association of Realtors members.

The numbers are slightly lower for states that legalized recreational use after 2018, which Christopherson said was a sign of the sector’s staying power once it enters a market.

Nationally, Realtors in states with legal prescription marijuana saw a 23% uptick in storefront demand, more than what is broadly seen after wider legalization. When recreational marijuana becomes legal, the demand boost is felt more acutely in the industrial space, Christopherson said. 

Florida first legalized medical marijuana in 2016, and generally lax prescription laws have led roughly 832,000 Floridians to get a card that grants them access to the hundreds of dispensaries that have popped up across the state. 

Chris Reece, CEO of the nontraded investment firm MJ REIT, sees the passage of Amendment 3 as the first step to paving the way to a new base of consumer: tourists.

“You have 22-plus million people living in the state, but where the economic benefit is derived is the over 140 million people that vacation there on an annual basis,” Reece said. “Not everybody will consume cannabis, but even if you had 3%, that's a lot of additional revenue that the state could take in.”

MJ REIT launched in September 2022 and has had an 11.3% return since inception on $6M in assets in five states with legal recreational marijuana, Reece said. Its portfolio is 55% industrial space and 40% retail properties, according to an investor fact sheet shared with Bisnow. 

Legalization in Florida would present his firm and others the opportunity to move into the state — and increase real estate demand and valuations.

“When a state goes from zero to medical, which is generally the process, and then medical to adult use, you see a significant increase in value because there's a limited amount of areas where you can actually grow, process and sell cannabis,” Reece said. 

What legalization would mean in Florida is anything but clear. The state currently requires all sellers to be vertically integrated and operating entirely inside the state, meaning one company is handling the product from farm to storefront. 

That system has allowed for a handful of large producers to dominate the industry. Trulieve, the state’s largest medical marijuana company, has spent at least $93M getting the issue in front of voters and advocating for legalization. Trulieve owns 136 of the 638 marijuana stores in the state, Florida Trend reported. 

That concentration has provided fodder for Gov. Ron DeSantis, state Republicans and the hemp industry to attack the referendum as an opportunity for Trulieve to develop a monopoly on the industry. Trulieve has sued the state Republican Party for defamation over the ads. 

Donald Trump, the Republican nominee for president and an influential Floridian, has put his support behind legalization in Florida. 

“What you've seen in the state of Florida, those licenses have been mainly acquired by the multistate operators that have deeper pockets, that have more economies of scale,” Reece said. 

New rules would need to be written if recreational marijuana becomes legal, which Reece said would likely take at least a year, but would give state lawmakers the opportunity to broaden the marketplace.

“Your Trulieves will continue to dominate the space, and they want to advance after dropping so much money to legalize, but I believe it will also open up the market to smaller players,” he said.

Despite concerns about smell and crime, an influx of cannabis-growing tenants would likely boost property values for noninstitutional owners, Christopherson said. Marijuana is still illegal at the federal level, so institutional owners avoid deals in the space, while federally insured banks typically have language in their mortgages preventing borrowers from leasing space to cannabis tenants.  

Marijuana companies are also more likely than the average tenant to purchase their facilities rather than lease, in part to avoid lengthy lease addendums and restrictions, but also because many landlords are wary of accepting cash for rent, a common occurrence in the notoriously nonbank cannabis business.  

“There’s a battle for control over the properties,” Christopherson said. “We also see a slight increase in the purchasing of commercial properties versus leasing, so that the business has more ability to use them as they see fit versus following the rules set by the landlord.”