A New Green Space: Can Cannabis Save Retail?


In a Hunterdon County, New Jersey, strip mall long characterized by higher-end retailers like Ulta Beauty and Talbots, one trio of newer storefronts may seem incongruous.

Start at Axeiom, a women and LGBTQ+-focused axe throwing space, then walk a few steps to Aunt Mary’s, a cannabis dispensary opening first for medical cardholders and eventually for adult-use, and then buy a burrito at Pancheros Mexican Grill.

Sounds like an amusing night, right?

But this potential scenario may hinge on the future of an industry that has caught the imagination of those who rent retail space and investors interested in making a buck from marijuana.

A 3% dropoff compared to the rest of 2022 in Q4 rents collected by Innovative Industrial Properties – reported by the cannabis-focused REIT in January – has introduced some doubt about retail space for marijuana businesses in 2023.

Still, that has not changed Forbes’ estimation of IIP as a cannabis stock investors should continue to consider this year.

At the start of Q4, Forbes said, IIP had 2 million square feet of space being either developed or redeveloped across 19 states, in addition to the 8.7 million square feet it was already offering for rent.

And that seems logical. Although full federal legalization remains a “pipe” dream for now, 37 states have now legalized at least medicinal cannabis, with 21 of those approving its recreational use.

These facilities aren’t small “head shops,” either. Taking IIP’s existing square footage and dividing it roughly by their 111 currently owned properties, each takes up an average of more than 78,000 square feet.

Where are shops opening?

On Monday, the third legal cannabis dispensary in New York City opened near Union Square. The owners plan to open a second location down the block in June.

The Union Square Travel Agency is the state’s fourth dispensary. New York’s first recreational use dispensary opened days before the new year, on Dec. 29.

Connecticut followed suit Jan. 10. In the “tri-state” area of the Northeast, those two states now join New Jersey, which went fully legal last April 21.

While Maine and Vermont have not replied to The Mortgage Note’s requests for comment on the status of available real estate for marijuana dispensaries, retailers and investors are paying close attention to evolving legislation and attitudes in all Northeast states.

Chief among these is Curaleaf, which settled atop Forbes’ list of companies for cannabis investors to watch in 2023. Despite some volatility in stock price, Curaleaf’s stable of nearly 150 dispensaries and 30 cultivation sites, employing more than 6,000 people in 21 states, points to continued growth.

In fact, within days of announcing its first adult-use dispensary in Stamford, Conn. – adding to its medical-only sites in Groton, Hartford, and Milford – the company said it would expand its product line in New Jersey.

Who is investing in commercial spaces for cannabis companies?

The editorial director of Investing Daily said in a column published on Tuesday that investors are buying warehouse, factory, and retail space in states that have legalized marijuana.

In “Cannabis: A New High for Real Estate Values,” John Persinos wrote that “the legalization of marijuana is creating a ‘green rush’ in the real estate industry.”

“Seasoned realtors are reporting an explosion in marijuana-oriented real estate deals, which is occurring in conjunction with venture capital-fueled expansion among canna-businesses,” Persinos wrote.

AFC Gamma, the REIT arm of Advanced Flower Capital, is based in Florida but CEO Leonard Tannenbaum said in a 2020 interview that he hoped his platform would learn from the pitfalls of Canadian lenders, many of whom still work hand-in-hand with American cannabis interests.

As of 2020, Tannenbaum said AFC Gamma had a transaction in place with Curaleaf and had also been investing in Nature’s Medicines and One Plant.

Research Analyst Ted Van Green at Pew Research Center said the public continues to favor the legalization of marijuana, but there are differences of opinion when it comes to if the drug is used for medical or recreational purposes.

According to a survey conducted from October 10 to 16, 2022, just one in ten respondents said marijuana should not be legal.

59% of respondents said marijuana should be legal for medical and recreational use by adults. 30% said marijuana should be legal for medical use only.

Americans 75 and older were the least likely to say marijuana should be legal for recreational use, according to the survey.

“While very small shares of adults of any age are completely opposed to the legalization of the drug, older adults are far less likely than younger ones to favor legalizing it for recreational purposes,” Green wrote.

Editor Kimberley Haas contributed to this article.

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