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Overcoming Real Estate Roadblocks in the Cannabis Industry

Overcoming Real Estate Roadblocks in the Cannabis Industry

The number of marijuana dispensaries in the United States is expected to grow this year as more states legalize weed, the federal government considers legalizing the substance nationally, and marijuana becomes more mainstream overall and sees growth through the pandemic. 

One of the biggest challenges that dispensary owners face is finding a location.

Even though it’s 2021 and recreational marijuana is legal in 15 states plus the District of Columbia, and medical marijuana is legal in another 33 states plus the District of Columbia, there are still a lot of landlords who want to work with cannabis companies.

In this post, we will go over the most common and frequently encountered roadblocks in the cannabis industry and how to overcome them.

Roadblock #1: Zoning 

Zoning requirements vary by market. Commonly, dispensaries must be a certain distance from public services like schools, churches, and parks. This, of course, further narrows the options for retailers. 

The good news is that large players are coming up with a solution to this challenge by dedicating real estate departments that focus on vetting locations and navigating regulations. We are also seeing a lot of commercial real estate practices, and portals specialized in marijuana businesses pop up across the country. These operations are often small and specialize solely in navigating the country’s budding marijuana business opportunities. 

A large part of their specialization is knowing what clauses to include in marijuana store leases that are not commonly included in other retailer leases.

Roadblock #2: Getting the License to Sell Marijuana in Tandem with Lining Up the Real Estate 

The timing of licensing is another roadblock that many marijuana dispensaries face. Some states, like California, require retailers to first have control over a particular site, whether through a lease or an option to lease before they can even apply for a license. Most states also have a limited number of marijuana sales licenses. This means that when one becomes available, there may be a flood of prospective retailers applying.

All during the commonly months-long licensing process, would-be retailers are building out their spaces and paying rent for it before they can even sell a single bud. Of course, this isn’t cheap and can cost upwards of hundreds of thousands of dollars. Then, if the license doesn’t end up getting approved, that money is just a loss. This problem is especially prevalent in highly populated areas where most mixed-use buildings aren’t owned free and clear, meaning a lender behind a building still has the final say on any deals for dispensaries and other businesses. 

Roadblock #3: Reluctant Landlords

Some landlords are still under the notion that marijuana businesses will attract illegal activity and increased hassling by law enforcement.

Even in a state like Oregon, where recreational marijuana is legal and the state’s legislature passed House Bill 3460 to authorize and regulate dispensaries, some landlords don’t even know the laws exist.

One great way to overcome this roadblock is to arm your potential landlord with the power of knowledge! Come to your initial meeting with them ready to answer any questions and concerns they may have. Bring some paperwork with you about laws in your state regarding the sale of marijuana and distribution regulation. Ensure them that your operation is completely legal and you are a functional, reputable, and legitimate business.

Some more tips to winning over hesitant landlords include:

  • Bring your professionalism: As we said, you need your landlord to understand that your business is just as viable and you are just as professional as their tenant down the street who sells watches. Do this by presenting him with your sales figures, showing up to showings and meetings on time, returning their phone calls as soon as you can, and be polite and courteous. Unfortunately, some people have preconceived notions that canna-businesses are run by criminals or shady people; it’s up to you to dispel that myth.
  • Preparation: As we mentioned, you must be prepared for whatever the landlord is going to ask you. Some landlords may worry about the kind of clientele your cannabusiness will bring to their neighborhood. Did you know that studies show that dispensaries actually reduce crime in the neighbors they are located in? Bring a copy of this information to ease the landlord’s concerns and debunk any preconceived notions in their head.

Finding that perfect location for your cannabusiness is most definitely a bit of a challenge and will likely be a long process. Search for cannabis retail locations for lease on 420property.com!

February 19, 2021Comments Off
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