The legalization of Cannabis in Canada is creating a new gold rush, with retail property investors standing to be one of the biggest beneficiaries of the new rules.
Legalization of marijuana is creating a massive surge in new business openings, demand for the commercial real estate in Canada, and many new tech and investment vehicles looking to cash in on the boom in use.
CoStar reports that a new record for retail lease rates could be set with the listing of 2 Bloor West at $400 per square foot. Some REITs are already reporting 97% retail property occupancy rates. Demand for Cannabis is expected to easily outpace supply for the foreseeable future. RENX Canada projects, there could be 500 new pot shops in Alberta alone before long, with the average space being leased ranging from 1,500 to 3,500 square feet. That’s an almost instant need for well over one million square feet of new retail space. That’s not including growth operations, distribution space and offices needed. Even in BC where local government has been slow to embrace the new laws, there is an expectation that marijuana dispensaries could revitalize business and retail districts.
Billions of dollars and millions of individuals are intensely focusing on the new pot industry. Yet, while new pot stores and various other commercial sites may grow like weeds, it could just be the beginning. Broader legalization of other drugs as we’ve seen in the growing number of countries decriminalizing cocaine could usher in a whole new era for retail and make shopping plazas even more vibrant and buzzing than we’ve ever seen. Many may have missed the best moment to get into the pot business, but there may be more opportunities on the horizon.
The new cannabis industry can be good for investors and much for the country, even if you are not in love with the idea. Certainly not everyone is a fan of legalization. Some municipalities are still pushing back on the perception that this will flood their cities with drug users. Many are concerned about broader productivity and safety on the road. Yesterday’s dealers are definitely not happy about it.
Yet, more tax revenues, reduced crime and high demand for retail space which will blow over to properties which don’t have pot tenants, are all benefits. You can invest in shopping plazas which don’t have these shops and which don’t plan to lease to them and still reap the benefits of this gold rush through increased cash flow and yields.
Higher rents, higher occupancy rates, higher asset values and higher returns – all look like probable outcomes of the new cannabis industry. For those who are not fans of the movement, there are great opportunities to profit from this boom, especially in the retail property investment space. With demand only growing, now is a great time to increase portfolio allocation in this sector and reap big rewards.