At the edge of an industrial park in this suburb south of Boston, past a used-car auction lot and a defunct cheese factory, is an unmarked warehouse bristling with security cameras and bustling with activity. Until recently, the cinder-block structure was home to a wholesale florist, a granite cutter and a screen printer. Today, it is home to just one tenant: a medical marijuana operation called Ermont.
Legalized marijuana has already upset societal norms, created a large legal gray area and generated a lucrative source of tax revenue. Now it is upending the real estate market, too.
In the more than two dozen states that have moved to legalize pot, factories, warehouses and self-storage facilities are being repurposed for the cultivation and processing of potent marijuana plants and products. Suburban strip malls and Beaux-Arts buildings have been reimagined as storefronts selling pre-rolled joints and edibles.
And because the marijuana business comes with added baggage, landlords and property owners are charging a premium for new tenants working in the cannabis business. In Quincy, Ermont is paying above market rate for the previously dilapidated 36,000-square-foot building.
“The landlord knew he was sitting on a gold mine,” said Zach Harvey, one of Ermont’s financial backers.
Commercial real estate developers say they have never seen a change so swift in so many places at once. From Monterey, Calif., to Portland, Me., the new industry is reshaping once-blighted neighborhoods and sending property values soaring. In some Denver neighborhoods, the average asking lease price for warehouse space jumped by more than 50 percent from 2010 to 2015, according to an industry report. In the city over all, there are five times as many retail pot stores as stand-alone Starbucks shops.
Wall Street is even cashing in. A few months ago, a real estate investment trust focused on leasing out warehouse space to growers started trading on the New York Stock Exchange.
The sharp rise in property prices follows the booming market for legal marijuana. Sales of legal cannabis reached $6.7 billion in the United States last year, and are expected to top $20 billion by 2021, according to Acrview Market Research.
“This is a new segment of the industrial real estate market that is being created in front of our eyes,” said George M. Stone, a longtime real estate executive now focused on the pot business. “It’s a huge industry and only getting bigger.”
Yet there are simmering concerns that a new real estate bubble might be forming. Right now, millions of dollars are being spent to make old warehouses suitable for cannabis cultivation. Warehouses are in vogue for a variety of reasons: They are big enough to hold thousands of plants, can accommodate the needed climate controls, and are private and relatively easy to secure. What is more, because it is still illegal to transport marijuana across state lines, pot must be grown in the state where it is sold.
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