But the Drug Enforcement Administration still classifies marijuana as a controlled substance. Banks are skittish about lending to cannabis businesses, constraining their ability to buy and hold real estate, although that may soon change. In some ways, what is happening in New York has already occurred in other states. California was the first to legalize medical use, in 1996; now 36 states allow it. With the signing of New York’s Marijuana Regulation and Taxation Act, 18 states have legalized recreational marijuana, although South Dakota’s law is being challenged in court. And many landlords won’t lease to cannabis companies, either because of the risk in having a tenant that violates federal laws or the unsavory reputation that still clings to weed. Those willing to do so have been able to charge premium rates.
“It’s a land grab,” said Gregory Tannor, a principal at Lee & Associates NYC, a brokerage that has been conferring with New York City landlords since November and has already lined up nearly 200 possible locations for dispensaries. Agricultural land upstate is now marketed as being “in the green zone” for hemp farming or the construction of grow houses for cultivating marijuana.
But for all the excitement, there are significant challenges in cannabis real estate. Brokers are talking to landlords about leasing storefronts to dispensaries. Representatives of out-of-state cannabis businesses are flying in to scope out properties. And suppliers of medical marijuana are expanding in the hope that they will be able to branch into recreational sales.
Meanwhile, funding is pouring into the industry in anticipation of possible federal legalization, some lenders will now do business with cannabis companies, and real estate investment trusts have sprung up to serve marijuana interests. There could be 700 to 900 dispensaries in New York and four million square feet of space devoted to cultivation, said David Weinstein, chief executive of NewLake Capital Partners, a REIT formed last year. But the pandemic may have softened the stance of some officials, given the jobs and tax revenue that cannabis businesses can generate after the protracted health crisis has decimated both. The state estimates that the new industry could bring it $350 million in annual revenue and create 30,000 to 60,000 jobs.
In New York State, cities, towns and villages have until Dec. 31 to opt out of the new law, prompting heated discussions among local officials, some of whom “can’t fathom the idea of the devil’s lettuce businesses within their borders,” said Neil M. Willner, co-chair of the cannabis practice at Royer Cooper Cohen Braunfeld, a New York City law firm. Zoning also puts the squeeze on real estate available to cannabis companies, often relegating them to industrial areas. Municipalities require that a cannabis concern be a specified distance from schools, houses of worship and other cannabis businesses — if they allow it at all.
The News Highlights
- ‘A land acquisition’ for a piece of the New York marijuana business
- Check the latest News news updates and information about business, finance and more.