CANNAINVESTOR Magazine May / June 2017 - Page 98



According to Investopedia, U.S. property values are blazing, at least that is in the parts of the country where the sale of marijuana is now legal. Factories and warehouses are being bought up to be used as pot production facilities while cannabis retailers are taking over suburban strip mall storefronts, and real estate investors are getting in on the action, according to a recent article by The New York Times.

Since January 2014, industrial real estate pricing has begun to soar for sale and lease two to three fold or more. These properties were generally constructed from the 1940s to 1980s and typically lease for around $5.00 per square foot, triple-net and sell for $40.00 to $55.00 per square foot to mainstream companies. Due to the incredible demand and a lack of appropriately located properties, those same properties are now leasing for $15.00 to $18.00 per square foot, triple-net and are selling in the $85.00 per square foot range.

According to the International Cannabis Business, the amount of places to rent/lease versus how many people want to find a commercial real estate spot is completely in favor of the real estate owners and companies that operate in the space. That balance is shifting more and more into the favor of the owner every day. Not just in Colorado, but in any area where cannabis businesses are allowed to operate. Last year, cannabis sales in the U.S. reached $6.7 billion, according to Arcview Market Research, and are expected to grow to $20 billion by 2021. In response to this explosive growth and its effect on property values, several real estate investment trusts (REITs), including Kalyx and Innovative Industrial Properties (IIPR Innovative Industrial Properties Inc (IIPR) are focusing their investments on properties geared at pot producers. Innovative Industrial Properties, Inc. targets medical-use cannabis facilities for acquisition, including sale-leaseback transactions, with tenants that are licensed growers under long-term, triple-net leases. It is clear this industry is poised for significant growth in coming years.