A new study analyzing the impact of changing cannabis laws on the real estate industry shows that demand is increasing for commercial properties in states with legal marijuana.
A new study from the National Association of REALTORS (NAR) analyzing the impact marijuana legalization has on the real estate industry, shows commercial real estate practitioners are discovering a rise in demand for land, warehouses, and storefronts for cannabis businesses.
The results reveal that in states where medical and recreational marijuana use is legal, more than a third of those real estate professionals saw an increase in requests for warehouses or properties used for storage.
In those same states, up to one-quarter of real estate professionals reported the demand for storefronts grew, while one-fifth reported there was a greater demand for land, according to a news release about the study.
“As more states legalize marijuana, the real estate market will progressively have to adjust,” said Dr. Jessica Lautz, vice president of demographics and behavioral insights for NAR. “From property owners, to manufacturers, to those who simply want to engage for leisure – it all touches real estate in some form.”
The study, Marijuana and Real Estate: A Budding Issue, examines states where marijuana has been legal since at least 2016 and before. Researchers found that the states that experienced the largest impact on both commercial and residential real estate were the states that cannabis has been legal for the longest.
Adjusting to cannabis legalization is especially noticeable in residential property regulations.
“Residential practitioners are getting used to the new normal of having marijuana legally used within rental properties, while homeowner associations are tasked with setting new rules to address consumption and growth,” said Lautz in a statement.
According to the report, most homeowner associations have restrictions on cannabis use. In states where cannabis was legal before 2016, there was a low percentage (9 percent) of homeowner associations that allow home cultivation and only three percent allowed smoking in common areas.
As for those leasing or renting residential property in states where recreational marijuana is legal, 58 to 67 percent of residential property managers have seen addendums added to leases that restrict smoking on properties.
Real estate professionals reported that in half of all states with legal medical and recreational cannabis access prior to 2016, cannabis addendums had been added to leases which restrict growing on properties
Marijuana Legalization Impacts Property Value
Real estate demand is just one area that marijuana legalization has been making an impact, another is property value.
More than four-fifths of real estate professionals in states where only medical marijuana is legal reported no change in residential property values located near dispensaries, while 60 to 75 percent of professionals in states with medical and recreational cannabis legalization reported no change.
In states where marijuana was legal the longest, 27 percent of real estate professionals reported a decrease in residential property values near dispensaries while 12 percent had seen an increase.
Some areas with cannabis legalization have experienced a boost in property values. A 2018 study published in the journal Contemporary Economic Policy found that some property owners living near cannabis dispensaries experienced a boost in property value.
Researchers from the study found that following the opening of dispensaries within .25 miles, home values increased by on an average of 7.7 percent, while prices jumped 4.7 percent on average for homes located just a quarter-mile further from the dispensaries.
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