Cannabis legalization has a direct impact on the real estate sector. When the plant becomes legal in a state, an increase in the demand of warehouses, lands and storefronts for cannabis selling is evident. You can find analysis of these trends in surveys of the National Association of Realtors (NAR), March 2023.
The real estate industry and its professionals adapt to changes in trends and also in local and national laws and regulations. The real estate survey of 2023 offers the insights of the real estate changes linked to cannabis legalization.
The conducted surveys explored different areas of interest linked to cannabis legalization listed below:
- Residential Real estate;
- Selling a grow house;
- Residential property management experience;
- Commercial Real estate;
- Perception of crime;
- Commercial leasing.
Random sample of 75000 NAR members who practice residential real estate and 53000 NAR who practice commercial real estate recieved the survey by email in March 2023. The overall response rate was 2.6%. The characteristics of this report are representative of NAR member characteristics in 2022.
Residential Real Estate
Just 1 to 4% of survey respondents were aware that the real estate multiple listing service contains a specific cannabis field.
In states where cannabis legalization lasted the longest, the 18% of respondents to the survey noticed a reduction in the real estate inventory linked also to the cannabis industry. The 14% of the respondents in states where cannabis just became legal noticed the same thing.
In states where cannabis was legal the longest, 13% of respondents noticed a decrease in residential property values near dispensaries. The same trend reported in 2021. Moreover there is a decrease in respondents noticing an increase in residential property values going from 10% in 2021 to 5% in 2023 survey.
Respondents in states where recreational cannabis is legal often highlight that homeowners associations define rules against smoking and growing cannabis in common or exposed areas.
Selling a Grow House
In states where prescription cannabis is legal the 81% never selling a grow house. On the other hand, where recreational cannabis use was allowed more than 5 years ago had sold a grow house in the past. Among residential members who sold a grow house, 31% in states where recreational and prescription cannabis were legal before 2018 had a hard time in selling it.
More than two thirds of them did disclose that the house is as a grow house. Nearly half of respondents said that after more recent legalization they had decreased share.
Nearly 9 to 10 people selling a grow house had no title issues to do it. 9% of them used a specialized company for the title.
Residential Property Management Experience
The majority of residential property managers in states where medical cannabis is legal had not seen modifications of original leases. Almost half of the respondents to the survey had no issues leasing a property. Nevertheless when there were issues with the growing the most common were the smell and the moisture.
These issues were more pronounced in the areas where recreational cannabis has been legal for more than five years.
56 to 65% of residential property managers have seen addendum changes to leases restricting smoking on properties. In states where only medical cannabis is legal 47% of respondents didn’t notice modification of agreements in terms of not smoking in the property. While in 2023 only one third of them noticed this.
Between 30 and 35% of residential property managers had issues in leasing a property after cannabis smoking.
If a tenant grows cannabis in the rental property, the utility costs is his responsibility.
The 2023 NAR survey also covered the question if a cannabis smoking tenant actively pays the bills. Regardless of the cannabis legal status, it came out that 9 out of 10 tenants pay the utility costs.
Around one-fifth of landlords are unwilling to take cash for rent. Nevertheless 45% of landlords based in those states where prescription cannabis is legal would take cash for rent. This payment comes from cannabis growing.
Commercial Real Estate
The survey covered questions regarding the increase in demand for commercial properties. It came out that in states where prescription cannabis use is legal 25 to 29% of respondents had seen an increased demand in warehouses. From 13 to 15% in land and 18% in storefronts.
On the other hand in states where cannabis use is legal for more than five years 29% of respondents noticed an increase in warehouse demand.
36% of respondents didn’t notice an increase in commercial property values near dispensaries (prescription cannabis). Only a small percentage of them (4%) noticed a slight decrease in the commercial properties values.
In those states where cannabis legalization lasted for more than five years. 74% of respondents noticed a change in the commercial property values near growing lands. Only 7% of respondents noticed a substantial decrease in the commercial property values and 5% saw a substantial increase.
From the survey it was found that in states with legalization which lasted the past five years. 30% of tenants don’t want to be near a dispensary. In states withprescription cannabis only, this percentage decreases to 24%.
In those states where cannabis use is legal for more than five years only the 14% of respondents noticed an increase in property purchasing over leasing.
The majority of them have seen the increase in warehouse purchasing (93%), followed by land purchasing (47%) and storefronts (27%).
Commercial Leasing
Most of the commercial member respondents were not leasing to cannabis related businesses. And just 7% of respondents placed in states where prescription cannabis is legal were leasing to cannabis related businesses. Moreover 71% of respondents declared that no additional addendums were added to leases regarding the sale of cannabis.
The most frequently cited issue related to leasing to cannabis business is the smell of cannabis crops. Among other reported concerns are the theft of cash in property, moisture problems and fire hazards.
In states where only prescription cannabis is allowed, 23% of commercial landlords would not take illegal activity cash.
Perception of Crime
More than a half of commercial respondents (53%) didn’t notice a change in the crime perception. The poll was held in states of prescription cannabis only. In 2021 it was only 39%.
Nevertheless, in states where cannabis was legalized, 22 to 28% of commercial members declared an increase in perception of crime.
Where both medical and recreational cannabis use is legal, 18% of respondents reported an increase in crime. 13% in 2021.
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