As a sign of the times, we had 6 calls last week from different marijuana grow operators looking for industrial space in Greater Edmonton.
Ranging from small operators to large enterprises, these groups are looking to capitalize on marijuana being legalized this upcoming summer. There are already some big players in the market too. Aurora Cannabis is nearing completion on an 800,000 square foot facility near the airport and Canopy Growth recently did a deal for 160,000 square feet in south Edmonton. It’s rumored there’s a +100,000 square foot facility just west of Edmonton that will be opening in 2018 as well.
Marijuana isn’t even legal yet, but these companies are an arms race to acquire space. While it’s impossible to predict exactly how this will unfold, we can look to other cities to see the impact legalized marijuana has had on their commercial real estate markets.
Denver, which has had legalized marijuana since 2014, offers some insight into what we can expect in Edmonton. Interestingly, a recent report indicates that marijuana grow operators are paying two to three times higher rates than the average industrial lease rate. Not only are these operators paying a huge market premium, but the industry as a whole has grown considerably in a very short period of time. With only a few years since it’s been legal, the marijuana industry is already responsible for 3% of Denver’s total industrial market.
Edmonton’s industrial vacancy rate is currently hovering around 6%. Vacancy has increased over the past few years, but considering we’re coming off the worst provincial recession in decades, our market has actually fared well. With oil prices approaching $60 / barrel, we’re quite optimistic we’ll see an increase in oil field activity in 2018 (especially if our prediction of $70 / barrel oil comes to fruition). With the rest of the economy recovering and a ramp up in the marijuana industry – even if it’s at a fraction of the speed of what’s occurred in Denver – we could see a very healthy industrial market next year.