Last week we wrote an article about how the forthcoming legalization of marijuana could have a big impact on Edmonton’s commercial real estate market. A number of high profile projects are already underway, and the total footprint of marijuana growers occupying industrial real estate in Greater Edmonton will exceed one million square feet before marijuana is even legal. Here are a few of the larger operations:
Canopy Growth is retrofitting a 160,000 square foot facility in southeast Edmonton;
Our story about the implications to our commercial real estate market caught the attention of Global Edmonton, and Chad was fortunate enough to be interviewed on last night’s news. Since the interview aired, we’ve been asked a number of questions, but one in particular came up a few times: What is the forecasted demand from marijuana growers for industrial real estate in Edmonton?
With the full disclosure that we’ve made wildly inaccurate forecasts in the past, we would draw on the report we mentioned in last week’s article that studied Denver’s market a few years after marijuana was legalized in Colorado. In Denver, the marijuana industry accounts for nearly 3% of the total industrial market. If Greater Edmonton’s industrial market (which CoStar reports as being just over 170 million square feet) were to get to a similar metric, that would equate to roughly 5 million square feet dedicated to marijuana growers in the next few years. As the committed space in Edmonton is around one million square feet, it is conceivable (but certainly not guaranteed) that we could see up to a five fold increase in marijuana grow operations.
Also mentioned in the report was the fact that marijuana growers in Denver are paying a 2 – 3 times premium on industrial space. We’ve seen vacancy rates increase and rental rates decrease during this past recession, so it’s actually played well for the growers. To our knowledge, none of the existing companies have paid a large premium to be in the space, but that could change if the market starts improving and we see positive absorption again.
All things being equal, most landlords we’ve talked to would rather lease to a traditional industrial user over a marijuana grow operation. That said, those same landlords would prefer a grow operation over a vacant building, and if a premium gets added similar to what’s occurring in Denver, we suspect more and more landlord’s will consider the use.