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CBC Chatter: Cannabis & Commercial Real Estate Recap & Insights

On June 24th, 2021, Coldwell Banker Commercial hosted its second CBC Chatter, a virtual quarterly series hosted by Managing Director Dan Spiegel to discuss hot topics in the world of commercial real estate. This event focused on cannabis and how the industry is warming up to the trend.

Daniel Spiegel was joined by Founding Partner of Mr. Cannabis Law, Dustin Robinson Esq. CPA, and Coldwell Banker Commercial NRT’s Rick Locchead to share insights, intel, and best practices when approaching a deal in the cannabis space. Jackie Bryant, San Diego based cannabis journalist, moderated the conversation.

The discussion began by defining three crucial terms: cannabis, marijuana, and hemp. Robinson outlined these differences by explaining that cannabis is a plant species that sources hemp and marijuana, with hemp being federally legal and marijuana being classified as federally illegal. However, since cultivation and dispensing are regulated by states, all three panelists emphasized throughout the conversation that many regulations and challenges associated with cannabis and commercial real estate varies by jurisdiction.

A variety of topics were covered from landlords and zoning laws, signage, and the rise of edibles, including:

  • Leases and Landlords

    • There are major challenges when looking to lease a retail space, including finding a compatible landlord, following all land development codes, which are highly varied, and ensuring the space is retail friendly.
    • Among property manages and consumers alike, there is a stigma around cannabis and what kind of image surrounds the industry. Many people are not aware of the level of regulation surrounding cannabis sales or what dispensaries even look like at a retail level, generating an overall negative sentiment.
    • Different uses of properties come with different zoning laws- sites that are used to grow require agricultural regulations, whereas dispensaries demand retail zoning, each presenting their own slew of real estate challenges.
    • Tenants typically pay premiums because of the added risk and lack of landlord cooperation. However, as more municipalities become open to dispensaries, supply of spaces will increase, the stigma will shift, and tenants will have more purchasing power.
    • While alcohol remains the only comparable industry, there is no true blueprint to integrating the commercial sale of cannabis, leading to multiple lawsuits across states.
  • Liability

    • The nature of the cannabis industry inherently presents a variety of challenges, especially when it comes to the liability that landlords take on. Robinson urges those looking to negotiate a lease to work with an insurance broker that is familiar with the space and understands the niche risks involved.
    • In the initial search for a retail space, tenants need to be wary of existing securities. Locchead discusses how existing debts on a property can pose a major problem when negotiating a lease, compounding additional liability for the landlords.
    • With added liability comes added insurance policies. Most tenants and their brokers will need to include language in the leases that call out what kind of insurance is needed for the space as to avoid major legal complications down the road.
  • The future of cannabis and commercial real estate

    • Social distancing and stay-at-home orders during COVID sparked a national increase in demand for delivered goods, cannabis included. Thus, Robinson predicts a shift to the delivery model for the long term, turning cannabis into a commodity, similarly to alcohol. This shift will also mark a decreased demand for retail space.
    • Edibles have become an increasingly popular product on the market, offering reduced risk for first time users and the ability to feel the effects without inhalation. As the demand increases, the industry is being forced to convert kitchens and comply with additional food laws.
    • As more states legalize recreational cannabis and become engrained into culture, social consumption lounges present an under-utilized opportunity for cannabis companies and open a new door of regulations for real estate.

You can watch the full recording of the second CBC Chatter here or check out the podcast, here

We’re excited to host our next event! If you have any suggestions on topics to cover, please e-mail cbc@curichweiss.com.

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