The real estate race is on for recreational cannabis retailers.
Though the use of recreational cannabis was made legal across all Canada last month, dispensaries in Ontario are still waiting to set up shop.
According to the Cannabis Legalization website of Ontario, the only way to purchase marijuana legally in Ontario until April 1, 2019, is through the Ontario Cannabis Store website. Private retailers will only be introduced after that date if they comply with strict government controls.
Currently, the retail model for cannabis differs across the county. In Quebec and The Atlantic provinces, excluding Newfoundland, a government-owned model is in effect. Meanwhile, Saskatchewan, Alberta, Ontario and Newfoundland have opted for a privatized approach.
Retailers aren’t waiting for the rules to be set in stone before they start looking at real estate. Real estate broker Dave Marino of Marino Locations Ltd told the Globe and Mail his client, cannabis retailer Spiritleaf, was already looking to lease 20 spots in Ontario. “They’re essentially placing their bets on what real estate will qualify under the rules,” he told the publication.
The decision could be costly for retailers. In addition to the uncertainty of the competitor scope and regulatory landscape, municipal zoning and advertising requirements may also change.
Until January, 22, municipalities also have the option to block the industry altogether. Richmond Hill, Ontario, for instance, has already elected to opt out of retail cannabis sales.
But for many cannabis retailers, the reward is worth the risk. According to Statistics Canada, about 4.9 million Canadians aged 15 to 64 spent an estimated $5.7 billion on cannabis in 2017 for medical and non-medical purposes. And CIBC believes adult-use cannabis sales will hit $6.5 billion in 2020.
So, it shouldn’t come as a surprise that cannabis companies want to ensure their product is front and centre. According to a report from Grant Thornton, cannabis compies are looking to lease street front or mall-based retail locations with 1,200 to 3,000 square feet of space. And the demand is driving up prices.
“Bidding wars have already driven some companies to offer double rent, with leases being signed for five to ten years,” Mitchell Osak, Managing Director, Strategic Advisory wrote in the report.
Cannabis legalization isn’t just good for the commercial real estate industry. Between grow-op facilities and greenhouses, the demand for land to grow marijuana has multiplied.