Legal weed could spark a Portland-area industrial space boom – Portland Business Journal (blog)
If Colorado is any indication, legalized recreational marijuana, which is coming to Oregon in 2015, has the potential to spark an increase in demand for industrial warehouse space in the metro region.
“We’ve had a flurry of activity from people saying they want to come to Oregon and open these grow centers,” said David Ellis, a principal with Capacity Commercial Group. “My sense is that it’s something we’re going to see a lot more of.”
Oregon voters approved the recreational use of marijuana in November.
Speaking at the Institute of Real Estate Management’s annual forecast breakfast Thursday morning, Ellis said his commercial real estate colleagues in Colorado, where recreational marijuana has been legal since 2012, have seen a big increase in industrial space being used by growers. He’s heard that grow operations in Colorado now occupy more than 4 million square feet of industrial space.
“It has changed the vacancy rate in the state just because of that particular business,” he said.
Ellis predicted that the metro region vacancy rate for industrial space will likely drop below 5 percent by the end of 2015. Recreational grow operations may play a factor in that, though Ellis and others have cautioned that there’s still plenty of uncertainty out there regarding leasing space to marijuana businesses. Federal regulations still play a role, and financial covenants may prohibit leasing to or otherwise interacting with marijuana operations.
Ellis also said that owners and landlords will need to consider the requirements of growing operations themselves. They will likely require lots of water and electrical power for lighting; expensive security systems will also likely be necessary.
“It will be very capital-intensive to make some of these tenant improvements,” Ellis said.
Legal weed could also have an impact on the retail sector, as well, according to George Macoubray, a broker with Commercial Realty Advisors who also spoke at the IREM event. He said many owners of shopping and retail centers have been reluctant to lease to medical marijuana dispensaries for fear that they will attract the wrong element. However, owners that are willing to work with them have found that dispensaries will often go into bidding wars for space, which ultimately drives up rental rates.
A similar effect could result from recreational retailers who spring up in 2015, said Macoubray, before injecting a little humor into the discussion.
“It may just increase sales at nearby restaurants, especially the fast-food places,” he said.