Legal pot sparks demand for commercial real estate
TORONTO Industry players say Canada’s impending legalization of marijuana is spurring demand for commercial real estate, particularly for retail shops in Alberta, where the government is selecting private operators to conduct overthe-counter sales.
Real estate consultancy JLL says its phone has been “ringing off the hook” as cannabis companies look to secure space to cultivate the plant and seek retail space to sell the final product.
Research manager Gaurav Mathur said during a panel discussion at an industry conference in Toronto that commercial real estate prices haven’t “seen a major bump yet,” but he expects that to change after legalization, expected later this year.
“It’s on an asset by asset basis, not prevalent throughout the industry just yet,” he said at the Land & Development conference on Tuesday.
Mathur also expects “offshoots” of the domestic cannabis industry, such as supply and accessories shops, to drive demand for commercial real estate going forward.
Canada is preparing for the legalization of cannabis for recreational use later this year, but has left it to the provincial or territorial governments to decide how to distribute the drug. Provinces such as Ontario, Quebec, Nova Scotia and Prince Edward Island have tasked their provincial liquor boards to handle retail sales of marijuana. But other provinces such as Saskatchewan and Newfoundland and Labrador have said the private sector will handle retail sales.
Alberta, however, is an attractive province for cannabis retail as the Alberta Liquor and Gaming Commission has not put a cap on the number of licences that will be issued, but stipulates that no one person or entity can hold more than 15 per cent. The province expects to issue roughly 250 licences to private operators in the first year.
Some landlords, however, are still hesitant about leasing to cannabis companies amid lingering stigma.
Lisa Borsook, executive partner of law firm WeirFoulds LLP, said in its work on leases for the Ontario government entity created to handle sales and distribution of recreational pot in the province, she has seen pushback.
“That’s in Ontario where we’re having a government laid-out store ... And yet it’s been my experience that landlords, nonetheless, have qualms about having cannabis in their centres,” she said during the panel.