Cannabis companies are benefiting from current challenges in the commercial real estate market, particularly as landlords grapple with high interest rates, overdue loans, and an oversupply of space following the COVID-19 pandemic. With an estimated **$1.6 trillion** in property financing expected to mature over the next two years and **$35 billion** in loans past due or in nonaccrual status by the end of the first quarter of 2024, landlords are increasingly open to leasing to cannabis-related businesses.
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This shift has been evident in the behavior of **multistate operators (MSOs)**, who are now leasing more traditional retail spaces, such as shopping centers or even outer parcels at major retailers like Walmart. In the past, cannabis businesses were typically relegated to secondary roads or industrial areas due to the risks associated with leasing to them. However, as the risks have diminished, particularly concerns over civil forfeiture laws, landlords are more willing to accommodate these businesses. **Ryan George**, CEO of 420 Properties, noted that landlords are scrambling to find tenants to cover payments.
**Christian Tremblay**, vice president at Northmarq, has also observed this growing trend, with traditional retail developers increasingly opting for marijuana retailers because of the higher rents these businesses are willing to pay. He emphasized that the risks involved in leasing to cannabis companies have decreased, especially when these companies are publicly traded and their financials are transparent.
The easing of restrictions by banks and greater understanding of the cannabis industry have also contributed to this change. **Meilad Rafiei**, CEO of Cannabis Real Estate Consultants, noted that although some landlords are still hesitant, particularly those unfamiliar with the industry's evolution, many become more comfortable after learning more about the market. In California, a state with a more mature cannabis market, some landlords have already been dealing with cannabis companies for years.
Looking forward, the potential rescheduling of cannabis from **Schedule 1 to Schedule 3** could further transform the real estate landscape for cannabis operators. This change would reduce their tax burdens and open up new financing options, leading to more traditional lending terms, better balance sheets, and increased investor interest in cannabis properties. However, according to Tremblay, it may take **12 to 18 months** for this shift to significantly impact the market.
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