Oregon passes recreational weed, is this another Colorado green rush?

16 Replies

I have seen what happens to rents and values when legal weed is added to the equation. Is Oregon the next Colorado? In my mind the state is more attractive than a lot of Colorado. What is your take?

@Matt R.

I am actually curious...what does happen when they add legalized marijuana to the equation?  I live here and would surely like a heads up to what might be coming over the next year as it relates to real estate.

Can you...and maybe some investors from Colorado share their experience?

@Matt R.  

 I'm not seeing where legalizing pot is going to have any effect on real estate pricing, unless they are allowing people to openly grow it in their yards, then prices may go down, or if they allow it to be grown in large volume like an agricultural crop. Already in northern California where it is illegal (Shasta, Trinity, Humboldt Counties) pot is the highest dollar agricultural crop, and it doesn't affect real estate pricing in the least. 

I think this is all much ado about nothing. It's no different than legalizing alcohol or cigarettes, they have nothing to do with the price of real estate. At first the novelty of it probably drew a few people to Colorado, but now that all the states are doing it, what's the big deal? 

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In Colorado, the figures are still coming in so it might be too early to peg official effects. What we do know is, it has created a lot of new jobs, new tourism and investment in certain commercial and industrial zones. The rents for those properties skyrocketed. Those properties had a new demand that did not exist before. Instead of a vacant warehouse you had several parties interested in leasing or purchasing.

For the residential a residual effect occured. New arrivals looking for jobs or those who wanted to medicate without legal issues pushed up rental demand. We are talking thousands of new jobs and thousands of new residents for Colorado.

Let's take the seaside town of Brookings, OR for example and throw in legal commercial weed. It is a small town population 6000, not many jobs outside of tourism/fishing. A new industry could create new jobs and residents for that town, increasing demand on a small supply of residential and the rest. I have heard retirees are considering OR vs CO now.

I have not read the Oregon law totally, but yes there will be large commercial grows to supply the new retail stores. I would not consider it like beer and cigs as those products are massively available and these new products are more exclusive retail wise. Maybe not for that many more years and 2016 California might blow the lid off too. That's another story.

When you physically look at Oregon vs. Colorado....Oregon in many ways is more attractive. Folks went to Colorado out of default, perhaps those same type of folks now have a better choice. The net effect is unknown but we know now it could only be a positive effect for REI.

Anecdotely speaking for Colorado, I did get a large percentage of inquiries from out of state folks looking to relocate. I was able to raise the rent solely based on that new demand.



Originally posted by @Karen Margrave :

@Matt Rosas and @Laureen Youngblood  

 I'm not seeing where legalizing pot is going to have any effect on real estate pricing, unless they are allowing people to openly grow it in their yards, then prices may go down, or if they allow it to be grown in large volume like an agricultural crop. Already in northern California where it is illegal (Shasta, Trinity, Humboldt Counties) pot is the highest dollar agricultural crop, and it doesn't affect real estate pricing in the least. 

I think this is all much ado about nothing. It's no different than legalizing alcohol or cigarettes, they have nothing to do with the price of real estate. At first the novelty of it probably drew a few people to Colorado, but now that all the states are doing it, what's the big deal? 

 For sure Karen you have NorCal experience and ground up reality there. Would you think RE values would be less or more if you took away the illegal activity up there..or no effect?

@Matt R.  

Portland saw a large run on medical retail space last February as the first state required registration date was on the horizon. Vendors were fighting over each other cash in fist desperately trying to lease an address they could put on their application forms. It didn't matter when they would be allowed to open, it was all about obtaining a physical address meeting locational parameters and being as close to the first application in line as possible. Property owners saw increased demand, rent and values. As well as longer leases with cash owners typically prepaying one to five years at consummation of lease. 

I don't know how small markets like Brookings will be affected, but Portland has green cross (the medical marijuana sign) signs all over the place. There will be a very large revenue stream created once recreational laws are implemented in Portland. Property owners, shop owners, shop employees, electricians, warehouse owners, warehouse managers, security companies (both guarded and monitored), carpenters and HVAC companies are just a few industries that will benefit from the increased demand. 

@Matt R.  I suppose it will be much like coffee shops, except the cost of the product is much more expensive, therefore; a little competition in areas could be tolerated, but pot shops on every block wouldn't be financially feasible, so I don't see any big demand for retail space lasting long term. The laws of supply and demand will eventually drive the price of pot down, making it far less profitable than it is now, meaning a store will have to sell a lot more. Besides, most areas are going to limit the number of dispensaries. 

Legalization of pot may be a topic that is hot right now, but as to affecting values on real estate in the long term, and creating jobs for a bunch of people,  I'm just not seeing it.  We'll see. 

Here in CO the shops are much more like liquor stores than coffee shops.  Public consumption is forbidden, so you can't sit and consume it at a store or any other location.  Cities can't criminalize it, but they can ban stores and other operations.  Many have.  Even the ones that allow it have enough restrictions that they aren't on every corner, except in a couple of locations.  In the upper right corner of that link is a map showing locations of stores, if you're curious.

The big impact for real estate seems to have been on warehouse space.  Other than that I've not noticed any real impact of this change at all.  A lot of hype at the beginning of the year but that seems to have died down.  Our rental market is very, very tight so getting higher rents is easier now.  Vacancies are filled very quickly.  Lots and lots of new construction.  I have no idea, though, if any of that is tied to legalization.

The main real estate benefits, as @Jon Holdman  stated has been commercial.  From Pot doctor offices to retail medical shops to warehouses etc.  It started with medicinal, if you got in THEN with a few big operations, and they use you to find warehouses, retail fronts, etc then you are golden.  I'm sure there are some commercial brokers out there who made 6 figures on MMJ business alone if they specialize in that.  Landlords obviously are doing well for these types of businesses as well.

I am not sure the liquor store comparison is accurate as far as jobs, sales volume, average ticket, taxes and average profit per store goes. It is sort of similar with respect to regulations and retail space perhaps. I imagine some of these stores do 30k a day with multiple employees vs liquor store at 3k per day and far less local jobs associated much less warehouse activity etc. Tax revenues are the biggest difference. Annual Colorado weed taxes $100 million+ , annual Colorado alcohol taxes less than $100k. Thanks, matt


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I had dinner last night with one of my good friends who is a lobbyist and he got the contract from the Pro legalization camp to do the lobbying for them and writing the bill.

In a nut shell they tailored this bill right a long with the Oregon liquor laws.. In Oregon you can only sell liquor in a designated store you can't buy it in grocery stores etc.

Washington also legalized it.. Other than creating a demand were one did not exist IE for retail space and for some warehouse space to indoor grow  that is the impact. And of course those that do well with it will probably buy nice new homes.

With the bill passing law enforcement moves any Weed violations to the bottom of their priority lists.

Putting this into a perspective of supply and demand is a great way to look at this topic. Demand for the product is strong and has been since our founding forefathers. That won't change. The changes in regulation have been helping it grow in popularity and use (or more demand). As pot laws become less and less strict and more pro than con, the demand will continue to grow. Increasing demand creates value. The more demand increases, the more it will be "okay" to consume. That is going to create even more demand. 

The big rush that I posted about was largely due to a large push of demand and a limited amount of supply in terms of retail and warehouse space. Pot shops are competing in a tough retail market and they simply had to get their licenses in place for their dispensaries to have a chance. That suggests that that type of storefront demand most likely won't be sustainable. 

However, Supply is highly regulated in Portland in terms of distance from schools and distance from shops being a local requirement. That right there limits the amount of possible supply in the dispensary market. It won't be anything like the coffee market where coffee shops literally operate out of basements and food carts (liquor stores are a good comparison). On top of government regulation you're going to have some property owners that simply will not condone nor lease to a dispensary. Other owners won't because they aren't resourceful enough to find an insurance company willing to insure such a storefront. 

The warehouse market has even less supply (Portland has a small fraction of the warehouse space of Seattle, especially industrial space) so the rapid increase in demand has affected that market even more. Unlike other cities Portland simply is not going to build more warehouse space. The industrial land market is probably the tightest market in Portland. There simply isn't enough industrial land suitable for corporate warehouse space. Smart grow operators may be looking to the smaller, less util land, in order to build more, but I don't for see any large contribution on the warehouse supply side of the equation through new construction. 

One thing to consider on the supply side is that change in law has slowly allowed supply to become easier and more legal. This has already resulted in retail pot costs being cut roughly in half across the Portland market. The increase in supply and cost to create the supply has already been absorbed in the market place to some extent. Sure more dispensaries will come around and more growers are going to get up and running. But there becomes a point when shops simply won't operate if there isn't any profit. 

Demand is going to stay and most likely will increase. Right now supply is chasing that demand and at some point an equilibrium will take place with a leveling of prices and profit margins. Those prices and margins may have already been met or they may go lower. 

Most of Oregon hasn't allowed medical dispensaries yet because the state gave the cities the ability to call for a one year moratorium last April. Only a handful (6 I think) of cities allowed implementation right off the bat with Portland, Eugene and Ashland leading the way (no surprise with those 3). The other cities in Oregon are still figuring out how to correctly regulate the dispensaries and grow sites via zoning laws and regulations. That will eventually off set some demand with more supply, which would lead to lower prices and less affect. 

The supply side of the equation is still figuring itself out and responding to the large change in demand over the past few years. No one has a crystal ball and can see what is going to happen. However, opportunity to create more income has presented itself. Some are going to take advantage, some already are and some will continue to discount it. None the less, legalization has already affected the Portland market and it has been measurable by the property owners participating in the supply side of the industry. 

@Matt R.  it sounds as if Northern Cali is going more regulated rather than less regulated. There is so much rural dense land that it may not be a big issue in Northern Cali, but I would imagine a ban on outdoor grow operations would lead to more demand for warehouse space. Portland is such a different place that regulation is going to and has already limited supply. So I think there is will be longer lasting affect on Real Estate here, than you have seen in your area. 

Wow, this got really long, sorry for the long post. That's what happens when I start thinking long and hard about supply and demand. The sad brain of an entrepreneur....  

Originally posted by Account Closed:

These folks will pay whatever rent you want in Colorado to be close to the (only?) Pot grower that breeds plants high in CBD (cannabidiol compound) and low in THC (psychoactive compound), I found it quite striking:

Medical marijuana refugees: 'This was our only hope'

I first heard about Charlotte's Web and the development of other low THC varieties for treatment of seizure disorders here on BP thread a few months back.  Until both legalization and medical research for marijuana opens up I think we'll see people moving cross country to be near the speciality growers in CO.  These families moving to CO for their kids aren't looking for a cure, just something to help with the day-to-day quality of life for their kids.  As the exposure in the media continues, more families will make the trek.  That's got to put pressure on the rental market and push the property values and rents up.