Legalized marijuana and the effect on the market

[Bryan Cork]

I live in Colorado Springs, and we have dispensaries all over town. And I know that as well as store fronts that sell, there are a huge number of indoor grow operations that operate in industrial areas, as we as in residential neighborhoods. So my question is, taking the ethical stance out of the equation, and the social ramification argument, what have you all seen as to the impact that this industry has had on the real estate market in the areas that have adopted some legal form of marijuana. Love to hear your thoughts!

[Jenifer Levini]

Hi @Bryan Cork

Here's what has been happening in California real estate. The market has been boom-bust-boom again. Initially, few counties were allowing cannabis businesses. Those that were experienced booms where, for example, real estate that was worth maybe $100,000, such as a polluted automotive junk yard, went on  sale for over $2 million because it was zoned "Industrial" allowing use of volatile solvents for manufacturing (one type of cannabis distillation).  Then as more and more counties saw the masses of  $$ flowing, they allowed cannabis businesses. Then prices dropped as all sorts of middle-of-nowhere places have allowed these businesses into their industrial areas. Investors started noticing and thinking "why should I pay $2 million in one nowhere place when I can buy in a slightly farther nowhere and save $1 million." Now, there are hundreds of growers looking for investors and investors are sitting on their money watching the prices drop. It's all a very interesting study in supply and demand. California is a huge state. There is a lot of real estate. I've been a part of some of these deal and the psychology of everyone involved is fascinating. 
Once the property is developed, and becomes a business with demonstrable cash flow, the value goes up again. But people dont trust one another because the P&L's are unverified because its all cash and the taxes are sketchy. So rather than just buying/selling, people form partnerships (LLCs) which solves some problems and creates other problems. It's an interesting time to be a lawyer, for sure.

Jen