Biggest complaint about cannabis growers: The smell

FILE – In this April 6, 2018, file photo, are the leaves of a marijuana plant inside Ultra Health’s cultivation greenhouse in Bernalillo, N.M. (AP Photo/Susan Montoya Bryan, File)

If you’re going to sell marijuana for legal sale, you have to grow it and store it somewhere, and most people probably don’t give much thought to where. Unless you’re in the commercial real estate business.

In a new report, the National Association of Realtors found that in states where prescription and recreational marijuana use is legal, one-third of its members have seen an increased demand for warehouses; 23% have seen an increase in demand for storefronts, and a quarter of commercial real estate Realtors have seen an increase in demand for land from cannabis companies.

But not all landlords are willing to rent to cannabis growers or sellers.

Because pot is still illegal at the federal level, producers and retailers can’t use the traditional banking system for illicit income, and are largely forced to conduct their business on an all-cash basis. Credit history is then a problem, and property owners can be leery of a cash relationship.

Many have concerns about the way their properties are used. The top complaints?

“The smell. You can’t get rid of it,” said Jessica Lautz, vice president of behavioral insights at the National Association of Realtors. “And moisture. If you’re growing on that property or using on that property, those are the two biggest concerns.”

Other landlords are willing to rent to cannabis producers, dispensaries and retail stores, but they add addendums to the leases.

“They may have different stipulations. Just asking those tenants not to do particular activities within those properties so they can re-lease those properties in the future,” Lautz said.

One solution for cannabis companies is to cut out the landlord altogether.

The Realtor group said 29% of commercial real estate members in states that legalized recreational marijuana in the past four years report an increase in property purchasing over leasing in the past year, indicating a shift in states where the pot business is more mature.

“You don’t have to deal then with those addendums. We know that marijuana is a big industry. So you can actually just purchase the property and have an all-cash sale,” Lautz said.

Property purchases by cannabis producers and sellers are topped by warehouses, but NAR says there has also been an increase in purchases of land and retail storefronts, over renting.

Landlord concerns aren’t confined to commercial real estate.

With people legally able to smoke marijuana at home, residential property managers and homeowners associations are addressing concerns and restrictions.

Jeff Clabaugh

Jeff Clabaugh has spent 20 years covering the Washington region's economy and financial markets for WTOP as part of a partnership with the Washington Business Journal, and officially joined the WTOP newsroom staff in January 2016.

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