The highs and lows of legalized pot, from a real estate perspective.

After reaching an agreement with the City of Montreal, Société Québécoise du Cannabis (SSQ) shops are due to start business as early as this summer. The first 4 pot stores are planned near popular metro stations, and will open their doors as of July 1 after the federal legislation passes legalization.

A recent survey by Zoocasa reveals mixed sentiments when it comes to Canadian views on the impact of pot on the real estate market. 

32% of Quebecers surveyed felt that marijuana dispensaries near their homes would negatively affect property values. More Quebecers felt that marijuana use within private residences would decrease property values, than respondents from any other province. Still, according to Zoocasa’s data, the majority of surveyed homeowners in all provinces did not report much concern about the impending legislation.

The effects of pot legalization on real estate prices in Montreal is purely speculative at this moment, but American cities that have previously undergone marijuana legalization may serve as a handy case study.

In the journal “Real Estate Economics,” James Conklin and coauthors studied the conversion of medical marijuana stores to recreational marijuana, and the subsequent effect on housing prices in Denver, Colorado after legalization in 2014.

Their research showed that homes located near converted stores experienced appreciation at 8% higher than homes further away.

Realtor.com also reported on American cities having undergone a year of experience with recreational marijuana sales. Their data showed a significant increase in home prices — well above the national median price.

The same data shows that while proximity to a pot shop tends to increase home value, Colorado homes close to grow-ops have lost value. Apparently, the pungent odor of pot is a sticking point for many American buyers.

Industrial and commercial real estate opportunities related to grow-ops

The Canadian marijuana industry 85 companies with a combined market value of about $30 billion. The new pot industry is expected to put pressure on the industrial real estate market amid a booming economy. According to Cushman & Wakefield (a commercial real estate firm) the industrial vacancy rate at the end of 2017 was at its lowest since 2011 at 3.9% . Rents for industrial spaces went up 15% in Vancouver and 7.3% in Toronto from 2016 to 2017.

Vacant warehouses and factories have become valuable real estate opportunities for the grow-ops, pot shops and other initiatives within the pot industry, which has put created a huge demand for commercial operations. States like Colorado and Washington are seeing premium prices for commercial buildings with the proper zoning.

In Edmonton, there are already some big players in the market.  Aurora Cannabis is completing on an 800,000 square foot facility near the airport, and Canopy Growth recently did a deal for 160,000 square feet in south Edmonton.

Canopy Growth Corp. also recently signed a joint-venture deal with Les Serres Stephane Bertrand Inc., to convert a large-scale tomato greenhouse operator in Mirabel, Quebec, into a retrofitted cannabis production site.

Upcoming timeline for Canada’s Marijuana Legalization: 

April 9, 2018

Ontario’s Real Estate Association will propose a 5-point plan to the provincial government to protect buyers and sellers from health and safety risks associated with growing marijuana in a private residence, including requirements for remediation, home inspections and real estate broker disclosure.

July 1, 2018

Original target date for legalizing the use, production and distribution of cannabis for non-medical use.

August-September 2018

Expected date for legalization.