Growers that aren't the only business creating new real estate demand as a result of cannabis legalization. There is a ripple effect that will take place from related ancillary businesses, like fan manufacturing and soil specialists, which will also grow as a result of legalization. Recently, businesses and professionals related to the burgeoning marijuana business gathered at the MJBizCon conference to discuss that most pertinent issues to the industry. Peter Padden, an associate at Lee & Associates, attended the conference, and we sat down with him for an exclusive interview to talk about the tone of professionals at the conference and how he sees this new industry impacting commercial real estate.

GlobeSt.com: Tell me about the recent MJBizCon conference in Las Vegas, and how the industry is expected to grow?

Peter Padden: According to the show organizers there were 18,000 people in attendance this year. People only see grow houses and dispensaries, but there is an entire industry of support businesses that work only for the cannabis industry and never touch a leaf. There are fan manufacturers and vapor pen vendors, soil specialists, security firms and other professional services companies who are focused on the industry.

GlobeSt.com: How do you think these auxiliary businesses will affect commercial real estate and what sectors are most likely to be impacted in the future?

Padden: Obviously the industrial sector so far has seen the greatest impact of the legalization of marijuana. Here in Los Angeles, we are seeing the willingness of distributors and growers to pay top dollar for the space they need and that has already affected lease rates and sale prices. But as lawmakers proceed with regulations for the industry we will also see a significant impact on the office sector and the retail sector at least in the short term.

GlobeSt.com: What do you mean by 'at least in the short term?'

Padden: While there seem to be thousands of operators looking for space right now, look for a lot of them to go out of business as the market matures. The price of the product is expected to dip significantly as supply shoots up, and that is going to be coupled with what looks to be an aggressive amount of taxation from the cities and state. Taxes and other costs of doing business coupled with the expanding population of operators will directly impact revenues and bottom lines, and a lot of people who didn't know how to forecast are sadly going to find themselves in trouble. There will be extensive consolidation in the next two to five years.

GlobeSt.com: How is the marijuana business evolving as a result of legalization in multiple states, including California?

Padden: There's a perception of the industry as a group of old hippies, but that couldn't be farther from the reality. The growing level of seasoned, incredibly intelligent and effective entrepreneurs navigating the space will blow you away. These are savvy business people, and as they continue to interact with the real estate industry we will see changes in the way our business is done as well.

Instant Insights /

Real Estate Will See a Ripple Effect from Cannabis Legalization

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