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Is commercial marijuana real estate investing wise? It\u2019s a high risk\/high reward question. In states where it\u2019s already legal, some warehouse values increased tenfold.<\/div>\n

NEW YORK \u2013 Commercial real estate markets across the United States are feeling a positive influence from the cannabis industry as property is bought, sold and leased for medical and recreational marijuana, a new report shows.<\/p>\n

Hemp also is making waves in agricultural land sales and industrial real estate, agents say.<\/p>\n

There were desert cities no one cared about until cannabis came along, said Ryan George, founder of cannabis real estate listing site 420property.com. \u201cIn Palm Springs, Adelanto, Cathedral City, [Calif.,] I personally know people who bought warehouses for $50 a square foot and sold them for $500 a square foot.\u201d<\/p>\n

Marijuana is illegal at the federal level, which interferes with some aspects of buying, renting and selling real estate. But 23 states have legalized medical pot, and 11 of them, plus Washington, D.C., also allow recreational cannabis sales.<\/p>\n

Mature markets in states like Oregon, Washington and Colorado appear to have gotten a commercial real estate boost from marijuana, according to a National Association of Realtors report<\/a> issued this month based on a 2019 survey of commercial brokers.<\/p>\n

In states where all forms of marijuana have been legal for more than three years, 42% of survey respondents reported an increased demand for commercial warehouse space, and between 20% and 30% said they saw an increase in sales of retail properties and land.<\/p>\n

But cannabis properties can come with regulatory hassles, said Vince Sliwoski, a Portland, Ore., real estate attorney. Recreational cannabis was approved in Oregon in 2015. \u201cTitle insurance is a huge headache,\u201d Sliwoski said. \u201cBuyers often have to use a third-party escrow instead of banks.\u201d<\/p>\n

Landlords with mortgages run a risk of banks calling in their loans if they are renting to a retail or industrial cannabis tenant.<\/p>\n

Hemp doesn\u2019t have these issues, Sliwoski said, because marijuana\u2019s non-psychoactive cannabis cousin no longer is federally illegal. A south Oregon sawmill has been repurposed as a hemp extractor facility, and that shows how the region\u2019s economy is changing, he said.<\/p>\n

\u201cIn southern Oregon, the biggest driver of the economy used to be timber, but now hemp is the new big agricultural commodity that people are banking on.\u201d<\/p>\n

Denver-based Foster, of VIP Commercial real estate, remembers when Colorado legalized medicinal pot in 2008, \u201cjust as the entire economy was falling apart.\u201d<\/p>\n

Many blamed the marijuana industry for higher rents, he said, but cannabis money for warehouses, dispensaries and doctor\u2019s offices was welcome. Colorado legalized recreational pot in 2014.<\/p>\n

As the industry has matured, landlords are recognizing some pitfalls unique to renting to cannabis businesses. Respondents from mature cannabis markets in the Realtor association study said the smell was the largest concern for property owners renting to cannabis-related businesses. Other concerns were moisture and mold and theft and fire.<\/p>\n

\u201cThere are complaints that large warehouses that grow produce a smell that kind of takes over the neighborhood,\u201d Foster said. \u201cYou smell it on the highway, and it\u2019s like \u2018Welcome to Denver.\u2019\u201d<\/p>\n

But even if marijuana initially helped hold up the prices of Colorado warehouse space, it\u2019s now too expensive to grow cannabis indoors, Foster said. Growers are turning to greenhouse properties in southern Colorado \u2013 in the poorest areas of the state \u2013 where land is cheaper.<\/p>\n

Hemp cannabidiol extractors are moving into prime warehouse space with complicated build-outs including \u201cexplosion-proof rooms and air-release vents 150 feet high,\u201d Foster said.<\/p>\n