Impact of Recreational Marijuana's Legalization on Denver Industrial Real Estate Market Continue
Industry Experiences Elevated Rental Rates, Consolidation in Key Submarkets and Stabilization of Overall Footprint; Findings Foreshadow Possible Market Impact for Other States With More Recent Legalization
The impact of the legalization of recreational marijuana in Colorado in 2014 continues to reverberate across metro Denver’s industrial market, according to new research from CBRE Group, Inc. In a report released today, CBRE Research found that industrial warehouse space being used for marijuana grow operations is commanding lease rates two to three times higher than average for comparable properties. The report also found that these operations are concentrated within four submarkets and overall, the marijuana industry industrial footprint in Denver is stabilizing three years post legalization.
“Consolidation and stabilization are two key themes to describe the Denver marijuana industry over the last six quarters,” said Spencer Levy, CBRE Head of Research in the Americas. “With the Denver City Council’s passage of new legislation in May 2016 putting a cap on the number of marijuana cultivation and retail locations allowed in the city, operators have primarily expanded their business through acquisitions, and efficiency has increased across the local industry.”
While metro Denver’s marijuana industrial footprint has grown 14 percent—or 525,000 square feet—since CBRE last gathered data in Q2 2015, most of that expansion occurred prior to the May 2016 legislation. Since that time, the market size has remained stable. Today Denver’s marijuana industrial footprint is 4.2 million square feet—representing 2.9 percent of Denver’s total warehouse inventory.