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Cannabis Real Estate: Purchasing Dispensary Space

Recreational cannabis is growing quickly. For example, in Massachusetts (home to Lowkey Dispensary), recreational cannabis sales topped $2 billion less than three years after the first dispensary opened its doors—only a little less than a year ago, the state passed the $1 billion mark. Massachusetts is now home to 165 cannabis retailers and while numerous factors will affect their long-term success, a critical element is whether they own or lease their space. 


Buying Cannabis Real Estate

Cannabis real estate is a tricky proposition and if you’re looking to open a dispensary, there are numerous hurdles you must clear to simply secure a location. Everything from state and local regulations to recalcitrant property owners to a tight supply of suitable locations can make just finding an acceptable storefront a challenge. While leasing provides a low-cost and often easier solution to finding a location for your dispensary, owning the property your dispensary is on can be a boon for the long-term health and success of your business.  

Buying property for a cannabis dispensary offers numerous advantages, but isn’t without its drawbacks. Understanding the reasons why to buy and how it will build a foundation for the future of your business is a key step in starting a successful dispensary. 


The Pros and Cons of Buying Cannabis Real Estate

The Pros of Buying Cannabis Real Estate 

In many states, the license to sell recreational cannabis is tied as much to location as it is an operator. For example, in Massachusetts a “licensee is limited to performing operations at a single location,” which must be secured by either buying or leasing property to even apply for a license. This can mean your location sits empty for an extended period of time while your license awaits approval and a storefront is built. Owning a location that has been approved to sell recreational cannabis is a valuable commodity and the equity you accrue on it can help offset the expense of an empty space during the startup stage.  

The numerous restrictions and regulations governing recreational marijauna dispensaries, in combination with a limited number of locations that offer the characteristics of a flourishing retail shop, have created an imbalance between the demand and supply of potential property for dispensaries. There simply aren’t enough locations that deliver the accessibility, visibility, and traffic that a retail operation needs, while also meeting municipal requirements for operating a dispensary (such as being at least 1,000 feet away from schools, public parks, and hospitals).  Possessing one of these scarce properties provides you with financial flexibility and creates the possibility of renting the property to another dispensary in the future.

Another reason for owning the property your dispensary is housed in is that you stand to benefit from any economic improvement brought about by your dispensary. 

Dispensaries create jobs, increase tax revenues, and drive up property values. A 2021 study found that home values increased $22,090 more in cities with recreational dispensaries, compared to home values in cities where recreational marijuana is legal but dispensaries are not available—with each new dispensary a city adds, property values increase by $519. A survey from the National Association of Realtors found that 13% to 22% of respondents saw an increase in commercial property values near marijuana vendors in their markets.  

Lastly, buying your dispensary’s property is a smart hedge against a shift in cannabis policy. If, for some reason, operating your dispensary becomes legally unfeasible, you can convert the property to court another retailer or different type of business. 


The Cons of Buying Cannabis Real Estate 

The biggest downside to purchasing cannabis real estate is finding funding. Because cannabis is illegal on the federal level, federally insured banks and other lenders will generally not finance cannabis real estate. In order to purchase a piece of property for your dispensary, you’ll need to have access to a considerable amount of capital or have an investor(s) lined up. 

While the absence of appropriate inventory is a benefit, it’s also a challenge. Demand for high-quality dispensary locations outstrips supply, which drives up property prices, that is if you can even find a suitable space. The aforementioned National Association of Realtors survey reported an 18% to 19% increase in demand for cannabis storefronts in states where both medicinal and recreational marijuana were legal.

Great retail locations are hard to find—even more difficult if you’re a cannabis retailer—and the right location can make a difference between being in the red or rolling in green. Unfortunately, the best retail locations are not always for sale or fetch a premium price. A willingness to lease, rather than buy, can increase the number of location options and may offer a location better suited to success.     


Why We Buy 

Lowkey Dispensary believes in purchasing our property, not just as business decisions but as a commitment to the community. When we acquire a property, we’re not just buying a storefront for a dispensary, we’re investing in the surrounding neighborhood by adding jobs and creating pathways to careers in cannabis. Lowkey is one of the few Black-owned dispensaries in the Boston area and is dedicated to improving minority representation in the recreational marijuana industry—Black and Latino people make up less than 12% of the marijuana workforce in Massachusetts, comparatively White people make up nearly 75%.

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