CREJ

December 2021 — Office & Industrial Quarterly — Page 31 www.crej.com INDUSTRIAL — TRENDS N early a decade ago, Colorado became the first U.S. state to legalize recreational can- nabis, setting a standard for marijuana regulatory structure in other markets across the nation. As one of the longest- running programs, Colorado serves as the industry’s original case study, with new markets often compared to it. Headset, a cannabis data and market intelligence solution, recently released ranked total can- nabis sales by state from January through September. Arizona, which began recreational sales at the beginning of this year, landed sec- ond behind California at $1.6 billion in sales and surpassing Colorado by $175 million. Though Arizona may have made the recreational transition faster, already outpacing legacy markets, Colorado continues to be an attrac- tive investment market for cannabis industry stakeholders because of its continued evolution. This year, Denver City Council passed a series of bills making com- prehensive updates to marijuana city codes, including the adoption of a marijuana hospitality licensing program. In addition, six municipal- ities that previously had prohibited recreational sales voted on whether to allow marijuana businesses in those cities. n New commercial opportunities. Almost half of the U.S. population lives in a state with legal adult- use cannabis, and two-thirds have access to medical cannabis. In a recent Gallup poll, support for mari- juana legalization reached a record high of 68%. With these numbers on the rise, cannabis real estate contin- ues to be an attrac- tive opportunity for investors. It is estimated that in the U.S. there are $1.5 trillion worth of industrial zoned properties within the commercial real estate sec- tor. By comparing the cannabis industry’s economic impact in the U.S. against total gross domestic product, a rough estimate suggests that cannabis development projects will initially account for about half a percent of industrial real estate, creating a total addressable market of $50 billion to $75 billion in commercial real estate. These opportunities are not rel- egated to newly legalized states. In Colorado and other older mar- kets, cannabis retail operations are undergoing an overhaul, in part due to the pandemic. The average size of retail space in dispensaries grew in 2020, rising 50% in medical cannabis establishments and 35% in recreational shops to meet new consumer demands. Veteran operators of well-estab- lished brands in Colorado are rede- signing their retail environments, recognizing that the industry has changed and so have cannabis shoppers. Some are adding drive- thru components to streamline ordering and pickup, while others are adding one-on-one consult- ing and exclusive VIP rooms. Most recently, the concept of consump- tion lounges is taking center stage. In Colorado, the city of Denver has ended the cap on new cultiva- tion and retail store locations and is now accepting applications for marijuana hospitality business licenses, of which there are three different types: • Hospitality – Customers can consume cannabis inside of the establishment. • Hospitality and sales – Owners can offer on-site consumption and sell a small amount of cannabis. • Mobile hospitality – Owners can operate marijuana tour buses. Cannabis hospitality and tour- ism is one of the newer sectors of the fast-growing market, and for the first six years, social equity applicants will have exclusivity over these licenses in Colorado. In March, the state established a new Cannabis Advancement Pro- gram designed to aid communities impacted by the war on drugs. The program will provide loans, grants and assistance to marijuana social equity business applicants. These updated regulations and new business models illustrate how Colorado, despite being one of the most robust and long-standing recreational programs in the coun- try, has room to grow. n A community-first approach, revisited. From the beginning, Colorado has focused on build- ing a cannabis program around its community. The first $40 million of the state’s marijuana tax rev- enue annually goes toward educa- tion, and in fiscal year 2020-21, an additional $80.3 million in excess excise tax revenue was transferred to the Public School Capital Con- struction Assistance Fund. In November, Colorado voters had the opportunity to vote on Proposi- tion 119, which would have includ- ed a 5% increase on the recreational marijuana sales tax that currently sits at 15% not including local gov- ernment taxes. The proposition did not pass, showing a shift in voter mentality to the consumer and patient. This was reflected across other election results related to tax increases on the local level. n Colorado impact on federal legal- ization. Colorado continues to hold flagship status for the new Ameri- can cannabis economy as well as a harbinger of what lies ahead. The States Reform Act, a Republican-led initiative to legalize marijuana at the federal level, proposed by U.S. Rep. Nancy Mace of South Carolina, in many ways honors the history of Colorado’s approach to regulat- ing cannabis at the state level and throughout local communities. Spe- cifically, the States Reform Act cre- ates a federal regulatory structure that is molded to systems already in place, treating cannabis much like other traditional industries that are regulated by federal oversight in agricultural, retail and pharmaceu- tical categories. Perhaps the most significant factor within the States Reform Act is the regulatory struc- ture allows each state to continue down its own pathways of discovery to explore and adopt the appropri- ate regulatory structures for canna- bis in its own communities. s Colorado remains leader for cannabis measures Bryan McLaren CEO, Zoned Properties Inc. ber, Dave White, the general man- ager of JFWTrucking and a founding member of IPOC, put it best when he said, “We understand that our com- munity is constantly evolving and ever-changing to meet the current and future needs of its residents. In fact, most of the companies associat- ed with IPOC have had a direct hand in the development of this commu- nity. Whether it be the fabrication of steel beams, the production of infra- structure materials, the construc- tion of homes and buildings, or the manufacturing of parts, we are proud to be part of this community.” Restricting or prohibiting industrial users can have major economic and environmental implications, which may not be apparent to munici- palities or community members. For instance, a manufacturer required to relocate farther from its client base may be forced to raise prices to offset higher operating costs. Similarly, the lack of larger industrial sites zoned for manufacturing use may result in a manufacturer needing to spread its operations over several locations, which can translate to a greater envi- ronmental impact in terms of power used, gasoline required, etc. These are the types of issues that IPOC hopes to educate municipalities on as the organization grows, with the ultimate goal of improving public understanding of the role industrial users play within the larger ecosys- tem of their communities. For those interested in becoming a member of IPOC, visit the organization’s Face- book page to join the outreach list, or send an inquiry to adcoipoc@gmail. com. s ryan.searle@cushwake.com Searle Continued from Page 26 and distribution logistics center, while offering ample yard space for users. From taking the pulse of hundreds of property owners and investors across the Denver metro indus- trial market this year, “cautiously optimistic” is the outlook for many as we look forward to 2022. More industrial owners who have held properties with significant equity built up over time have caught wind of the increase in property values, and many are coming to the con- clusion that now is an ideal time to sell, which means there could an increased supply of industrial proper- ties coming to market. As we look out to 2022, we see many economic indicators trending positively, which should support a robust economy and, in turn, robust demand for industrial properties. While the rise in property values over the last 18 months has been incredibly strong, we see prices being grounded by fundamentally driven local demand surrounding Den- ver. However, the local growth and economic environment statewide remains exposed against several fac- tors the market should keep a close eye on. Macroeconomic factors and economic policies paired with the month-over-month rise of inflation compared to 2020, and various supply chain hurdles, including rising mate- rial and labor costs, will continue to impact industrial real estate moving forward in the Denver market. Next year should present a robust period of market activity for both buyers and sellers. s clisle@pinnaclerea.com Lisle Continued from Page 20