The soon-to-grow recreational cannabis industry will create opportunity and challenges for the commercial real estate sector.
The legalization of the industry in the fall will mean strong demand from cannabis retailers but many property owners have been concerned about whether the industry will suit their properties.
A new report from Avison Young aims to help landlords determine what they need to do to qualify prospective tenants.
"Our discussions with landlords about the cannabis sector initially focused on their natural apprehensions, given the stigma surrounding what was historically a banned product," comments James Heaps, a Vice-President based in Avison Young's Calgary office, who specializes in acquisitions, divestitures and business advisory services. "We began an education process more than six months ago to help landlords understand how they will be affected by federal, provincial, and municipal motivations and frameworks for the legalization of recreational cannabis."
The firm has since developed a request-for-qualifications (RFQ) framework for landlords considering cannabis retail tenants.
Evolution will see leading retailers
Heap says the industry has already engaged in a considerable amount of leasing activity to date but will continue to evolve.
"Once legal retail-cannabis sales commence in October, industry leaders will likely expand by merging with and acquiring other companies. This activity will spark demand for additional retail space, providing landlords with a second opportunity to attract and assess prospective tenants,” he says. “Thus, landlords will need to ensure that they select retail-cannabis tenants who are the best fit for their property operations and provide the best opportunity for the ongoing success of existing and future new tenants."
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