Marijuana Affects the Rental Market

Colorado is clearly a leader in the pot market. With the legalization of Marijuana came new real estate opportunities for those in Colorado. It created a market for recreational drugs that is unique, bringing in a surge of new customers into the state. It has also created questions about how marijuana affects the rental market.

Currently, the price of pot is declining. At the same time, the market for industrial space is also declining in the Denver area because those leasing space for pot have found cheaper alternatives in other locales. Therefore, if you leased space in the Denver area for a pot warehouse and would like to move the warehouse somewhere else, the terms of your lease may make it difficult to do so.

Industrial Space

The opening of the marijuana market created a demand for industrial space to house the supply of marijuana. This led to a significant increase in rent for industrial space in an already crowded real estate market. Initially, the Denver area saw the largest increase of industrial space used for pot because of Denver’s large size, its reputation as a pot haven, and that it hosts a large airport. People were getting off the plane and heading straight to the marijuana dispensaries.

Recently, however, the industrial space market in the Denver area has cooled off. People from neighboring states like New Mexico and Kansas started pouring into Colorado for the pot experience. As a result, more dispensaries opened outside Denver. With that, more pot sellers sought industrial space outside of Denver, especially where that space is significantly cheaper. Industrial space in Pueblo can run $10 per square foot whereas industrial space in Denver can run at close to $100 per square foot. This trend caused the demand for industrial space in Denver to lag.

Marijuana Farms

Initially, marijuana farms created a greater real estate demand in the Denver area, pushing the prices of real estate higher in an already overheated Colorado real estate market. Using industrial space to grow pot by using heat lamps can get expensive. In response, growers started to spread to other areas of Colorado where the rental space and properties are cheaper.

Breaking the Lease

If you find yourself needing to break your lease so that your pot business can thrive, there are some considerations. In general, signing a lease obligates all parties to fully comply with their respective side of the deal. A bad deal or changed circumstances, by itself, usually does not allow someone to legally break the lease. However, if you are “constructively evicted” then, under Colorado law, you may be entitled to break your lease.

A constructive eviction occurs when there is a major repair problem or the facility does not meet health standards. Therefore, if your warehouse needs repairs or is not up to standards, you may be entitled to break your lease and move operations to a more cost-effective area.

Involved in real estate in Colorado? Rentals? For these or any other questions about real estate law in Colorado, contact Eric L. Nesbitt, P.C. at 303-562-1580.