Many people are wondering what impact that the upcoming legalization of recreational marijuana use in Canada will have on the demand for various forms of Commercial Real Estate in Toronto.
The sector is booming. According to an estimate from Marijuana Business Daily, annual sales for Canada’s recreational marijuana market could range between $2.3 billion and $4.5 billion by 2021.
If a business grows, handles or sells cannabis they must be a licensed producer under the Health Canada guidelines. Currently there are over 1600 applicants that have applied for licenses to grow or sell medical cannabis. The largest grower in Canada is currently Canopy Growth. They occupy the former Hershey Chocolate factory located at in Smiths Falls Ontario. This 168,000 square foot climate controlled facility has been converted to grow licensed marijuana. It has an R&D facility, oil extraction infrastructure, and in-house lab.
The industry is heavily regulated and has stringent security requirements. Every square foot of these buildings must be under video surveillance.
Vacancy rates for the Industrial market in the GTA are at an all-time low so as a result growers tend to be drawn to low cost facilities in small communities outside of the GTA with some exceptions in Mississauga and Markham. These buildings also have requirements for heavy power usage and available water. Zoning for growing and production is also an issue.
There are also many varied business ventures which never actually touch cannabis itself but may supply to those that do. There are droves of entrepreneurs who are dreaming of huge returns from the many other related business ventures including growing equipment, packaging, labelling, surveillance and security services, accessories, distribution and delivery services, cannabis medical research, consulting, software apps for users, legal and consulting services. Nearly all of these businesses require some form of real estate and will impact demand for office, warehouse or manufacturing space.
On September 8th, 2017 the province of Ontario announced its first plans for the sale and distribution of legalized recreational cannabis. Residents of Ontario will be able to purchase legal recreational cannabis from a planned storefronts run by the LCBO but physically separate from current locations. The Ontario government also announced a crackdown on hundreds of dispensaries across Ontario, which have already been subject of police raids in recent years and will be forced to close within 12 months.
It’s clear that there will be a number of opportunities to participate in the industry. However, because legislation is still not in place, it is difficult to determine which businesses are considered illegal as a result many Landlords and agents are sitting on the sidelines watching to see how this industry develops. One thing for certain is that it will be big.