Legal marijuana gives rise to Denver's first pot lounge and new real estate opportunities 

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Governing.com reports that 30 states and Washington, D.C. have legalized marijuana to some degree, with the majority of those states legalizing medical marijuana. However, eight states have also legalized recreational use of marijuana, which has helped jump-start state economies in a variety of ways.

In 2016 alone, sales of cannabis grew to $6.8 billion, a 34% increase over the previous year. Marijuana may mean big business for states like California and Colorado, but it's also indirectly benefiting the real estate industry as well.

For instance, in Sacramento, California, legal pot growers led to a "green rush" in the city's largely empty industrial district. Warehouses and industrial spaces that had sat empty for years were suddenly selling for double the asking price. The Sacramento Bee reported that the sudden interest in these properties was a direct result of legal pot growers.

“Sacramento’s done a great job of digging in and putting a system together,” said Hezekiah Allen of the California Growers Association. “The city got out in front. They figured out what they were interested in and created opportunities for those types of projects to move forward.”

Now, recreational marijuana in Colorado is creating new opportunities for entrepreneurs and real estate investors as well. In February, the Denver Department of Excise and Licenses officially granted a Cannabis Consumption Establishment license to The Coffee Joint, and according to Westword, that makes the company the first to hold an official pot consumption license in Denver. On the same day, a bill was introduced in the Colorado Legislature that would allow dispensary tasting rooms (imagine cigar clubs or wine tasting, only at a dispensary). And a week before that, a members-only pot lounge successfully opened in RiNo.

About 35% of coffee drinkers enjoy their coffee black, but The Coffee Joint is hoping that at least some Denver residents will take their coffee green. Rita Tsalyuk, part owner of Coffee Joint, plans to charge a $5 entrance fee to the cafe, which will include a free cup of coffee or tea. Guests can then purchase drinks made to order as well as prepackaged food. There will not be any smoking allowed inside because of the Colorado Clean Indoor Act, but vaporizing, dabbing, and edibles are all welcome.

How can investors and entrepreneurs take advantage of this new business opportunity in Colorado?

Because marijuana is still federally illegal, it may be difficult to get financing from a bank. However, local banks may be more willing to take on the risk. In terms of actually leasing a space, Carmen Andrade, a real estate attorney who writes for legal website Lexology, suggests a triple net lease.

A triple net lease is a type of lease agreement on a commercial property wherein the tenant agrees to pay the "three nets": real estate taxes, building insurance, and maintenance. Because many of the costs associated with operating a cannabis facility are unknown, using anything other than a triple net lease may be a deterrent to lenders and investors.

With more pot tasting rooms on the horizon, it's clear that legal marijuana is affecting the Colorado economy in a number of ways. Last year, more than $1.5 billion worth of marijuana was sold in Colorado, and as of March 2018, there were 1,150 active business licenses associated with marijuana in Denver alone.


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