The New Gold Green Rush
The New Gold Green Rush; Washington’s Pot Bubble
In 2012, the voters of Washington State voted to decriminalize possession of marijuana, and in so doing paved the way for one of the largest growth industries our state has seen in a very long time. In addition to legalizing possession of pot, Initiative 502 also paved the way for the rapid growth and development of a multi-billion dollar business centered around the growing, processing, and retail sales of pot to adults over 21 years of age. Though the effects have been felt throughout Washington State, the impact to us here in Thurston County has been very strong, particularly with respect to our commercial real estate market.
Large scale marijuana production
Let’s start where the pot does… with the plant itself. While marijuana has been grown outdoors for centuries, only recently has the trend been toward higher potency pot grown “hydroponically” indoors. A far cry from the old days of basement “grow ops” that we’ve all seen on the news, today’s modern and legal hydroponic production facilities are a marvel of modern science and engineering. As the growth moves indoors, it creates a new source of absorption for our industrial property – with some estimates putting that figure upwards of 250,000sf of warehouse in Thurston County over the last two years. This tremendous & rapid absorption of space has some obvious ramifications such as decreased availability and higher lease rates, which are both a boon and a bane depending on which side of the table you’re sitting at. Landlords are benefiting from the above market lease rates as they compensate for the additional risk (perceived or otherwise) of taking on marijuana businesses as tenants. Alternatively, the more conventional industrial property users suffer as the prices for the space they need to conduct their respective businesses have skyrocketed.
Marijuana ready for sale
Less dramatic but still significant have been the impact of the retail outlets for recreational pot sales. Despite stringent restrictions on the type and location of appropriate properties, more than a half dozen recreational marijuana shops have opened just in Thurston County alone. These stores have absorbed some of the most difficult-to-lease retail locations, providing a much needed boost to local property, sales, and B&O tax receipts.
Though Washington’s recreational marijuana industry is still relatively in its infancy, the impact to Thurston County’s commercial real estate markets has already proved to be very… “potent”. Where we go over the next few years as the market and the players in it mature is still yet to be decided. All we know at this point is that we really don’t know what to expect – just how big can this industry really get?