Mention the notion that industrial property may be an interesting way to play the ongoing process of marijuana becoming legal for recreational use and the conversation quickly shifts away from much of anything else. There are of course other factors making the space compelling, but even the squarish among us are intrigued by being part of what could be a modern-day gold rush.
Fortunately for Californians, we have other states which are further along the legalization trail to look to for guidance on how the trend here may play out. What's more difficult is parsing out pot's true impact, since so many factors are positively impacting supply/demand fundamentals for the shrinking supply of urban warehouses.
The graph below shows the value of industrial real estate, as measured by price per square foot, in Portland where recreational pot was legalized in late 2014. Sale prices are up almost 50% in a little over two years. It's no wonder why: with cannabis tenants able to pay much higher rent than traditional tenants, landlords are looking to cash in.
But there may be more to the story, since cannabis legalization didn't happen in a vacuum. In mid-2015, Amazon quietly announced same-day delivery in Portland. Since then, industrial property values are up more than 33%.
The lesson here isn't that cannabis is having a larger, or smaller, impact on the market for industrial space than the race to control the "Last Mile" of the distribution chain. With so many factors impacting this type of real estate, it's important not to under or overstate the role of any one driver. But what's clear is that in Portland, as in Seattle, San Francisco and other urban areas, owning warehouses is a good way to benefit from these industry-changing trends.