Marijuana real estate bubble inflates in California


Humboldt County cannabis farmers seek first-ever licenses this week. (Photo courtesy of Berner’s Marijuana Mania)

A marijuana real estate bubble is inflating in parts of California thanks to new state regulations clarifying the legality of the $1.4 billion medical pot economy in the Golden State.
Newsweek reports March 5 that the pot industry is outbidding the Predator drone industry for commercial real estate in the tiny desert town of Adelanto. Marijuana tenants face premiums for space in San Francisco, Oakland and beyond.

In Adelanto, city leaders hope to corner the Southern California medical pot market, and are speeding to permit mega-farms that will be grandfathered in among the limited number of state licenses for mega-farms.

Consequently, property values in zoned areas have shot up from $1.5 million to $4 million. Desert wasteland once going for 50 to 90 cents per square foot is now going for $12 to $14 — a yearly increase of 14,000 percent, reports state.

“I’ve had a broker’s license since March 1980,” one commercial realtor told Newsweek, via Reason. “I have never in my life seen anything like this happen.”

The Adelanto bubble “could end up driving out the local representation from General Atomics Aeronautical Systems, the manufacturers of the Predator drone, because their landlords can get more money from the marijuana growers.”

Over in Oakland, realtors report bubble pricing is already baked into real estate values inside the city’s waterfront industrial zone, the site of the city’s first licensed pot farms this year or next.

In San Francisco, medical cannabis permits are tied to the building, not the manager — leading to a string of multi-million dollar buyouts of underperforming clubs by investors. One Financial District landlord is charging a reported $1 million in application fees to lease one of 15 small, licensed medical cannabis delivery co-working spaces for up to $15,000 per month each.

The only thing that could slow the bubbles is increased competition from other California towns, which is likely to happen very slowly.

Meanwhile, less competitive counties are seeing their potential cannabis real estate values decline this year. Residents in Mendocino County report property value declines since Mendocino voted to radically restrict legal medical pot cultivation, said activist Tim Blake.

Mendocino residents filed a referendum last week to make their cannabis cultivation rules competitive with nearby Humboldt County.