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Landlords a Little More High on Cannabis

Avison Young Created a Framework for Landlords to Consider Before Renting Ahead of Oct. 17 Legalization
June 29, 2018
A new report from Toronto-based Avison Young suggests retail landlords are high on cannabis tenants, ahead of the Oct. 17 date for legalization in Canada.

But for owners still paranoid about renting to marijuana distributers, the real estate company has created a request-for-qualification framework for landlords.

James Heaps, a vice president with Avison Young Calgary.
Photo Credit: Avison Young

"What does it mean for clients is a key consideration, in terms of current tenants," said James Heaps, a vice-president based in Avison Young's Calgary office. "The stores are evolving to anything from looking like a pharmacy to an Apple store in terms of aesthetics. It's about being comfortable with where the market is going."

With provinces controlling distribution, the retail landscape is really different in every jurisdiction with Avison Young explaining the lay of the land in its report.

"Different provinces have taken very different approaches," said Susan Thompson, research manager in Avison's Calgary office. "You can go from Alberta, which is 100 percent private [cannabis retailers] to British Columbia, Saskatchewan that are doing a mixture of [public and private distribution]. Then you've got Ontario, Quebec and Newfoundland that are more 100 per cent owned."

Avison said key considerations for landlords looking at tenants are leadership teams, hiring/training processes, ongoing oversight, standard operating procedures, security and product tracking, store appearance and current funding.

Heaps says early studies show the millennial demographic is one that will be attracted to cannabis outlets, making the retail location desirable for some mall owners.

"It really depends on what type of retailer you want alongside your tenants. If they tend to be more medical inclined, something that really fits a pharmaceutical aesthetic and approach versus something that is more lifestyle based," said Heaps. "There are a lot of different groups and approaches to the marketplace."

An issue for tenants is how the product line evolves, especially when it comes to edibles and extracts, which will not be available on Oct. 17. "How and when those are introduced is a key consideration to size [of units being rented]," said Heaps, referring to expansion plans.

One thing the report seems confident to say is that e-commerce will not wipe out the cannabis retail market. "The medicinal market is a very small part of the market," said Heaps, noting that market is mostly online.

Thompson adds you can't just order online without having tried the product. “You really have to know your strains.

Garry Marr, Toronto Market Reporter  CoStar Group   
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