Demand for Alberta commercial property intensifies amid looming legalization

Alberta's current regulatory regime has made it especially attractive to dispensaries and growers

Demand for Alberta commercial property intensifies amid looming legalization

Canada’s impending legalization of marijuana is spurring demand for commercial real estate, particularly for retail shops in Alberta, where the government is selecting private operators to conduct over-the-counter sales.

Real estate consultancy JLL said that its phone has been “ringing off the hook” as cannabis companies look to secure space to cultivate the plant and seek retail space to sell the final product.

Research manager Gaurav Mathur said during a panel discussion at a recent industry conference in Toronto that commercial real estate prices haven’t “seen a major bump yet,” but he is expecting that to change after legalization later this year.

Mathur is also expecting “offshoots” of the domestic cannabis industry, such as supply and accessories shops, to drive demand for commercial real estate going forward.

Canada is preparing for the legalization of cannabis for recreational use later this year, but has left it to the provincial or territorial governments to decide how to distribute the drug. Provinces such as Ontario, Quebec, Nova Scotia, and Prince Edward Island have tasked their provincial liquor boards to handle retail sales of marijuana. But other provinces such as Saskatchewan and Newfoundland and Labrador have said the private sector will handle retail sales.

Alberta is an attractive province for cannabis retail as the Alberta Liquor and Gaming Commission has not put a cap on the number of licenses that will be issued, although with the stipulation that no one person or entity can hold more than 15%. The province is projecting roughly 250 licenses to be granted to private operators in the first year. Saskatchewan, for comparison, only plans to issue 51 retail cannabis permits in 32 communities, and qualified applicants will be put into a random selection process, similar to a lottery.

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Mark Goliger, CEO of National Access Cannabis Corp. which has signed an agreement with coffee chain Second Cup to convert some of its coffee shops into weed dispensaries, said the competition for retail space in Alberta is “absolute insanity.”

In addition to NAC’s existing network of medical clinics and pharmacies, the company is aiming to open recreational cannabis dispensaries in provinces where legal under its newly-launched Meta Cannabis Supply Co. brand.

Alberta’s cannabis retail licensing system has big players and mom-and-pop shops alike vying for prime spots and submitting applications, Goliger said.

“Everybody is trying to get retail locations, and that of course is driving up the price and driving up the terms,” he told The Canadian Press.

Goliger added that NAC has encountered bidding wars, with other parties “spiking the market with overly aggressive terms” such as double the asking price per square foot and very aggressive termination clauses.

However, some landlords continue to have reservations on leasing to cannabis companies amid lingering stigma.

Lisa Borsook, executive partner of law firm WeirFoulds LLP, said that she has seen pushback. Her firm has been working on leases for the Ontario government entity created to handle sales and distribution of recreational pot in the province.

“That’s in Ontario where we’re having a government laid-out store... And yet it's been my experience that landlords, nonetheless, have qualms about having cannabis in their centres.”

 

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