Reefer real estate: NM's cannabis retailers struggle to find space - Albuquerque Journal

Reefer real estate: NM’s cannabis retailers struggle to find space

Trishelle Kirk, who is the CEO of Everest Cannabis Co., stands inside one of the greenhouse at the grow farm located in the North Valley on May 5, 2022. (Chancey Bush/ Albuquerque Journal)

Since adult-use cannabis sales started in the state earlier this year, New Mexicans now have almost 500 places to buy marijuana products around the state, according to recent data from the New Mexico Regulation & Licensing Department.

And, the industry is booming, with record-breaking sales last month.

But there have been some growing pains, industry members report. Finding places — and landlords willing — to rent has been a struggle.

“It’s been a challenge, it’s been a challenge from Day 1,” said Leonard Salgado, director of business development and expansion for Pecos Valley Production.

Stigma from landlords, high demand, a conflict between federal and state laws, and varied municipal regulations of the industry have all contributed to a pinched real estate market for cannabis retailers.

“It turns out that ending prohibition is difficult,” said Ben Lewinger, executive director of New Mexico’s Cannabis Chamber of Commerce.

Stigma, ‘reefer madness’

Everest Cannabis Co. has 11 locations around the state, with a 12th soon to open in Texico. Trishelle Kirk, CEO of Everest, said that while finding properties seems to be getting a bit easier in the months since legalization, there are still some negative beliefs about dispensaries and their clientele that make some landlords hesitant to rent out their spaces.

“There’s a perception that folks that are buying cannabis are lingering or loitering,” Kirk said.

Lewinger said he’s seen a similar attitude.

“I think that there’s still a lot of ‘reefer madness’ with landlords,” Lewinger said.

But, he said that fears about customers “lighting up” in the parking lot are generally unfounded.

“That’s just not the behavior around dispensaries,” Lewinger said.

Additionally, Kirk said many landlords and banks fear that bringing in dispensaries will also bring in crime. However, she said that most cannabis retailers have more security than an average store.

“We have more security cameras and security equipment than any other business,” Kirk said.

Celeste Davis has operated ChocGlitz & Cream, a West Side dessert shop just a few doors down from Everest’s Paradise Hills location, for eight years. Davis said she was initially hesitant to see Everest move into the area, because the shopping center previously had a medical marijuana dispensary that attracted some crime.

“I wasn’t really excited to have it come in again,” said Davis.

The daughter of a police officer, Davis said she didn’t like seeing illegal activity near her business.

But, she said she was pleasantly surprised — she hasn’t seen an increase in crime since Everest moved in almost two years ago.

“We haven’t noticed any issues,” Davis said.

Adam Silverman, vice president of Albuquerque-based commercial real estate company Geltmore, which often works with dispensaries, said he hasn’t had problems with security with his cannabis tenants.

“Our poor guy who does cellphone repair has gotten broken into more than the marijuana business,” Silverman said.

Salgado has worked in cannabis — first medical and more recently, recreational — for 10 years. He said he thinks property owners are becoming more understanding of the cannabis industry.

“I think in general, landlords are becoming more tolerant to really examining what it means in adding a cannabis retailer to their property,” Salgado said. “… They’re kind of getting used to it now. The train has left the station.”

Banking issues

Besides stigma, many property owners also have their hands tied legally by federal banking restrictions.

“One of the largest issues in recreational cannabis is the banking issue,” Silverman said. “And it overflows into a real estate issue.”

Because marijuana is illegal on the national level, if local property owners have federal mortgages they may be reluctant to lease to cannabis retailers, fearing that they’ll upset their lender.

“They don’t really want to rock the boat on their property,” Salgado said.

Salgado notes, however, that he’s never seen a bank pull a note from a property owner who leased to a dispensary.

Pat Davis, founder of cannabis consulting firm Weeds, said that until recently, only two banks in New Mexico – Southwest Capital and U.S. Eagle – were authorized by the federal government to do cannabis banking. Recently, First Financial was added to that list, Davis said. There are other, out-of-state banks that handle cannabis accounts, he said, but they generally only take wire payments, making it inconvenient for New Mexico-based dispensaries.

Silverman said he thinks that banking restrictions are inhibiting the growth of cannabis in the state.

“Until we can get the federal government to change the banking rules, that’s really handcuffed the industry,” Silverman said.

Tight market

Since legalization in April, new dispensaries have exploded around the state – and competition is fierce.

“Right now it’s extremely hard to find locations … because of all the new licenses being issued,” Kirk said.

New dispensaries also have to compete with the established medical marijuana market, which Pat Davis of Weeds said was “grandfathered” into the recreational industry.

“The door is closing for new retailers — very quickly — to find the best and most profitable locations,” Pat Davis said.

Lewinger isn’t convinced that the market will hold, though.

“I think it would be Pollyannaish to say that all these retailers will (still) be open in two to three years,” Lewinger said.

He said he anticipates that as the industry develops, many dispensaries will close, freeing up space for new retailers.

Regulation mismatch

Different cities and counties in New Mexico have different zoning regulations for cannabis companies, which complicates the process of finding appropriate retail locations.

“Finding the right location for retail has been probably one of the biggest challenges for our industry, because of the fact you’re dealing with zoning that is very unique to every municipality,” Salgado said.

Pat Davis, who is also an Albuquerque city councilor, has seen a similar issue. Certain locations in the state, like Los Lunas, which currently only allows one retailer per 2,000 residents (for a total of about nine establishments), have instituted caps on the number of retailers that can operate, increasing the competition for storefronts in the state. As long as municipalities don’t outright ban marijuana, Pat Davis said, they could even limit down to just one retail store.

And, Pat Davis added, because the industry is so new, in the amount of time it takes a prospective retailer to get their license, zoning regulations could have changed in the area they planned to operate. This adds a layer of insecurity, especially for smaller businesses, Davis said.

“For the folks that sold their cellphone store, or their small business, or took money out of their kid’s college fund … it adds a lot of uncertainty to sign a five-year lease,” Pat Davis said.

Salgado said that Pecos Valley Production is planning to add nearly a dozen new locations by next year. But the different zoning regulations, he said, are making it more difficult to find those locations.

“We’ve earned the right to be there,” Salgado said. “You can’t make it overly restrictive to do business. At the end of the day, we are creating jobs, we are adding to the statewide, countywide, citywide tax base, and this is recurring revenue. This is not gonna go away.”

 

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