How Much Annual Rent One Needs to Pay for Cannabis Dispensary

The legalization of marijuana in some of the US States for medical and recreational purposes has created a lot of business opportunities. The pot market was valued at $13.2 billion in 2022, and it's estimated to grow at a compound growth rate of 14.2% annually.

Considering only 31 states have legalized cannabis in 2023, the market is expected to broaden further once legalized across the US. 

If you are interested in the cannabis business, it’s essential to understand all the requirements to avoid colliding with the law. In states where cannabis is legal, the industry is highly regulated, and you don’t want to miss a step to prevent extra costs due to fines. Apart from licenses and permits, rent is also worth considering since it takes a considerable amount of your money.

This guide helps you estimate your annual cannabis dispensary annual rent.

Annual Cannabis Dispensary Rent Estimates

Establishing a physical cannabis store requires proper planning and extensive research. Getting a store can be tricky even if your state has legalized weed due to zoning and other restrictions. It is, therefore, normal for landlords to charge high costs compared to other businesses.

Actually, for a cannabis store, annual rent will cost at least $100,000 on average or more, depending on the location.

Paying premium prices for cannabis stores isn’t a new thing. The restrictions and other factors significantly contribute to the shortage of cannabis real estate, which skyrockets property rents. Also, the risks associated with the cannabis business make the property owners hesitant to lease their premises.

When you consider marijuana businesses, they attract higher rent than any other investment. According to the Los Angeles Times, weed sellers can pay up to $22 per square foot per month, translating to $264 annually. In some instances, weed stores have reported spending over $900 per foot annually. If you compare this with an average industrial rate of $7.36 per square foot, you can deduce that cannabis real estate is highly expensive.

Factors that Influence Cannabis Dispensaries Rent Rates?

Cannabis investments experience higher real estate costs than any other business.                                                          Whether renting or buying, prepare to pay double or even quadruple the price. But what caused this scenario?

1. Property Location

Unlike other businesses, dispensaries are only allowed in designated places. Finding a perfect place with amazing traffic is a goldmine. Finding the ideal location is hard because even if cannabis is legal, it also has other restriction laws depending on the state. For instance, Vermont has a buffer zone of 500 feet from schools, while Washington requires a minimum of 1000 feet distance from schools and other public places. This buffering restricts the establishments, reducing the number of available locations.

Opening your dispensary in urban, suburban, or rural areas will all impact your rent. Renting in urban areas will see you pay more annually than in rural areas. The high competition in the urban and suburban creates shortages, causing rent to shoot up.

In some large cities, rent can be as high as $15,000 monthly, translating to $180,000 yearly. Conversely, rent can range from $3,000 to $5,000 in rural and less densely populated areas.

2. Competition and Demand Levels

Although highly regulated, the medical and recreational weed business has become extremely competitive. This has pushed the number of players up, making competition fierce. In high-traffic areas, demand for THC-based products like oils and others has seen many companies tighten their grip. Established companies with more financial muscles can pay premium prices, keeping startups away from the huge end areas.

If you plan to venture into high-potential areas with high demand, you may need to pay exorbitant rent. It’s, therefore, important to research the ideal location that will give you a better landing ground in the industry.

3. Property Size

Property size is another factor determining the amount to pay yearly for your cannabis store. The larger the store, the more you will pay. For instance, if the landlord rents the store based on the square foot, it means you need more money.

Let's say your store is 3,500 square feet, and the cost per foot is $20. If you multiply the price, it will be 3,500 by 20, you will get a total of $70,000 a month and $840,000 per annum. If the property is smaller than that, it means less rent amount.

4. Condition of A Building

Every prospecting cannabis entrepreneur knows the importance of property that offers enough parking and security. That is why getting these vital amenities is essential when renting a house to attract huge customers. A property designed for a cannabis dispensary comes at a higher price than a regular house, which you need to modify.

Apart from the available features, the condition of a house can be looked at in the general situation. Does the property require renovations besides modification? Remember, some upgrades are expensive and can cost you over $50,000. Therefore, the rent should consider the property's general condition.

Conclusion

Renting a property for cannabis store or retail purposes can be tricky. The shortage of these properties, coupled with zoning and other regulations, has seen the rent skyrocketing in high-demand areas. While the venture is highly profitable, you must assess the situation in advance to ensure rent doesn’t drain all your income.

As the cannabis sector continues to evolve, streamlining different issues will make the venture less stressful. This will reduce the pressure on the real estate, lowering the annual rent for cannabis dispensaries.