Page 12 - RE-NJ
P. 12

10 APRIL 2022
 SUPPLY SQUEEZE
Approvals for adult-use cannabis growing, processing sites unleash new demand for already-scarce industrial space
With licensing for recreational marijuana now underway in New Jersey, commercial real estate owners are seeing a real-time rush for spaces that will help launch the industry beyond the medicinal use market created more than a decade ago.
Insiders point to one glaring challenge in the early going — industrial space has never been harder to find in the Garden State, creating an added hurdle for the manufacturing and cultivation businesses that regulators conditionally approved in late March. It only complicates a market that, for now, is limited to less than a third of New Jersey municipalities.
“The demand is huge,” said Jack Fersko, a Roseland-based attorney with Greenbaum Rowe Smith & Davis LLP, who chairs the firm’s real estate department and cannabis industry
By Joshua Burd
operator didn’t necessarily need high
practice, noting that conditional licensees have 120 days to secure a location.
“They really need to get space locked up and the landlords know it,” he added. “And there’s not a lot of negotiation taking place.”
To that end, Fersko in late March was representing
ceilings and saw the chance to convert the space. The landlord is now selling the building at “a good premium
for a market class that was a little challenged,” in another sign of the demand from the cannabis industry.
With medical marijuana sales legal since 2010, New Jersey’s recreational use market is slated to reach $2 billion in five years, by some projections. State regulators have worked to establish an industry framework since Gov. Phil Murphy, largely with social justice reform in mind, signed a law
in February 2021 to legalize adult use sales and advance a policy that voters also supported in a November 2020 ballot question.
On March 24, the New Jersey Cannabis Regulatory Commission approved
68 conditional licenses for cannabis cultivation and manufacturing
businesses, the first to be cleared under the recreational program. The agency drew criticism for delaying the start of retail sales — including from established medical operators that are eager to expand — but the approvals set the stage for a level of real estate activity that had been only contemplated in recent years.
“They are essentially the beginning of the supply chain,” said Edmund DeVeaux,
president of
  Jack Fersko
at least four different property owners that were weighing leases with cannabis tenants. When a deal fell through at one of the buildings, there
the New Jersey CannaBusiness Association, referring to cultivating and manufacturing sites. He believes that “it’s going
were “eight people in line who keep calling, wanting the property.”
Fersko also represents the owner of an older office building that could now become a cultivation site, whose
Edmund DeVeaux
 With licensing for recreational marijuana now underway in New Jersey, commercial real estate owners are seeing a real-time rush for spaces that will help launch the industry beyond the medicinal use market created more than a decade ago.
to take the longest to get them up and running,” he said, due in part to their heavy-duty power, ventilation and plumbing requirements.
“So it’s not a bad thing to get them out, get them on the road first and make sure that they’re investing and creating their grow facilities and processing facilities.”
The approvals, meantime, have spawned a new crop of users seeking industrial space in New Jersey, in a market that has seen record lows
in vacancy and double-digit asking rents, on average. They also laid bare the challenges that operators and legal experts have long discussed with respect to leasing space to a cannabis business. Chief among
them is the fact that marijuana is still illegal under federal law — despite recent momentum in Congress to decriminalize it — meaning lenders may balk at financing such properties.
“Landlords absolutely are and should be concerned about getting lender approval prior to getting too far


































































   10   11   12   13   14