Is Booming Marijuana Industry Causing a Warehouse Shortage in Denver?

Is Booming Marijuana Industry Causing a Warehouse Shortage in Denver?

Over recent months, we've continued to hear whispers about the impact the rapidly growing marijuana industry is having on commercial real estate prices, as well as the amount of available warehouse space.

Now, a new Wall Street Journal piece offers insight into the situation — and helps identify some of the winners and losers.

Among those quoted in the article, headlined "Marijuana Producers Gobble Up Warehouse Space in Denver Area," is Mark Bowen of DCT Industrial Trust Inc., which owns warehouses aplenty in the metro area.

According to him, the WSJ reports, "demand from marijuana growers has driven up the cost of warehouse space for users from the natural gas and tech industries by 60 percent or more, and increased lease renewal rates by 25 percent for DCT’s clients worried that if they don’t re-sign they will lose their space to the pot industry."

A warehouse grow raided by Denver police in 2013.
A warehouse grow raided by Denver police in 2013.
File photo

Adds Tom Glaspern of SEKO Logistics: “It seems like every warehouse from 8,000 to 20,000 square feet is being turned into an indoor marijuana farm."

As such, rates are up in a big way. CBRE Inc., a real-estate services firm cited by the Journal, notes that warehouse rents rose 10 percent last year, to $5 a square foot. And buying warehouse space is even more costly — $80 per square foot.

That price tag has inspired some ganjapreneurs to build their own warehouses — but because they'll be using the facilities, the construction projects seem unlikely to significantly increase the number of warehouses in the city or surrounding areas.

The lack of such spaces is frustrating for those who aren't in the weed trade. The Journal quotes one person in the construction-supply business who says he's been looking for a warehouse for the past eighteen months and hasn't found anything yet.

His difficulties will likely continue as long as the boom lasts. But patience may pay off: If there's a bust, that pricey warehouse space will go for next to nothing.

For more from the Journal, click here.

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