10A — December 2024 — New Jersey — M id A tlantic Real Estate Journal
www.marej.com
N ew J ersey
AEBOV Industrial Real Estate Brokerage Shaping the Future: How 2023 redefined New Jersey cannabis real estate demand
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in order to receive an annual license, 2023 yielded a much larger sample size of real estate transactions. We are happy to share some of the data from these transac- tions as well as more details on the 2023 conditional licenses, which may offer a glimpse into where demand is heading: • Retail: Of the 413 adult personal-use conditional can- nabis licenses approved in 2023, approximately 61% of these were class 5 retail li- censes - as it pertains to real estate, retail awardees require storefronts, shopping plazas,
or other properties suitable for or convertible to retail use. • Cultivation: Approxi- mately 20% of these licenses were for cultivation - gener- ally, cultivation licensees re- quire warehouses to accommo- date indoor growing however there have been some transac- tions for land and greenhouses as well. • Manufacturing: Roughly 18% of the conditional licenses issued were for manufacturing - manufacturing operators also require industrial properties, albeit the industrial properties utilized for manufacturing are
typically smaller with lower ceiling heights and less power service than their counter- parts utilized for cultivation. • Wholesale, Distribu - tion, and Delivery: Whole- sale, distribution, and delivery licenses each accounted for less than 1% of the conditional licenses issued in 2023. Retail Trends: • Over the period from 2022- 2023, the average NJ recre- ational dispensary lease was for 3,587 s/f, a decrease of ap- proximately 14% from the prior years’ average of 4,175 s/f. • The average lease rate in
2022-2023 was $26/SF/year. Value appeared to be closely correlated to the number of retail locations allowed by the township where the property was located, as opposed to any particular attributes of the real estate, such as traffic count, condition, etc. Specifically, in townships that allow sev- eral retail locations or have no limit on approvals altogether, the average rent was $22/SF/ year. By contrast, in townships that will only issue one retail approval - thereby ensuring that the license recipient will operate the only dispensary in the town - deals were inked at an average of $48/SF/year, over double the average rate for space in towns that allow multiple dispensaries. • Approximately 84% of dispensaries leased spaces with on-site parking over 2022-2023, marking a slight increase from prior years. Industrial Trends: • Contrary to retail deals, which were spread somewhat evenly throughout the state, cultivator and manufacturer deals for industrial properties were mostly located in the southern part of the state. A few possible reasons include the lower real estate acquisi- tion costs, lower labor and supply costs, and greater labor availability in those regions. Since operators will be selling product into a statewide mar- ket with fixed prices, there is logic to operating in a region of the state with lower operating costs and a larger labor pool. • Industrial rents for cul - tivation and manufacturing properties varied based on size, power service, and clear height. Rents averaged in the mid-teens psf and were trend- ing higher as of the writing of this report. The market for vi- able, existing warehouses that can accommodate cannabis as a use continues to be supply constrained. • Land sold for an average of $75K/acre. Generally, there was less demand for land than built facilities. This could be due to a number of reasons, in- cluding the lengthier timeline associated with developing a ground-up project as well as a challenging financing envi - ronment as most lenders still perceive both the cannabis use as well as development projects as higher risk. “Despite market challenges, continued on page 12A
EW JERSEY — 2023 marked an active growth year for the NJ
cannabis real estate mar- ket. While the number of condition- al licenses granted by the CRC, the state’s can- nabis agen-
Daniel Tropp
cy, was down from 910 in 2022 to 413 in 2023, the number of annual licenses issued soared over 800% year-over-year. As site control is a requirement
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