"There is no stopping the influx of capital coming into this behemoth," says a new report on cannabis real estate from Colliers. In California, the market is already proving to be tremendously popular. In 2020 alone, the market has racked up $2 billion in total tax revenue and $4.4 billion in sales. The report estimates that there is a market of 4.5 million consumers for the product.

Despite the clear demand, there are challenges to operating in the space. Cannabis is still considered a controlled substance under federal law, and while there are now 33 states that have legalized usage, the federal prohibition has pushed traditional capital sources, like banks that are federally regulated, out of the market. It also has restricted the real estate market for cannabis tenants. Nine out of 10 property owners in the Bay Area will not lease to a cannabis tenant, and institutional owners do not allow cannabis users.

Property owners that will consider a cannabis usage are able to charge a premium, both because of the limited availability of cannabis-friendly space as well as for taking on the risk of collecting income from a federally illegal business operation. In addition to premium rents, cannabis users are also more flexible with their leasing needs and take smaller spaces.