While states ordered mandatory shutdowns for most businesses as the COVID-19 pandemic spread across the U.S., several states allowed exceptions for businesses that were deemed “essential” to residents. Not surprisingly, essential businesses included hospitals and other healthcare facilities, grocery stores, gas stations, and banks. In a surprise to some observers, cannabis dispensaries were also declared “essential businesses” during the pandemic. So, what does this mean for the cannabis industry as a whole? And will the classification of cannabis retail distributors as “essential” create new opportunities for investors?
What Makes Marijuana Dispensaries “Essential”?
Given how long it took for recreational and medical marijuana use to be legalized in certain states, it might have come as quite a shock to see state and local governments so strongly embracing the cannabis industry as the coronavirus forced many other types of retail businesses to temporarily close their doors. The government’s embrace of marijuana as an essential product can be viewed as a response to public demand: when Denver dispensaries were initially ordered to shut down at the beginning of the pandemic, the resulting outcry from residents essentially forced the city government to reverse the order and allow marijuana retailers to remain open during the crisis. To put it bluntly: people did not want to be denied access to marijuana while they were stuck at home and struggling with the stress and uncertainty brought on by the coronavirus pandemic. (To say nothing of sick people who depend on medical marijuana as part of their treatment regimens.)
Beyond public demand for cannabis products, there is another sense in which states recognized that cannabis is essential: marijuana is now a critical component of the economy. With unemployment at an all-time high and the closures of many traditional businesses in the wake of the pandemic putting immense pressure on the U.S. economy, it has become clear to a lot of state and city lawmakers that legal cannabis could be an important source of tax revenues going forward.
Cannabis Operators Look to Leverage New Opportunities Created by the Coronavirus Outbreak
The recognition of cannabis dispensaries as “essential” has spurred innovation and encouraged business strategies that anticipate strong, sustained growth in the industry after the COVID-19 pandemic has subsided. While most traditional businesses struggle to survive during the coronavirus outbreak, the cannabis industry finds itself in an advantageous position to leverage new opportunities. Some of these new opportunities may include:
- Legalization: Cannabis brands and industry leaders believe that this is an opportune time to communicate the benefits of marijuana to the public, with the ultimate goal being to accelerate efforts to legalize recreational marijuana throughout the country. If cannabis is an essential part of the U.S. economy, then it only stands to reason that cannabis should be legalized at both the federal and state levels.
- Easing State Regulations: Cannabis operators are also hoping that the “essential” nature of their businesses will help them to persuade state and local governments to ease regulatory restrictions on cannabis distribution. Even a slight reduction in investment restrictions, banking access, and tax laws could lead to increased sales for marijuana retail dispensaries and increased profitability for the cannabis industry generally.
- Better business strategies: Cannabis dispensaries have adapted to changing circumstances by implementing home delivery and curbside pickup options as part of the retail distribution process. While many states are only allowing these options on a temporary basis during the pandemic, the hope is that pot delivery can become a permanent way of doing business.
Strong Outlook for Cannabis Real Estate Investments in the Future
During these uncertain times, it is important for individuals to have confidence in the industries in which they choose to invest. The cannabis industry is strong right now, and the expectation is that it will remain strong in the future. Some investors see cannabis real estate as an opportunity to broaden their portfolios beyond the stock market and other traditional sectors, while others see cannabis real estate investing as a steady source of fixed income.
Scythian Real Estate is a commercial real estate company that specializes in long-term lease agreements in the cannabis sector. Scythian acquires, develops, and stabilizes properties serving the cannabis industry. Since 2014, Scythian Real Estate and its principals have formed premier partnerships with The Green Solution, Grassroots Cannabis, and other nationally recognized cannabis operators. For more detailed information about Scythian Real Estate, please email them here.
PLEASE NOTE THAT THIS BLOG IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN SCYTHIAN REAL ESTATE FUND.