Pot shops offer double the rent, long leases to scoop up best retail spots in Calgary
City data shows many vying for prime locations despite no promise of opening
Cannabis companies are scrambling and taking risks to secure prime spots in Calgary, a real estate broker says.
Companies, hoping to get in on the industry boom expected with legalization later this year, must secure permissions from municipal and provincial governments — and that requires leasing rental space first.
In bidding wars, some companies are offering to pay double the rent, Nick Preston with Colliers International Commercial Real Estate said Friday.
And most are signing leases of five to 10 years even though they may not be allowed to open, he said.
"They're paying a premium and they're actually volunteering to pay that premium on it," Preston told the Calgary Eyeopener. "That's the only way the landlords are going to allow them to come into the space."
Where space normally goes for $50 a square foot, Preston said he's heard of cannabis companies paying $100.
Earlier this week, they flooded city hall with more than 200 applications for development permits. Those will dictate which shops are allowed to open, come legalization.
The city is limiting how close shops can be to each other to 300 metres, and how close they can be to other businesses such as liquor stores.
For instance, as of Tuesday, 12 companies had applied to open on the busy 17th Avenue S.W. between Fourth and 14th streets.
If one cannabis shop is allowed to open every 300 metres, that would be roughly five shops allowed in that strip.
But the calculation could be more complicated.
More shops may be allowed, the city says, as it retains the right to relax the rules. It also may be fewer as further restrictions apply depending on proximity to child-care centres, schools and liquor stores, etc.
"What's going to happen to all that space that's left over?" Preston said. "They're going to need to either sublease that space out or come to terms with the landlord and terminate their lease agreement."
Other high-traffic areas are seeing similar attention, including Inglewood's Ninth Avenue S.E., and 10th Street N.W. in Kensington, according to data provided by the City of Calgary.
Other communities, such as Sunridge, the west Beltline and Forest Lawn are seeing clusters of applications. Macleod Trail is also a popular street, with at least 22 applications along its route.
Cannabis retailer Angus Taylor with NewLeaf says his company has submitted 16 development applications in Calgary. He's looking for shops in neighbourhood shopping plazas that are destinations but not necessarily high volume walking areas.
"What's important to us is the characteristics of the neighbourhood we are in," he said. "we think that people's attitudes toward cannabis will change."
He started leasing some spots last summer and faced resistance from landlords. But for rent, he said "we think double is fair."
'Too many unknowns'
Preston's brokerage has taken on only five or six cannabis clients, opting instead to wait for the industry to develop.
"We do obviously get a ton of calls," Preston said. "But there are brokers out there who are taking on 20, 25 clients in this industry.
"There's too many unknowns right now. It's quite risky, so we're kind of staying away from it and shying away from it a little bit."
Bidding war?
Some landlords are shying away, as well, but others are jumping on board and applying for permits to make their space cannabis-approved themselves, he said.
"Once they get that approved in the coming months, they will be kind of putting that out to different corporations as a bidding war," Preston said.
Applicant names were not provided by the city. However, the province's cannabis regulator does post a list online of cannabis retailers seeking permission to open in Alberta. Neighbours are encouraged to submit concerns before those permissions are granted.
The full picture of where these cannabis shops will be won't be available until after legalization, when all these permitting processes shake out.
"The forecast models are very extreme and the dollars that are promised on some of these franchises are quite lucrative," Preston said. "And so it is exciting and we'll have to see what happens."
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With files from Donne McElligott and the Calgary Eyeopener.
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