One of the most important business decisions cannabis businesses need to make is whether to lease or buy real estate. I have worked on too many cannabis real estate transactions to count. And in my experience, the vast majority are leases. Today I want to look the top three reasons why that’s the case.
#1 – Deferring costs for a later day
Even long before the cannabis recession, cannabis businesses were cash strapped. The process between incorporation and operation costs hundreds of thousands, if not millions of dollars. At the same time, cannabis real estate (whether for lease or sale) tends to run at a much higher cost than for non-cannabis businesses. At the same time, cannabis business owners often bet on the ability to get licensed and succeed in an industry that’s basically designed to make them spend money in inefficient ways and where there is never-ending illegal market competition. Success is by no means guaranteed. Quite the opposite.
The prospect of an already cash-strapped business putting down millions of dollars to buy real estate is just… out of the question. I’m not saying that leasing cannabis real estate is cheap. It definitely is not, and in the long
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