The “Growing” Market: Cannabis legalization in NM and how it applies to commercial real estate

by Shelly Branscom, CCIM 

Generally speaking, July is vacation month.  Where did you go or where are you planning to go on your summer vacation?  My husband and I enjoyed a trip to my home state of Minnesota over the 4^th of July to see family and celebrate 2 of our grandchildren’s summer birthdays!  The ability to gather with family, dear friends, and hear our granddaughters calling us Grandma & Grandpa filled me to the brim with joy!  I hope your summer vacation did/does the same for you!!  After all, APS school starts August 11, 2021!

Some big news in the commercial real estate industry the past month was the State of New Mexico legalized cannabis possession.  After years of debate, New Mexico became the 17^th state to legalize recreational cannabis for user 21 and over.  With the new law in effect, New Mexico now allows for possession of up to 2 ounces of cannabis – or equivalent amounts of cannabis extract – and personal production of no more than six mature and six immature marijuana plants per adult.  The deadline for beginning commercial sales is not until April 2022, to give state officials time to craft rules that will govern the cannabis industry and begin issuing licenses for legal pot production and sales. Key dates:  September 1, 2021 – New state agency begins accepting and processing license applications for cannabis producers and microbusinesses.  January, 2022 – State begins issuing cannabis server permits and processing all types of license applications AND Department of Public Safety must review criminal records for automatic expungement of cannabis possession-related convictions.  April, 2022 – Retails sales of commercial cannabis begin.

Landlords have been maneuvering the waters of the cannabis industry for several years now.  Since the federal government has not yet legalized cannabis, there are some complexities around New Mexican Landlords accepting lease payments, processing them and paying their mortgage payments.  New Mexico’s Commercial Association of Realtors New Mexico (CARNM) is planning to host a Continuing Education course later this year to explain the benefits and pitfalls of the State’s new legalization.  I will report back once the State of New Mexico has crafted the rules that will govern the industry.

Although we have heard of an uptick in the Delta variant of COVID, we are still seeing high levels of consumer confidence, high balances in consumer savings accounts and the Federal Reserve has kept our interest rates low.  These factors coupled with continued growth in governmental spending bodes well for continued strong performance in our consumer-driven economy.  Mark Fawer, partner at Greenspon Marder indicated “absent any new governmental restrictions, there really should not be any noticeable impact on commercial real estate.  However, if case numbers increase, it could inhibit international travel which will impact the recovery of the hospitality industry.”  Fawer also points out “a certain amount of Covid fatigue” and that “people are becoming a bit more inured to it.”  He found evidence short term construction work really will not be impacted with projects in the works, other than simple construction delays.  However, he thinks “the bigger impact on commercial real estate will be the long-term changing markets after the Covid experience like desk sharing or people working from home.”

Employers are finding “flexibility” is key when allowing employees to work from home.  Many are considering “Hoteling.”  Although we may not see as much “hoteling” in Albuquerque as in larger markets, the concept is causing larger national employers to take another look at their bottom line and downsize their space.   Hoteling is the concept where employees no longer have defined workstations.  Rather, employees share desks while alternating hours they are in the office.  The most successful employers have discovered if they get feedback from their employees and allow them to provide input in the hoteling process, production has not suffered.  Desk sharing is a deeply personal issue employers are challenged to overcome as 1/3 of employees do not care about having their own desk, 1/3 have their own desk and 1/3 say personal desks are nice to have, but not a necessity.  There is not a magic ratio for companies to determine how many workstations they need per employee.  Rather, companies need to determine the maximum number of employees who need workstations on any given day while taking into account company future growth.  There is a definite correlation between appetite for hoteling and frequency in the office a concept that is not a prevalent in tertiary markets such as Albuquerque as it is larger metropolitan areas.

Here in Albuquerque, the lack of inventory has owner/user buyer frustrated with the lack of product available to purchase.  As we have seen with the residential inventory, commercial “For Sale” inventory has been picked over due to our long run of low interest rates.  Consequently, owner/user buyers are looking for space to lease versus own.  This has our local leasing activity on the rise for all sizes of office space.  Additionally, there have been a tremendous number of small tenants in the market seeking to lease space which has caused lack of inventory in the lower range sizes.  Finally, our market is enjoying several looks from contact/call centers seeking to enter our market desiring 15,000 SF and above.  This is promising giving these employers closed their doors and sent their employees home at the onset of Covid.

If you are still looking for a great summer vacation guide, check out these free vacation tours in Washington DC. https://www.nomadicmatt.com/travel-blogs/free-things-to-do-in-washington-dc/

Shelly Branscom, CCIM is an NAI SunVista commercial real estate specialist who provides substantial long-term strategies and business planning services to her clients.  She prides herself on thinking outside the box, enabling her to contribute unique solutions and outcomes specific to each of her clients.  Learn more about Shelly and her listings.   

NAI SunVista is a full-service commercial real estate company serving New Mexico since 1996. The company is a dynamic commercial real estate firm offering best-in-class real estate services in brokerage, property management, asset management, business brokerage and development services.