Legal cannabis revitalizing towns, raising land prices

IMAGE: Ray Wong, vice-president of data operations for Altus Group’s Data Solutions division. (Courtesy Altus)

Ray Wong, vice-president of data operations for Altus Group’s Data Solutions division. (Courtesy Altus)

Recreational cannabis use has been legal in Canada for six months and, while still early, it has started to impact agricultural land and real estate.

A recent Altus Group study shows that, among other factors, the growth of cannabis companies is pushing agricultural land and house prices higher in tertiary markets.

For example, Aphria set up an operation in Leamington, Ont.,  where the economy was hit hard by the closure of a Heinz Ketchup processing plant. As a result, the average price per acre for unimproved farmland between 25 and 200 acres rose from $8,000 in 2013 to $30,000 in 2018. The average price per acre for improved greenhouse operations jumped from $150,000 to $250,000 during that period.

Tertiary markets are benefiting because similar land in major markets such as Toronto or Vancouver is too expensive to make such operations economically viable. In the Greater Toronto Area, agricultural land averages $103,000 per acre; in Vancouver the price is more than $400,000 an acre.

More demand for agricultural land

“We’re starting to see agricultural land diversify now,” said Kruti Desai, manager of national research insights for Altus Group’s Data Solutions division. “There’s competition among crop producers in these areas.

“We’re also seeing some crop production facilities being converted into greenhouses or joint production plants that have both food and cannabis production.”

Smiths Falls, Ont. also went through hardship after its Hershey plant closed, but Canopy Growth Corporation has largely filled the void.

Both Leamington and Smiths Falls went through periods of high unemployment, but the cannabis companies have sparked economic growth due to the rise in cannabis tourism and relocating workers.

Housing prices have also increased in these towns.

“It’s a very specialized industry where you need workers that are skilled in bioscience and biotechnology,” said Desai. “There are similarities with food production, but there’s also a very specialized workforce that’s difficult to find, so you may see some lift in terms of wages for these types of employees.”

Canada’s top cannabis producers

Canopy and Aphria are among the top five cannabis producers in Canada, according to Altus Group data. Things stack up this way:

* Aurora Cannabis occupies approximately four million square feet of space and is expected to produce around 570,000 kilograms annually;

* Canopy occupies 4.3 million square feet of space and is expected to produce 500,000 kilograms annually;

* Aphria occupies 800,000 square feet of space and is expected to produce 115,000 kilograms annually;

* HEXO Corp. occupies one million square feet of space and is expected to produce 108,000 kilograms annually;

* and Tilray occupies 900,000 square feet of space and is expected to produce 90,000 kilograms annually.

“Industrial buildings are changing to meet demand for e-commerce fulfillment centres,” said Ray Wong, vice-president of data operations for Altus Group’s Data Solutions division. “I think we’re going to see efficiencies in production and space utilization on the cannabis side as well.

“The constant challenge for companies is to try and make things cheaper and faster, so I think we’re going to see some other changes in how these facilities evolve to meet up with demand with existing space but increased production.”

Wong said there can be zoning issues restricting where cannabis-related companies can operate. This is especially challenging in markets with tight industrial vacancy rates and buildings requiring customization for cannabis production.

“Building owners are looking at a longer time span or life cycle for a building. So they may not want to, or can’t, accommodate some of the customization needed based on the building’s structure. You have to look at bylaws, allowable uses and regulations, as well as the existing stock of buildings.”

Cannabis and retail

Zoning, bylaws and other regulations will also play a role in where cannabis retailers can locate. Residents of some neighbourhoods may welcome such stores, while others may object to them. Ontario’s first legal cannabis stores opened on April 1 — joining those in Alberta, British Columbia and Quebec — and will continue to roll out this year.

“It definitely adds a lot of excitement to the sector,” said Wong. “There’s going be a lot of demand in the retail sector for cannabis locations.”

Supply has lagged demand for legal cannabis over the past six months due to product scarcity, licensing backlogs and regulations. However, it’s unknown whether the initial demand will be maintained or if a novelty factor will wear off for some purchasers.

As the next phase of legalization, cannabis edibles, beverages, topicals and extracts can be legally sold in Canada as of October. Food and cannabis companies are partnering in anticipation of that date, which is expected to create a new series of impacts on the commercial real estate industry.


Steve is a veteran writer, reporter, editor and communications specialist whose work has appeared in a wide variety of print and online outlets. He’s the author of the book Hot…

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Steve is a veteran writer, reporter, editor and communications specialist whose work has appeared in a wide variety of print and online outlets. He’s the author of the book Hot…

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