Marijuana on table

Oregon Experiences A 420% Increase In Marijuana Sales

“In things you cannot make up, Oregon sales per adult along the Idaho border are 420% the statewide average,” says Josh Lehner, an economist with the Oregon Office of Economic Analysis (OEA).

The Oregon-Idaho border has seen a 420% increase in marijuana sales and no, that’s not a joke. Recreational marijuana is legal in Oregon, but not Idaho, though experts at the OEA don’t believe that Idaho residents are the only ones contributing to the massive increase in sales. Lehner also stated in his report for the OEA that the border sales can also be attributed to individuals from any state coming in and purchasing marijuana legally, as well as Oregon residents themselves who purchase their marijuana from the border. 

While other state residents, and residents of Oregon itself, can be held responsible for the boost in the marijuana economy, Washington, another recreationally legal state, has seen an increase in sales along their border with Idaho as well. Lehner states that these Idaho border increases are a result of an economic pattern known as the “border effect.”

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Relatively self-explanatory, the “border effect” is a “phenomenon observed when neighboring jurisdictions have different rules, regulations or tax rates for one industry or product,” according to Lehner.  Obviously, Idaho shares a border with two legal states, making it one of the greatest modern examples of the border effect in current day markets. Idaho doesn’t even have legal medical marijuana, so it makes sense that the residents would use their neighboring states to make the purchases, even if it is a risky game. 

About 75% of marijuana sales in Oregon and 35% of sales in Washington in counties along the borders with Idaho appear to be due to the border effect. Obviously recreational marijuana is not legal in Idaho, but even after throwing the data into a rough border tax model that accounts for incomes, number of retailers, tax rates and the like, there remains a huge border effect,” Lehner said.

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When comparing both Oregon and Washington border sales coming in from Idaho residents, reports show that Oregon has seen much more success (420%’s worth), which is most likely due to the fact that Oregon has less of a tax on marijuana. Washington also has much fewer dispensary retailers along their border, and they’re more centrally located within the state. Numerically speaking, Oregon sales are 16% more per capita compared to Washington. 

A 420% sales increase in itself seems already massively successful, however, that number is quickly expected to change, and not in the way you’d likely expect. Recreational marijuana sales in general are predicted to increase even more within the next coming years as more states loosen their strict policies, and more federal regulation begins to take place. 

In Oregon specifically, the OEA reports that they expect their sales to grow up to 80% at least within the next year as the economy begins to shift. The report’s projections claim the state will see an increase in overall household incomes for Oregon residents, a population increase (as expected every year), and a social shift as well in which marijuana will be deemed more socially acceptable as it rises in popularity and legality throughout the United States.

Cannabis Field

How Real Estate Investors Are Helping The Cannabis Industry Grow

The marijuana industry in America is vast and constantly growing. Economies tend to thrive when the herb is sold and distributed in legal settings, however, many states have tight regulations on this retail industry because of how new it is, and due to the fact that federally, marijuana is still an illegal drug. This makes the industry extremely hard to keep up with, as it’s forever changing. According to Crain’s Business Magazine, cannabis stocks are down 60% compared to where they were this past March, which was considered a peak period for this industry. In response, companies are selling real-estate as a means to keep up with costs and make up for other areas where finances are lacking. 

“We’ve done $375.6 million worth of deals in 2019 and the pace has picked up over the course of the year. It’s becoming more and more attractive for operators because of the scarcity of alternatives out there. Our pipeline has never been more vigorous than it is today,” said Paul Smithers, CEO of Innovative Industrial Properties Inc., the largest cannabis-focused real estate investment trust.

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The struggle that comes from living in a legal state in a country where the product is federally illegal, is finding the right real estate to run a cannabis business. Many landlords don’t want to rent out spaces to new marijuana businesses because of how up and down the economy for it is. However, the absence of willing landlords is only further contributing to the declining cannabis market. To avoid this struggle, many companies in the industry are just buying property to own and using their assets to gain further capital, (Crain’s). 

Development in the marijuana industry has definitely slowed down within the past year. According to Capital Advisers, this time last year the industry acquired $707.8 million in equity and debts. This year, that number decreased to a whopping $26.8 million, for Real Estate Investment Trusts, this isn’t a bad thing, however. Innovative Industrial properties Inc. (IIPI) owns a total of 38 cannabis business properties, which brings their personal stock up, and grabs the attention of big investors. When these investors invest in these real estate companies, they’re indirectly reinvesting into the cannabis business, so the acquisition of more real estate, leads to more capital and equity for the marijuana businesses. 

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“When we talk to investors, they get comfort that we are a real estate company foremost. We’re not unlike a utility. We’re the picks and shovels, if you will,” said Smithers.

Additionally, IIPI is able to keep themselves as a real estate business afloat when investing in marijuana properties by buying out the spaces and renting them out to other marijuana companies in long-term contracts. This ensures that IIPI doesn’t lose money on their investment, can continue to gain additional investments, and give the space to a growing industry that will, hopefully, bring in a significant amount of income. The additional investments also work in favor of the cannabis industry, as it lets companies like IIPI acquire even more space to continue to lease out to more cannabis companies.

While it may be difficult for cannabis businesses to find private landlords to rent from, larger real estate companies are investing and doing their part to give this new and exciting industry a space to thrive. It can be argued that even now, after marijuana has been legal in some states for over five years, these real estate investors are ahead of the curve when it comes to putting money into this industry. Eventually, marijuana will be legalized federally, it’s just a matter of time, and government, but when that day arrives, companies like IIPI will already be in the game and thriving to capitalize off newer growth in the market.