The focus of a city council in the United States has been on creating a framework to govern cannabis consumption. On Wednesday, New York City council passed an annual budget that includes money for the development of regulations for the legal market. At present, the Metropolitan Transportation Authority will collect taxes from any commercial enterprises, such as cannabis retail shops, that open in the city. How the revenue will be shared with police and the newly legalized industry still needs to be ironed out.
The move is a step forward for legalisation in the US. Medical marijuana is legal across 29 states, but has not been permitted for recreational purposes for fear of attracting a pool of users to which it will be very difficult to prevent. In Colorado, where recreational cannabis was legalised in 2012, sales of recreational marijuana grew by 50% in 2018. These statistics lead many in the marijuana lobby to believe that the time is now right for legalisation.
As far as property values are concerned, there is ample precedent for economic growth occurring in cities once property owners have greater freedom to get into profitable new ventures. Some of the most valuable places in the world, such as London, have witnessed this in action. London overtook Sydney in 2018 in terms of the value of commercial property.
Developers have realised that unprofitable, low-rise property in the centre of cities – office blocks, tower blocks and those covered in urban fabric – has long since been cannibalised by developers building sprawling, luxury apartment blocks. The kind of development that had historically flourished in the country centres has now been displaced to the city’s centre by tall, glassy towers. This wave of engineering is what prods the commercial real estate sector forward and drives the economy. Commercial property values are currently holding steady despite the general downturn in the property market.
In 2008-9 the banking sector that accounted for a fifth of commercial property assets was taken over by the world’s central banks. In the next several years the economic crisis that followed in 2008-9 would create a global phenomenon where banks would stop taking on new property altogether. If they had not, prices would have dropped further. The policies of the central banks are still in effect and very much under the control of the government. They have never really stopped. In fact, it has become easier for banks to lend on property due to the supply of two kinds of funding: a kind that is only available to those who pay on time, and a second kind that helps avert foreclosures and refinances.
Supply-demand economics can be a powerful force in driving people’s motivation to conduct business. As long as there is supply and demand, prices will be the outcome of both supply and demand. There will always be an argument of whether free market and competition win out. Perhaps there is an argument to be made against it, because if the inherent flaws are just noted, corrected and passed down through generations of consumers, there is almost no chance of their affecting those who start today.
Now, whether people are driving the boom or not, it is a question that can be answered only by the markets. Cannabis companies in New York City have already been snapping up ground floor space in the city. One very high-profile group, GreedyBlue, recently bought up almost a hundred stores in sub-divisions of New York, taking their aim at the marijuana market in the city. While taking steps to create a great location for them is important, GreedyBlue would have already done that. They bought properties on high streets on Long Island, Long Island City and South Bronx. These areas are places that have seen a recent commercial resurgence due to redevelopments, their buyers thought, because their rents are currently below market rate. These are places where people already live, where they go to the supermarket or shop on a daily basis. They will drive the market if they choose.
On the other hand, other speculative groups, including GreedyBlue, have given the impression that they will rent out retail premises that are not going to be within reach of regular people. Even though this might actually cost them money, they are prepared to do so. In effect, they are betting that people, especially suburbanites who have seen little development in their area in recent years, might easily buy products by thinking the store will be within walking distance. They are betting that the suburbite among them may be a visitor and might even need cannabis.