‘It’s tricky’: Retailers, landlords having trouble placing legal cannabis stores

That’s what Western New York’s first adult-use dispensary licensees say they are finding out as they search for locations to open their state-sanctioned weed stores.

Landlords are reluctant to rent to cannabis shops. Tenants in bigger retail plazas – especially national chains – often have language in their own leases that bars landlords from renting space to certain types of businesses, including cannabis shops.

It all complicates the hunt for space by cannabis license holders, like Aaron Van Camp.

Van Camp, one of four entrepreneurs approved for retail weed dispensary licenses in Western New York, had hoped to be open by last month, but his search for a location has been one disappointment after another.

He still hasn’t found a spot for his store – one of the first licensed to open in the Buffalo Niagara region.

“We are lowering our standards daily and still not finding anything,” he said.

Van Camp had settled last month on a property he liked across from the Boulevard Mall on Niagara Falls Boulevard, but as time went on, he saw signs the Realtor was being more hesitant with him than it would have been with other tenants.

“We didn’t feel like meeting with the company CEO was something everyone was going to have to do,” he said.

For weeks, Van Camp has been given the “extreme runaround” by commercial realtors, he said. He is adamant about not trying to finagle his way into a space where his line of business may not be wanted.

“I’m not bamboozling anyone,” he said. “It’s my third question: ‘Will you accept a state licensed recreational marijuana shop?’ “

So far, the answer has been no.

The state has not been much help, either.

From the beginning, sites for legal cannabis dispensaries were supposed to have been developed by the Dormitory Authority of the State of New York. The authority was supposed to secure properties, build them out, then lease them to licensees in a turnkey operation.

But when that process fell far behind the necessary timeline, the state reversed course in December – a month before the first retail stores were initially supposed to open – and told licensees they would have to secure their own spaces, or be prepared to wait an uncertain amount of time for the authority’s services.

Now, as licensees throughout the state search for their own properties, some have complained that they find themselves in competition with the dormitory authority. Sometimes the state is already considering opening a dispensary in a conflicting area too close nearby, or sometimes in competition for the same properties licensees want to secure for themselves.

Van Camp was interested in a site at Elmwood and Bryant but was steered away from it by his real estate agent over rumors that the dormitory authority was looking at sites nearby that could put his potential location within the state’s exclusivity zone.

Last week, a group of Conditional Adult-Use Retail Dispensaries, or CAURD, licensees sent a letter to Dormitory Authority and Office of Cannabis Management officials, complaining about long delays in site approvals, lease agreements lacking basic information as well as much higher than market rate construction costs and rental rates.

“As experienced business owners, we are accustomed to performing a deep financial analysis of our business endeavors and participating in competitive markets with accessible information,” the licensees said in the letter, which was published by NY Cannabis Insider. “By contrast, in the CAURD program, we are cosigned to a process that is monopolized by DASNY and the [Social Equity Cannabis Investment] fund by way of financial information, service providers and access to real estate.” 

With so much about the budding cannabis industry up in the air, and so little transparency from the state, dispensary hopefuls and licensees are leaning on each other to figure things out as they go along. 

“I feel like we are winging it because there’s not a lot of guidance,” said Gina Miller, who was recently granted a Conditional Adult-Use Retail Dispensary license with her husband Glen. “Most of the useful information we’re getting is from other CAURD applicants, and other people who’ve done it before.”

Miller said she has been doing as much research as she can on her own and with her attorney’s help. She also joined the New York CAURD coalition, a group meant to provide resources, training and networking for those navigating the licensed cannabis market.

“We’re learning as we go,” she said.

Miller’s search for a Southtowns dispensary location has led her out of prime retail sites and into out-of-the-way locations.

“I’ve heard those bigger plazas don’t want to risk losing their national tenants for a 3,500-square-foot store, even though it brings traffic, because of the federal regulations,” she said.

She has sought out smaller developers and plazas, and honed in on standalone locations, which she heard are more favorable to dispensaries. She has found a few properties that make good possibilities, including one on South Park Avenue in Blasdell. That ultimately suits the Millers’ purposes, since they are hoping to stay out of the fray in larger, busier locations in Buffalo or the Northtowns.

“We don’t want to go too big and not be able to sustain it because of competition with the legal market opening up and the illegal market,” she said. “We want to find our little niche in a community that is warm and welcoming, and stay there.”

Real estate developers also face their own set of challenges when deciding which tenants to accept and where to put them.

“It’s a tricky situation, certainly, when dealing with something as polarizing as dispensaries,” said Eric Recoon, vice president of development and leasing at Benderson Development. “Our approach, always, is to err on the side of caution with regard to our existing tenants.”

That’s not just the case with dispensaries but with any retail use that might raise concerns among pre-existing tenants.

Something the company encountered during the Covid pandemic is a great example. When the push was on to roll out Covid testing sites, Benderson was quick to offer vacant space to health care providers for Covid testing sites.

“We were not charging for any such use, but rather providing a community benefit during a time of need,” Recoon said.

But before it could even take its first steps, the company received “immediate and vocal reactions” from on-site tenants. They, along with their customers, were worried about bringing in people who were potentially infected with the virus, and being in close proximity to them.

Benderson went back to the drawing board and instead found some free-standing locations to donate to local health care, where tests could be performed away from other tenants.

“I think the situation with dispensaries is analogous,” Recoon said. “The potential for existing tenant resistance exists.  A multi-tenant plaza setting is probably the wrong location, in most instances, for the use. Particularly with the uncertainty about potentially large crowds and parking needs – especially for the first local openings.”

In addition, as Miller learned, the company’s larger shopping centers with national tenants often have language prohibiting certain uses they consider undesirable, such as vape shops, pornography sales, automotive repair, vehicle sales and – yes – dispensaries.

“We’ve experienced legalization in many other states in which we have properties,” Recoon said. “Local reactions have varied. It’s clear that the acceptance and reaction to such meaningful change from illegality to retail sites is evolving.”