The cannabis industry is blowing up in a way not seen since the dot com boom of the 1990s, leading many people to wonder where to invest. While specific product categories within the space have begun to stand out (for example, cannabinoid-infused beverages or vape oil cartridges), one analyst believes there's another hot trend emerging: cannabis consumption lounges.
According to Jack Delaney, Associate Editor of investment website Money Morning, marijuana lounges are the future of cannabis, basing his insight on market trends and interview with industry insiders. They envision a day where going to a cannabis club is no different than hitting a traditional bar for happy hour. While the plant is still illegal on the federal level, 30 states have approved the sale of cannabis products for either medical and/or recreational use and so-called “social use” sites are beginning to pop up across the landscape.
The City of Denver, where adult-use cannabis has been legal since 2014, announced last week it had approved plans for a marijuana-friendly arcade, the second social marijuana consumption license to be awarded since voters approved designated consumption areas (DCAs) two years ago. Vape & Play will allow for dabbing of cannabis concentrates by patrons when it opens later this year, but no actual smoking, as it would violate Clean Air regulations. The Coffee Joint, a cannabis-friendly cafe and the first business awarded a DCA license by city officials, has similar rules.
In his report, Delaney argues that as the popularity of cannabis lounges continues to grow, there will be two main “profit opportunities” to come. The first would be a rise in so-called pot tourism, which would lead to an uptick of sales in those markets and therefore an increase in the demand for stock of publicly traded cannabis companies doing business there. Many communities are looking to cannabis lounges as not only a gathering place for like-minded people but also as a public safety tool.
The second, and arguably more interesting, is the prediction that more real estate investment trusts (REITs) will soon enter the cannabis space. Delaney points out that there is essentially one big player in that segment now - Innovative Industrial Properties Inc. (NYSE:IIPR) but that the number could grow. He encourages investors to seek out REITs that are open to leasing property to not only cannabis lounges, but also dispensaries, growers, and processors.
So, which US city wants to become the epicenter of the new cannabis lounge trend? According to Money Morning, the city of Las Vegas could soon see the highest concentrations of social consumption businesses per capita due to the explosive popularity of recreational cannabis in a market already saturated with tourists looking for a good time.
"The State of Nevada and the city of Las Vegas, in particular, understand the need for social consumption lounges better than anyone else,” said Erik Blakkestad of Electrum Partners, a consulting firm in the cannabis space, in an interview with Delaney. “When you consider the fact that over 45 million people visit Las Vegas a year and a percentage of those legal tourists can buy cannabis but have no place to legally smoke it, there is a glaring need.”
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