MJBizMag January 2021 - 49

businesses-they can be a useful guide
for what rates lenders who work with
marijuana entities will charge.
Also, having debt options in addition to
equity are good for cannabis businesses.
" With more banks serving cannabis
companies and the potential passage of
the SAFE Banking Act, that will drive
down the cost of capital, " Velasquez said.
" What I expect to see is less equity plays
and more operators getting debt, risking
it on themselves, versus introducing
equity partners into their operations.
" That will really be the last
stranglehold of backed capital, " she said.
" That's access to real money that the
industry needs, and operators need to
be successful. "
COMMERCIAL
REAL ESTATE
PRICES AND
RENTS
In the wake of the
coronavirus pandemic, scores of
commercial properties have been
vacated either from businesses closing
or significant numbers of office staff
working from home. As a result, both
sales and rental prices for commercial
real estate are edging downward in some
areas, but not all.
For example, an October 2020 report
from the Chicago-headquartered
National Association of Realtors found
that in the third quarter of 2020,
mall, strip mall and stand-alone retail
space prices were down 7%, 5% and
3%, respectively. But land prices for
industrial and agricultural purposes
were up 4% and 1%, respectively. A
December report from Deloitte revealed
similar findings.
These trends will probably continue
well into 2021, with retail real estate
prices expected to stay depressed until
COVID-19 is contained enough to
enable a return to something close to
normal shopping activity.
That means entrepreneurs seeking
retail storefronts for dispensaries should
be able to find good deals. Executives
seeking cultivation and manufacturing
properties, meanwhile, shouldn't hold
their breath for bargains. Nevertheless,
now might be a better time to invest
in a warehouse or land for cultivation,
because prices could be driven up even
higher as large players enter the industry.
" If bigger corporations move in and
buy thousands and thousands of acres
of land or loads of warehouse space, "
warned Robert Sonora, associate director
of the Bureau of Business and Economic
Research at the University of Montana,
" land prices are going to be an issue. "
Executives should, of course, assess
situations at a local level.
ELECTRICITY
PRICES
Besides labor, the
biggest cost for
most cannabis
businesses-especially cultivators
and manufacturers-is electricity.
Commercial and industrial electricity
prices are a valuable cost indicator
to watch. A December 2020 report
from the U.S. Energy Information
Administration (EIA) forecast
commercial electricity prices rising
to 10.74 cents per kilowatt hour
(kWh), on average, in 2021 from
the 2020 average of 10.61 cents. The
energy agency forecast that industrial
electricity prices would increase to 6.76
cents per kWh from 6.71 cents in 2020.
But like other economic indicators,
electric rates vary by region and
provider, observers said. For example,
Central Maine Power and Duke
Energy's Florida unit will charge lower
electric rates in 2021, while Southern
California Edison and Pacific Gas and
Electric are seeking to raise prices this
year, according to news reports.
GASOLINE PRICES
The pandemic has
vaulted delivery to
the forefront of retail,
including in the cannabis
industry. Many cannabis retailers
reported huge increases in delivery sales
in 2020, thanks to the combination of
marijuana businesses being declared
essential and limits on in-store shopping.
Although delivery sales are expected
to slow as the threat from COVID-19
recedes and people return to more
normal in-store shopping, delivery
is expected to remain an important
component for many businesses. So it
makes sense to watch gasoline prices.
According to the EIA, U.S. gasoline
prices in early December 2020 were lower
than the year-earlier period by 28 cents to
42 cents, depending on the region.
Gasoline prices are expected to rise in
2021 as the economy gains steam. The
energy agency forecast that the prices for
the benchmark Brent crude oil, which
averaged $43 per barrel in the fourth
quarter of 2020, will average $47 per
barrel in the first quarter of this year and
rise to an average of $50 per barrel by the
fourth quarter.
Again, regional differences must be
considered. California has the nation's
highest gasoline prices, followed by other
West Coast states, according to the EIA.
Florida and other Gulf Coast states plus
Ohio and other Midwest states have the
lowest gasoline prices.
UNEMPLOYMENT
The national
unemployment rate fell to
6.7% in November from
6.9% in October, but the
employment recovery has been slowing,
and many millions of Americans haven't
been able to regain or replace the jobs
they lost because of the pandemic.
For marijuana companies-especially
those with plans to expand-that means
a greater pool of executives and workers
to choose from.
" In this kind of economy, where
companies are trying to reduce their
operating costs, there's going to be
some great talent that's been laid off and
seeking work, " Velasquez said. " That's
going to provide the industry with a
great talent pool to reach into. "
January 2021 | mjbizdaily.com 49
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MJBizMag January 2021

Table of Contents for the Digital Edition of MJBizMag January 2021

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