Retail Landlords Losers in Texas Hemp Ban

Texas retail landlords are staring down an approaching wave of shop closures related to cannabis illegalization.

A sweeping Texas proposal to ban intoxicating hemp products would force the closure of more than 8,500 businesses across the state, potentially leaving up to 17 million square feet of retail space vacant and delivering a shockwave through the commercial real estate sector, Bisnow reported.

Senate Bill 3, which passed both chambers of the Texas Legislature and now awaits Gov. Greg Abbott’s signature, would outlaw the sale of tetrahydrocannabinol or THC-containing consumable hemp products, such as Delta 8.

Barring an unlikely veto from Abbott in the 20-day window from the session’s end today, the law would take effect Sept. 1, effectively wiping out a $5.5 billion annual industry and shuttering storefronts ranging from independent CBD shops to multi-location hemp retailers.

The industry supports more than 50,000 jobs statewide, including an estimated 1,500 hemp shops in Greater Houston — more than the total number of McDonald’s restaurants in Texas, according to the Texas Hemp Business Council. Assuming an average store size of 2,000 square feet, the retail space at risk spans roughly 17 million square feet, a huge chunk of Texas’ leasing market.

For landlords like Monte Anderson of Dallas-based Options Real Estate, the bill’s passage threatens valued tenants and stable rent streams.

Anderson wrote to Abbott asking for a veto, citing the potential commercial real estate “ripple effect.” His tenants Eddie and Martha Velez, owners of Oak Cliff Cultivators and vocal leaders in the Texas hemp community, are two years into a five-year lease at Anderson’s Tyler Station development.

While non-intoxicating hemp products like CBD and CBG will remain legal, they represent only a small fraction of market demand. Major cannabis REITs like Innovative Industrial Properties have invested tens of millions in Texas holdings amid the sector’s rapid rise following the 2018 legalization of hemp derivatives.

If the ban moves forward, Texas would join other red states like Alabama and Tennessee in cracking down on hemp products, a stark reversal for an industry that grew under the state’s purportedly pro-business, small-government ethos.

— Judah Duke