Cannabis continues to be an emerging trend within California. In some areas of the state warehouse prices that went for $0.50 a square foot under leases jumped to in excess of $2.50 a square foot. We filed our first lawsuit, which was successful, involving a real property related to legal cannabis cultivation and as real estate prices continue to climb we expect to see more. With the legalization of cannabis, landlords have been forced to become more specific in the lease agreements related to what is and is not allowed cannabis use within the property. This again was made more complicated by AB 1159 which was signed by Governor Brown on October 6, 2017 that made regulated commercial cannabis use a lawful subject of a contract. All in all, as the legal landscape evolves around cannabis and real estate this will be a subject of changes to look for in 2018.
RENT CONTROL IN SACRAMENTO
Rent control has become a hot topic as organizers have pegged Sacramento the new hotbed rent related action. With climbing housing prices and a lack of available inventory on the market, rent prices have seen significant increases in the Sacramento market. The question for the real estate investors is how much traction will the rent control push get. Thus far, it seems to be limited. Mayor Steinberg has expressed his concern to rent control citing the lack of housing inventory that already exists and the detrimental effect rent control would have on new housing starts. Will investors and builders be less likely to start new housing projects in Sacramento if surrounding areas such as El Dorado County and Placer County are unlikely to see any rent control restrictions in their counties. The housing activists seem to be pushing more and more aggressively, but given the sprawling nature of development in the tri-county area, rent control in one municipality is unlikely to have much impact as investors and developers would easily and readily be able to move to other areas.
HOUSING SHORTAGE AND LACK OF NEW HOUSING
2017 was a market filled with ups and downs, but mostly ups. Prices increased as the real estate market continued its upward swing. Part of that upward swing was driven by a lack of inventory on the market. That resulted in a seller friendly market leading to many properties selling for more than list. As we head into 2018, we will be watching to see what the housing market does and whether more sellers jump into the market with the prices reaching some of the highest levels seen in more than a decade. Additionally, what, if any impact will the recent tax changes have on the real estate market as we begin to move into 2018.