Here’s what you’ll walk away with: the actual numbers behind New York’s cannabis retail buildout, why these tenants now pay more per square foot than traditional retail, and which vacant storefronts in your portfolio are quietly the most valuable ones you own.
Because the reversal here is remarkable. Three years ago, a cannabis tenant was the lease your lender called about. Today it’s the fastest-growing retail subcategory in the city — and it’s the tenant willing to outbid the restaurant.
The Data
The Real Deal analyzed more than 230 currently operating dispensaries tracked by storefront directory database Live XYZ. The headline finding:
Dispensary openings jumped 108 percent compared to Q2 of last year — the largest increase of any retail subcategory Live XYZ tracks. Ahead of sports and recreation centers. Ahead of fitness and gyms. Ahead of restaurants.
The multi-year ramp:
| Year | Dispensaries entering operation |
|---|---|
| 2023 | 42 |
| 2024 | 53 |
| 2025 | 96 |
| 2026 (through July) | 75 |
In 2025, nearly 100 dispensaries entered operating status — roughly double the year prior — while just seven permanently closed. Through the end of July 2026, 75 had already opened, a pace that would exceed last year’s total.
A 7-closure year against 96 openings is a survival profile most retail categories would envy.
The Part Landlords Care About
Here’s the number that should reframe how you think about these tenants.
In prime Manhattan retail corridors, cannabis tenants can pay $100 to $150 per square foot — roughly 10 to 25 percent more than comparable traditional retailers, according to research from Colliers.
Why the premium? Because supply of eligible space is artificially constrained.
Strict zoning and buffer requirements limit the pool of storefronts where a dispensary can legally operate. Two spaces on the same block can have completely different values to this tenant class — one is compliant, one isn’t. That’s not a market inefficiency. That’s a regulatory moat around your specific address.
If you own a compliant storefront, you don’t own retail space. You own a licensed-use option on a tenant pool that has nowhere else to go.
What Changed: The Counterparty Got Real
The credit story is what flipped landlord sentiment. Kristen Motel, a partner at Cuddy + Feder and chair of the firm’s cannabis law group, described the shift directly.
Early on, federal prohibition and restrictions around banking and insurance made even legal operators an uncertain bet. That’s changed:
“Operators have three, four, six investors or people with subscription agreements, and they’ve got money coming in from outside sources. It’s not like, ‘Hey, I’m Joe Smith, and I think I can run my own cannabis store.’ It’s ‘Hey, I’m Joe Smith. I have experience, and I have the backing of X, Y and Z investors.'”
That is a description of an institutionalizing tenant class. Capitalized, sponsored, repeat operators — which is the same underwriting profile you’d want from any specialty retailer.
The Pent-Up Demand Thesis
Kevin Brennan, deputy director of market analytics at the Office of Cannabis Management, explained the surge in demand terms.
New York legalized recreational use in 2021, but licensing delays kept legal dispensary counts low even as unlicensed shops proliferated across the city. When licenses finally flowed:
“All this locked up demand was now unlocked.”
Convenience compounded it. “More stores were opening, creating more access for customers who maybe aren’t going to drive an hour to some of those first stores that were open,” Brennan said.
Worth remembering the landlord damage from that same delay: the proliferation of unlicensed shops became a genuine headache for property owners when the Adams administration began padlocking illegal stores. The rollout’s failure mode landed on landlords first.
They’re Not Taking Junk Space
This is the detail that proves the category has matured. Dispensaries aren’t backfilling marginal storefronts — they’re replacing conventional retail in good locations.
Among the operating dispensaries TRD analyzed, prior uses were:
- 24 replaced restaurants
- 23 replaced vape, cigar or accessories shops
- 16 replaced grocery or convenience stores
- 15 replaced banks or ATMs
That bank number isn’t random. Motel explains:
“Banks are coveted because there’s a vault. There’s a level of security built into the building and safe room to place products.”
A former bank branch is a purpose-built dispensary. Vault, security infrastructure, secure back-of-house, strong street presence. If you’re sitting on dark bank space — and plenty of NYC landlords are — you may be holding the single best-fit inventory in the city for the highest-growth retail tenant in the city.
The Caution Flag
The article is honest about the other side: there are signs the rush is beginning to saturate parts of the market.
Take that seriously. A 108% year-over-year opening rate is not a durable growth rate, and the same zoning buffers that protect your compliant storefront also cluster operators into the same eligible corridors. Saturation in this category will be intensely local — block by block, not borough by borough.
The premium rent exists because eligible supply is scarce. Underwrite the lease on the assumption that the premium compresses as the eligible-space pool fills in.
What to Do With This
- Audit your portfolio for zoning-compliant storefronts. This is a real, checkable characteristic — and it’s the entire basis of the rent premium.
- Flag every dark or expiring bank branch. Vault + security = a fit no other tenant class values as highly.
- Underwrite the sponsor, not the sector. Ask for the subscription agreements and the investor list. Motel’s distinction between “Joe Smith” and “Joe Smith with backing” is your credit memo.
- Don’t extrapolate 108%. Structure escalations and terms that survive a normalized opening rate.
The Bottom Line
Motel’s closing line is the whole shift in eleven words:
“I think landlords are starting to realize, it’s not as risky as they thought.”
Three years into a rocky rollout, cannabis went from the tenant your lender questioned to a retail lifeline paying 10–25% above market in a constrained-supply corridor. Ninety-six openings against seven closures. Seventy-five more already this year.
The landlords capturing this aren’t the ones who got comfortable with cannabis. They’re the ones who checked their zoning before their competitors did.
Have you leased to a licensed operator yet — and if so, what did your lender actually say when you brought them the deal? That conversation is the real barrier, and I’d like to hear how it’s going in practice.
