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How profitable are pot shops? You'd be surprised

MoneyWatch headlines for June 29, 2016

The marijuana business is a bright spot in an otherwise gloomy retail sector.

According to the 2016 Marijuana Factbook, a store that sells either medical or recreational pot earns on average $974 per square foot in revenue, topping Whole Foods, whose 431 stores earn an average of $930 per square foot (h/t Quartz), and traditional department stores such as Macy's, which earn an average of $180 per square foot.

Survey: Most Americans think medical marijuana should be legal

"That statistic shows that the fundamentals of these businesses are pretty solid," said Chris Walsh, editorial director of Marijuana Business Daily & The Marijuana Business Factbook 2016, in an interview. "A lot of these businesses are profitable and landlords in states that have legalized either medical or recreational marijuana are actively trying now to work with the industry."

There is a drawback for pot entrepreneurs: Cities restrict the locations where cannabis businesses can operate through zoning ordinances. As a result, the properties available to purveyors of pot are limited, enabling landlords to jack up their rents, according to Walsh.

"You are seeing the marijuana industry come into dilapidated areas and neglected areas and reviving them by filling up the retail spaces and also the warehouses to grow marijuana," he said.

Consumers with certain medical conditions are able to get marijuana with a prescription in more than two dozen states, while another 20 or so have decriminalized it, treating these offenses like a traffic ticket.

Cannabis sales are expected to skyrocket to nearly $23 billion in 2020, nearly triple from this year, according to Arcview Market Research and New Frontier, a data analytics company that focuses on the industry.

Wall Street doesn't feel nearly as upbeat about traditional retailers like Whole Foods (WFM) and Macy's (M), both of which have struggled in recent years.

Jonathan Berr

Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.

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