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HIGHLIGHTS
  1. Oakville and Brantford became the latest to opt out this week.
  2. Commerical real estate expert says  warns the ongoing threat of local prohibition makes it even more difficult for aspiring retailers to find space.
  3. At least one retail lottery winner not pursuing a lease until cities declare their status

More Ontario municipalities are saying no to cannabis retail, further challenging the rollout of pot shops in what is both Canada’s largest province and the only one still without any bricks-and-mortar locations selling legal marijuana.

Oakville and Brantford – home to a combined population of more than 330,000 – became the latest to opt out this week ahead of a Jan. 22 provincial deadline. They join 52 other cities that have informed the Alcohol and Gaming Commission of Ontario as of Wednesday afternoon they will be at least temporarily banning pot stores from opening within their boundaries.

Ontario is authorizing just 25 stores to open on April 1st, but combined with the right to apply for those permits being granted via lottery mostly to sole proprietors last week, Scott Addison warns the ongoing threat of local prohibition makes it even more difficult for aspiring pot retailers to find space.

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Anyone hoping to secure a cannabis retail storefront today “would have to do a conditional lease transaction that would be conditional upon the municipality opting in,” the president of Canadian brokerage services for Colliers International told Cannabis Professional, “but landlords don’t like to do those kinds of deals.”

Landlords also prefer tenants with previous retail experience, Mr. Addison said, noting virtually none of the 25 lottery winners – which include a family therapist and a food scientist – have any significant background in sales.

“It is going to be difficult to get transactions done, quality transactions in good locations,” said Mr. Addison. Canada’s largest commercial real estate firms such as Rio Can and First Capital, he said, prefer to do business with “large, well-financed corporations” over sole proprietors.

“I think that is going to be a restriction [for the retail cannabis lottery winners],” Mr. Addison said.

Even the handful of corporate entities that won the right to apply for one of Ontario’s first cannabis retail permits are holding off securing locations. The Niagara Herbalist, one of seven lottery winners for western Ontario, said in an update to its Facebook page over the weekend the company was still “looking at a few locations in the Niagara Region [but] due to some cities/towns being undecided on whether to opt in or out, we cannot confirm this.”

Niagara-on-the-Lake, for example, a popular tourist destination in the heart of Ontario’s wine country and thus an attractive spot for hopeful pot sellers looking to maximize foot traffic, opted out of cannabis retail on Dec. 17.

Cities that say no to pot shops will be allowed to change their minds after the Jan. 22 deadline, the province has said, while those opting in will not be allowed to subsequently opt out. Omar Khan, vice-president of public affairs at Hill + Knowlton Strategies, argues the walls keeping cannabis stores out of certain cities will come down sooner than many might expect.

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“As we see some of those initial storefronts roll out, I think we will see some of the concerns that a lot of these municipalities that have chosen to opt out, like Mississauga for example, will be alleviated to a certain degree,” said Mr. Khan. “We will start to see a lot of them change their position and opt back in.”

Meanwhile, residents of municipalities that have opted out will not have to travel far to find a more pot-friendly jurisdiction, Mr. Khan said. Brantford might have opted out, he said, but the surrounding county of Brant has chosen to allow cannabis retail sales.

While the province is attempting to avoid having those first 25 stores clustered in close proximity to one another by distributing licenses by region, the municipal opt-out process is working against that goal in some areas. The suburban cities of the Greater Toronto Area, for example, has been allocated six of the province’s first 25 pot store permits, but several GTA cities such as Markham, Mississauga, Richmond Hill, Pickering and, now Oakville, have opted out, leaving a relatively small area where those six stores will be allowed to open.

Some cities are also waiting until the last minute to make a decision. Both Windsor and Brampton, home to more than 800,000 people between them, have scheduled to vote on cannabis retail on Jan. 21, one day before the provincial deadline. Colliers’ Mr. Addison says that tight timeline, combined with fines starting at $12,500 and going to $50,000 for stores that open just one day after April 1, will make it all the more challenging for Ontario to successfully roll out a cannabis retail network.

“Let’s say somebody got a lease for a space in the next month, to actually outfit and make it look like a quality store is a six month process to get the permits and build them out at the fastest,” Mr. Addison said. “What we are going to see is a lot of people just leasing stores and making do with what is in there already, [they] won’t be set up professionally.”

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