The legalized cannabis industry appears to be moving more rapidly toward leasing property as opposed to buying it as new states open up for sales, creating more competition.

A decline in cannabis prices that began last summer caused the industry to rethink its property needs. The National Association of Realtors has observed the direct effects on multiple facets of real estate, according to the trade group, which surveyed its members in March and released a report last week.

More cannabis businesses are favoring leasing over purchasing properties, NAR said. In states that have legalized recreational marijuana in the past five years, only 18% of NAR’s commercial members reported an increase in property purchasing over leasing in the past year by marijuana businesses. That figure is down from 29% in 2021.

For states that legalized cannabis more than five years ago, just 14% of the members reported an increase, down from 20% in 2021. In states where only medical marijuana is legal, members reported a 4% increase, a significant drop from 21% in 2021.

“The decrease in commercial property purchases is likely due to the state of the industrial market,” Matt Christopherson, NAR senior research survey analyst, said in an email to CoStar News. “With the surge in e-commerce and improving distribution networks, warehouse spaces have been in high demand. Because of this, cannabis businesses are dealing with increased competition, lower inventory and higher prices when considering commercial space purchases.”

The demand for properties is increasing as more states approve legalized cannabis sales, according to New Frontier Data, a Washington, D.C., firm that produces studies covering a variety of industry topics globally.

Sales in New Mexico, New York, New Jersey and Rhode Island opened up last year. Connecticut, Virginia, Maryland and Missouri have passed measures to legalize adult-use cannabis sales this year or early next year. That makes some form of cannabis sales legal in 38 states and D.C.

States with newly legalized cannabis sales are driving up competition with more mature markets, which has created downward pressure on prices, according to New Frontier. Some states have reported a 50% drop in wholesale prices, the firm said.

Annual sales in the three states where marijuana sales have been legal the longest — California, Washington and Colorado — were down 14% in 2022 from 2021, New Frontier said.

Falling prices and slowing sales in mature markets also has led to declining employment in the industry even as new states have come online, according to Vangst, a leading cannabis industry hiring firm.

The latest Vangst jobs report found 417,493 full-time equivalent jobs supported by legal cannabis as of early 2023. That’s down 2% from one year ago. That is the first drop in job count in the history of legal cannabis.

“After nearly a decade of unbroken double-digit job growth, the cannabis industry collectively pressed pause on new hiring in 2022,” Vangst said.

Nationwide, annual cannabis sales increased by $850 million in 2022. That’s a 3% rise, from $25.25 billion in 2021 to $26.1 billion in 2022, according to Vangst. That figure includes all state-regulated medical and adult-use sales but not hemp, delta-8, CBD or unregulated sales.

“A confluence of factors — global inflation, rising interest rates, cooling investor enthusiasm, depressed wholesale cannabis prices and a shift in post-pandemic consumer demand — challenged the legal industry’s unrelenting growth,” Vangst said. “The result: an industrywide reset. Where companies once hired to expand and grab market share, in 2022 they slimmed headcount to bring payroll within the bounds of current and projected revenues.”