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Surrey's cannabis plans could spur competition for commercial space

After years of prohibition, cannabis retail gets a fresh start in 小蓝视频鈥檚 second-largest city
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A neighbourhood cannabis retailer near 49th and Victoria Drive in Vancouver.

Surrey’s decision to welcome cannabis retailers to the city could bring major opportunities for landlords—and could sway neighbouring municipalities to follow suit.

City council on November 4 approved staff to initiate rezoning applications for 12 cannabis stores to be operated by eight businesses. It is the first time cannabis retailers will be able to operate in the city since Canada legalized cannabis six years ago.

The decision by 小蓝视频’s second-largest city is expected to draw businesses and consumers back to Surrey, said Colliers’ associate director of research for Western Canada Susan Thompson.

She explained that if cannabis businesses continue to expand, and developers can consolidate cannabis shops into retail hubs, major benefits could be realized in the commercial real estate industry.

“People are going to want to gravitate to somewhere where they can consolidate multiple trips,” said Thompson. “If [consumers] were going, ‘Well, if I have to go to the cannabis store all the way in Delta or into Vancouver or Burnaby, maybe I’ll go do the rest of my shopping there as well.’”

This consumer consolidation, along with the possible expansion of cannabis stores, could increase competition for commercial real estate in Surrey, which already holds one of the lowest retail vacancy rates in Metro Vancouver.

One of the biggest challenges of cannabis retail stores after legalization was stigma from neighbours and retail space owners. Nevertheless, these groups have started to embrace the idea.

In the early days of legalization, landlords would go through a rigorous process of vetting potential operators, said Thompson. Six years down the road, landlords can now wrap their heads around how cannabis retail fits in their communities.

Although developer mentality has improved, cannabis retail stores across Metro Vancouver have decreased since 2018 due to surging supply.

“It’s calmed down quite a bit. It’s starting to balance out,” said Thompson. “They’re figuring out what’s the right number of stores, and every market is going to be subtly different.”

Surrey’s cannabis industry could thrive if supply is controlled

Despite the slowdown, the 小蓝视频 cannabis industry continues to endure, and few financial institutions know it better than Vancouver-based credit union Community Savings—providing over $20 million in loans to businesses in the sector. 

CEO Mike Schilling says his institution is the largest provider of banking services in the industry.

He said Surrey’s decision is a great opportunity for commercial developers to attract traffic.

Growing from $0 in 2018 to around $6 billion in sales in 2023 across Canada, the cannabis industry contributes around $2 billion to the 小蓝视频 economy, said Schilling.

He added Surrey is a little late to the party, but that it’s usually the municipalities that take a thoughtful approach to cannabis retail that succeed in the sector.

Based on simple supply and demand, the municipalities that have chosen to allow unlimited stores to open are the ones experiencing store closures due to market flooding.

Allowing a limited number of stores to open, like in Surrey, could drive demand and more sustainable success, said Schilling.

“The typical cannabis store is really high quality.… I often say it’s like going to an iPhone shop,” he said. “It’s staffed by knowledgeable, trained people and really welcoming areas. So I think they’re an absolute asset to the broader retail environment.”

While cannabis retail in Surrey will not begin this year, this initiative will give consumers the opportunity to access licensed high-quality stores with a better choice of products.

Improving local economies and building trust in the industry

Surrey’s decision could bring significant positive impacts to the cannabis industry across the Lower Mainland, said DIG360 executive retail advisor Rick Bohonis, explaining this is an opportunity to build community trust.

“It’s a great start. It shows me that municipalities and even provincial governments are starting to think a little bit more about, ‘Okay, we’ve hogtied the industry for too long.’” he said.

With a population of over 600,000, Bohonis added he couldn’t believe Surrey was left vacant for so long, especially when the municipality has been losing out on so much tax revenue.

Bohonis, who owned a cannabis retail store in Thunder Bay, said cannabis will also support the local economy via job creation moving forward.

The stigma surrounding the industry, and assumptions about its clientele, are still holding progress back, he said, adding that most cannabis storefronts are breaking stereotypes by being well built and thought out.

Four years ago, he spoke at an International Council of Shopping Centers panel in Whistler, where the main concern among landlords was the crowd that cannabis stores could attract.

“[Developers] don’t want the, let’s call it, ‘criminal element’ that comes along with that,” he said. “I’m glad to see them (Surrey) move along, and maybe that’s what Richmond is still concerned about.”

Other municipalities holding out on cannabis retail

Richmond has chosen a clear stance to prohibit cannabis stores within its municipality.

The city’s website says it “will vigorously enforce its bylaws should any retail cannabis outlet attempt to operate within Richmond.”

In 2023, a discussion led by a Coun. Carol Day proposed having a medical cannabis dispensary in Richmond—a motion defeated by council.

Still, mail-ordered cannabis is allowed in the municipality, and even comes from a distribution centre in East Richmond.

However, this reliance on online sales opens the door to the black market, as people resort to other easily-accessible sources, defeating the purpose of legalization, said Bohonis.

He also questioned the city’s unwillingness to venture into the industry, saying retailers are missing out on significant revenue streams.

Ultimately, Bohonis said he believes Surrey’s decision could influence Richmond to follow suit. Greater openness to the industry could pave the way for the Lower Mainland becoming a hub for cannabis innovation, he said.

“Liquor is regulated, but it’s easily accessed by anybody that is of age, and that should be the same way for cannabis,” said Bohonis.

The day after Surrey’s decision was announced, the Surrey Board of Trade issued a press release endorsing the move, saying it has advocated for an “evidence-based approach” to cannabis policy for a while.

“Aligning Surrey with other major cities in Canada that have seen positive economic impacts from similar decisions,” it said.

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