Ever since New York began licensing recreational cannabis dispensaries three years ago, thousands of dispensary license applicants have been navigating bidding wars, artificially inflated rental charges, cash shortages and months-long legal delays to find and lock down legal real estate sites in the Big Apple for their marijuana retail operations.
The process was so intensive for dispensary owner Jessica Naissant in Queens that, despite winning a permit almost two years ago in July 2023, she just managed to launch sales in March this year.
“It has been a money pit,” Naissant told Crain’s New York Business of her quest to open a legal dispensary in New York City.
Many of Naissant’s peers — thousands of potential dispensary owners — are still fighting that same real estate battle today, even as they continue to wait to hear whether they’ll ever be granted business permits by the state.
It likely means many will probably never get open despite having invested serious sums of money in the process.
Despite 15,000-plus empty storefronts in New York City as of November for which landlords are still seeking tenants, the process for many cannabis entrepreneurs has been fraught with expensive pitfalls and delays, and has led to at least two lawsuits being filed thus far against state marijuana regulators.
“On a scale of one to 10, I would say like nine. It’s very difficult,” to find legal and compliant dispensary real estate in New York City that checks all the boxes required by the state Office of Cannabis Management, said Lauren Rudick, managing principal at Rudick Law Group in Manhattan.
Rudick estimated that the typical real estate deal for dispensary sites in New York City is 30% more than the cost for other mainstream companies that occupy similar commercial spaces.
“These landlords, they want huge personal guarantees on these social equity businesses where the principals have very little money, access to capital or long-term credit,” Rudick said. “It forces them into these arguably predatory financing relationships to get access to capital just to satisfy their leasing obligations and they don’t even realize.”
As companies spin their wheels trying to follow the rules in the legal market, black and gray market operators have found an eager customer base in the city — and consumers are none the wiser.
State of play
As of May 22, there were just 158 operational adult-use marijuana dispensaries in the five boroughs of New York City, including 14 in the Bronx, 43 in Brooklyn, 60 in Manhattan, 35 in Queens and six on Staten Island, according to a list of cannabis shops maintained by the New York Office of Cannabis Management (OCM).
But there’s room for far more than that in the Big Apple.
The market will likely support several thousand dispensaries in New York City alone, simply based on the estimated 2,000 to 3,000 unlicensed smoke shops that have been selling cannabis without permits for the past several years.
The city’s Department of Finance didn’t respond to a request for comment for this story, but in September, New York City Sheriff Anthony Miranda told the city council that — even after half a year of padlocking shut more than 1,000 illegal cannabis stores — there were still 2,600 operational illicit marijuana sellers active across the five boroughs.
And according to a recent internal poll of the New York Cannabis Retail Association, about 50% of dispensary members said the proliferation of illicit shops had “gotten noticeably worse” over the past year, while another 20% said there had been essentially no progress made against illegal sellers, and about a third said law enforcement had made some noticeable headway in shutting down illegal cannabis shops, said Dave Nicponski, owner of Freshly Baked NYC dispensary in the Bronx.
More legal marijuana shops are opening on a regular basis each month, OCM Policy Director John Kagia said at a meeting of the state Cannabis Control Board on May 20, including 27 more that joined the statewide market rollout in April this year. It’s not clear how many more will be opening in New York City proper, but OCM Executive Director Felicia Reid reiterated during that meeting that the agency’s goal is to permit between 1,600 and 2,000 dispensaries statewide.
To that end, there are already 951 total cannabis retail permits that have been awarded as of May 20, Kagia said, though not all of those are yet operational. That includes not just adult-use dispensary licenses issued, but also those for social equity shops known as conditional adult use retail dispensaries (CAURDs), microbusinesses that chose to have retail, and licensed medical marijuana companies that have also pivoted into recreational sales.
The OCM declined to comment for this story — including questions about exactly how many dispensary applications in New York City are left to be analyzed.
But based on numbers from the last permitting window, OCM still has yet to review another 5,024 applications for various license types from a pool of hopefuls that put their paperwork in during an application window in December of 2023, including more applications for retailers and microbusinesses.
It’s not clear how many of those are hoping to set up shop in New York City as opposed to somewhere upstate or on Long Island, but cannabis industry attorney Jeffrey Hoffman said his expectation is that upwards of 60% of licensed marijuana shops will be in the Big Apple.
That means the state likely already has far more possible cannabis shop applications than it ever intends to allow, which suggests it should be relatively easy for licensed dispensary owners to find sites for dispensaries.
Dispensary owners told Crain’s New York that the reality has been anything but simple.
Sheer cost and capital struggles
For many hopeful dispensary owners, the biggest challenge when it comes to real estate in New York City is money.
That’s because most traditional banks refuse to grant standard business loans to marijuana companies, given the industry’s federal illegality, and if a license winner doesn’t already have plenty of cash in the bank, finding loans on the open market can come with extreme interest rates that many decry as predatory.
“The biggest hurdle is capital,” said Aaron Ghitelman, a former communications staffer at the OCM who now does freelance consulting work for marijuana businesses. “A lot of the folks who got provisional licenses weren’t necessarily sitting on $500,000… In a world where you’re not really getting good loans, you’re getting high-interest, risky loans for cannabis businesses, and it’s tough.”
Ellis Soodak, the owner of Verdi Cannabis in New York City, said he’s aware of some less-than-savvy dispensary owners who were “sweet-talked into some situations that I don’t know if they’ll survive … because their rent is like $200,000 a month.”
At one of his two current cannabis shops, Soodak said the monthly rent is $23,000, up from the $10,000 per month that the previous tenant, a pizza restaurant, had been paying.
“The landlords know that dispensaries make ludicrous money, and you can’t hide the use either,” Soodak said. “The location we originally got approved on, the rent was astronomical.”
Naissant, who owns Renaissant NYC in Queens, said she’s heard a wide range of costs through the cannabis grapevine for dispensary sites in New York City, ranging from $15,000 to $35,000 a month in Brooklyn to $20,000 to $100,000 in Manhattan.
“I have a friend in Soho who’s doing $65,000, and a friend on the Upper West Side paying $75,000, and that’s a month. I’m like, that’s someone’s entire salary,” Naissant said. “If you don’t have the money immediately … to get operational with huge five-figure amounts, six-figure amounts, for just a lease alone, you’re not going to have a fair shot.”
The financial struggles of legal dispensaries are also tied to the still-thriving network of illegal, unlicensed marijuana sellers across New York City. Anecdotally, there are still several thousand such shops in New York City, industry insiders agreed, and enforcement against the unlicensed shops has been a mixed bag of victories and failures thus far by officials.
But one thing is certain: the unlicensed shops are taking plenty of market share away from the city’s legal dispensaries, and their financial future is directly tied to whether the government can engineer an effective crackdown to quash rulebreakers once and for all.
“It seems to me there’s more bandwidth for legal stores, but you have to shut down the illegal stores,” said cannabis industry attorney Jeffrey Hoffman.
Bidding wars
Soodak won one of the earliest dispensary permits available in 2023 — social equity licenses reserved for “justice-involved individuals” who have some sort of criminal record related to marijuana prohibition. But it took him well over a year between when he won a dispensary permit and when he was finally able to sign a storefront lease, in part because he found himself competing with both a state agency and other would-be dispensary owners for real estate.
In the early days of dispensary permitting in 2022 and 2023, New York State was only handing out licenses to social equity candidates like Soodak, while those without cannabis-related criminal records had to wait until late 2023 to throw their hats into the ring for dispensary permits.
Soodak recalled that when he won a CAURD license in April two years ago, the OCM was accepting letters of intent from retailers in lieu of signed storefront leases, and the agency was giving approvals on multiple storefronts to single applicants in its rush to get the adult-use market up and running as quickly as possible. The first legal dispensary had only opened a few months before, in December of 2022.
“Really, what I had to do to find it, I quit my job and walked around the city and called hundreds of brokers,” Soodak said. “Then I’d have to go home and do the research: is this compliant?”
Compliance in New York City means any dispensary must be at least a thousand feet from any other licensed dispensary, as well as at least 500 feet from any school or youth facility, and 200 feet from any church or house of worship. It also means that any building with a federally-backed mortgage is off-limits, because such mortgages are legally incompatible with the federally prohibited marijuana trade.
One of the challenges Soodak also ran into early in his search for dispensary real estate was a denial by the OCM for his first proposed location because the Dormitory Authority of the State of New York (DASNY) at the time was engaged in locking down its own dispensary sites, as the overseer of the state Social Equity Fund.
The concept at the time — which has since been canceled by Gov. Kathy Hochul’s administration — was that DASNY and the Social Equity Fund would lease and build out up to 150 dispensaries for social equity entrepreneurs like Soodak (ultimately the Social Equity Fund only paid for 22 dispensaries before being shut down, according to a state report issued last fall).
That meant that while the very first dispensary licensees were searching for sites, DASNY was getting first crack at pretty much any dispensary location it wanted, and there was no way for independent operators like Soodak to know beforehand which spots DASNY was interested in. Licenseholders like him had to just apply and keep their fingers crossed.
So when Soodak first applied for permission to set up shop at a space on 72nd St. in Manhattan, he was told by the OCM that he had to look elsewhere because it was within 1,000 feet of a spot that DASNY was thinking about leasing.
“We got f—-d at the beginning,” Soodak said. “We applied, and we were told we were too close because of proximity protection to a state-funded store.”
There’s also been competition between licensees for locations, said Naissant. Naissant said her location was previously an illegal, unlicensed smoke shop that had been shut down for selling marijuana without a permit.
“It was no easy feat,” Naissant said when asked how hard it had been for her to find a workable location. Like Soodak, Naissant won a CAURD license in mid-2023, and at first, she was eyeballing sites in Brooklyn, near where she grew up. “Day and night, I was searching for a location.”
Bidding wars for dispensary real estate began quickly, Naissant said, and the Brooklyn location ultimately went to a competitor who offered more cash than she had. Part of the problem, Naissant said, was that when she started, the OCM wasn’t requiring fully signed or executed leases for dispensary sites, only letters of intent or some kind of paperwork signed by a landlord indicating that a dispensary applicant had access to the location.
“What ended up happening was, many landlords were giving this paperwork to many licensees, so you’d have three or four licensees submitting (paperwork to OCM) on one location,” Naissant recalled.
Naissant pivoted, finally found her current location in Queens, and didn’t wind up opening for business until March of 2025.
“We just opened our first location two years later, and that same company is on their sixth store, so people did get to monopolize the market,” Naissant said. “Almost two full years since being licensed, it took to open up. And all the while, spending money on locations, on lawyer fees.”
