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Fire & Flower: Subleasing as a Strategy

A regulated industry presents additional challenges

With a recent change in regulations, cannabis real estate has become particularly competitive in Toronto and its surrounding municipalities. The opening of additional retail licenses created an opportunity where retailers were suddenly able to widen their footprint, and the market saw a mad rush. Those scaling rapidly and aggressively knew they had to move quickly. Because cannabis leases were difficult to secure, tenants were signing leases on anything they could get their hands on and often foregoing extensive due diligence in the name of landing a lease.

Josh Harris recently joined the Colliers team as a listing agent specializing in cannabis and suburban retail. This was an intentional complement to another Colliers broker, Robert Stepak, who focuses on cannabis tenant representation. As two of the top cannabis brokers in the country, they were able to match their market knowledge and network to solve a problem for one of their clients, Fire & Flower, a large retail chain with a national footprint.

Strategy to solve scaling too quickly

In the leasing frenzy, Fire & Flower, like many other cannabis retailers, had signed multiple location leases knowing it may not end up opening a store on every site. Its now broad portfolio needed to be whittled down. New competition in the area, a change in the neighbourhood, and simply too many sites to feasibly open at once left it with the need to re-evaluate its real estate strategy.

Josh and Robert approached Fire & Flower, offering to strategically review the whole picture and advise on which properties could be sacrificed or modified to better suit the overall strategy. They looked at each lease they had negotiated, taking into account the area, the competition and the termination options. As a result, they brought forward a list of leases which would be more fruitful to sublease than terminate.

Full-service solutions for landlord and tenants

Josh and Robert had previously negotiated a lease for Fire & Flower in Georgetown at 333 Mountainview Road South. As a stipulation of the deal, Fire & Flower had to sign a lease on a double unit in order to secure the location. After looking at the full landscape of leases and revenue opportunities, Josh and Robert saw an opportunity to maximize on that space. Fire & Flower could inhabit half of the unit and sublease the remaining half.

Rather than list the properties on MLS, Josh strategically sought out the perfect sublease tenant by determining who would benefit from the location and proactively going out to the market to find them. From his network, Josh knew that Scholars Education had an active franchisee who wanted to expand into the area. Josh and Robert recommended that Fire & Flower demise the unit into two, putting Fire & Flower and Scholars side by side.

This approach resulted in a full-service solution for all parties involved. The landlord gained an additional long-term tenant, Fire & Flower was able to land a more economical footprint while keeping its presence strong, and Scholars found a location it had been seeking.

Looking at the whole picture

By advising first and transacting second, Colliers added value to Fire & Flower’s real estate planning and provided it with an additional service line. After witnessing the successful strategy in Georgetown, Fire & Flower granted Josh and Robert several additional sublease assignments. 

To remain competitive, cannabis retailers need strong advisors who can support them in holistic real estate planning. As a full-service advisory and investment broker, Josh was able to look at Fire & Flower’s bigger picture and, in tandem with the full Colliers team, continually advise on opportunities for all sides of tenancy. The group was able to bring their collective offering to serve multiple clients’ needs and expand the business at Colliers.

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