What happened

Innovative Industrial Properties (IIPR -1.38%) stock gained 22.2% in October, according to data from S&P Global Market Intelligence. For context, the S&P 500 index returned 8% last month.

IIP (as the company is sometimes called) is a real estate investment trust (REIT) that focuses on the U.S. cannabis industry. It doesn't appear that any company-specific news was the catalyst behind IIP stock's robust October performance.

This month, shares of IIP are up 1.5% as of Nov. 8, while the S&P 500 is down 1.1% over this period.

So what

Innovative Industrial Properties stock's strong October performance was probably largely driven by strength in the overall market. The company didn't release any market-moving news, nor did any Wall Street firm change its rating on the stock.

Shares did get a modest lift of 4.5% from industry-related news from the Biden administration. On Oct. 6, President Biden announced that he was granting a pardon to all people convicted of simple marijuana possession under federal law. Moreover, he urged all Governors to do the same with regard to state offenses, and directed the pertinent leaders in his administration to "expeditiously review" how marijuana is scheduled under federal law.

Many investors viewed these actions as the country moving a leap closer to the legalization of marijuana on the federal level. The news lit a fire under many cannabis stocks. Shares of cannabis growers Canopy Growth and Tilray, for instance, surged about 22% and 31%, respectively.

IIP stock's move was muted on this news because the company is quite different than most other cannabis companies. It's in the financial sector and not involved in handling cannabis in any way. 

For IIP, the legalization of marijuana on the federal level has the potential to be both a tailwind and a headwind. Such legalization should spur booming demand for cannabis properties in the country. However, it would also open up more financing options for cannabis operators, which currently aren't eligible for some traditional forms of financing because marijuana is illegal at the federal level. In other words, IIP would face increased competition.

Now what

Last week, Innovative Industrial Properties turned in good financial results for the third quarter, but its acquisition activity slowed down. It acquired just one new property during the quarter, compared with two properties in both the first and second quarters.

Rapidly rising interest rates have cooled off activity in real estate markets. Uncertainty and concerns about a possible recession have caused many companies, including state-licensed cannabis operators, to take a more cautious stance on spending on growth initiatives.

Investors will want to see acquisition activity pick up in the relatively near future.