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Why Is Drugstore Transaction Volume Plunging?

Why Is Drugstore Transaction Volume Plunging?

Cap rates for the single-tenant drugstore sector increased by 11 basis points in the third quarter of 2018 to 6.21 percent over last year. Cap rates for CVS properties remained unchanged, at 5.65 percent, while Walgreens and Rite Aid properties experienced increases of 15 and 7 basis points to 6.15 percent and 7.32 percent, respectively.

Commercial Property Executive

The increase in cap rates experienced by Walgreens and Rite Aid properties can be best attributed to uncertainty surrounding Rite Aid’s long-term viability and the store closures associated with Walgreens’ acquisition of approximately 1,900 Rite Aid locations.

Transaction volume in the drugstore sector slowed significantly in the first three quarters of 2018 and was down more than 40 percent as compared to each individual year between 2013 and 2017. Recent events in the drugstore sector— including the pending CVS and Aetna merger, Walgreens acquisition of approximately 1,900 Rite Aid stores and the failed merger between Rite Aid and Albertsons—caused concern for investors.

The spread between asking and closed cap rates for drugstores widened for all three tenants in the third quarter of 2018 as compared to the prior year. This illustrates pushback sellers are receiving for drugstore valuations from net-lease investors.

More info at Commercial Property Executive:
Why Is Drugstore Transaction Volume Plunging?

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The Boulder Group
The Boulder Group
Newsroom   Real Estate Research Center

The Boulder Group is a boutique investment real estate service firm specializing in single tenant net lease properties. The firm provides a full range of brokerage, advisory, and financing services nationwide to a substantial and diversified client base, which includes high net worth individuals, developers, REITs, partnerships and institutional investment funds./

Founded in 1997, the firm has arranged the acquisition and disposition of over $2.1 billion of single tenant net lease real estate transactions. In 2010-2014, the firm was ranked in the top 10 companies in the nation for single tenant retail transactions by Real Capital Analytics. The Boulder Group is headquartered in suburban Chicago

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Phone: 847-562-0003