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Drugstores Command High Prices

NEW YORK CITY-Drugstores are second only to fast-food properties in median price per sf, according to reports.

By Michelle Napoli | Updated on April 20, 2005

Michelle Napoli is the editor of Real Estate Media’s Net Lease Forum. For the full story, please click on Net Lease Forum .

NEW YORK CITY-Drugstores continue to be one of the most favored subsectors within the net-lease property investment arena, and not surprisingly they have lately commanded some of the highest per-sf prices among single-tenant retail properties nationwide. During 2004, drugstore properties—which accounted for 8% of single-tenant retail transactions—sold for a median of more than $300 per sf, according to estimates in a recent report from Encino, CA-based Marcus & Millichap’s research services group. Only fast-food properties garnered higher median prices per sf.

Investors’ interest in drugstore properties is widely credited to several factors. The stores have generally been reported increasing revenues as well as active expansion plans, and the same demographic—aging baby-boomers—that is helping to fuel the 1031 exchange and net-lease investment market is also driving the drugstore/prescription business itself. “Drugstores are one of the highest-growth components of the retail sector,” notes the April research report of the Boulder Group, of Northbrook, IL. “Drugstores continue to be popular among net-lease investors and are the main staple of IRC 1031 transactions in the net-leased market.”

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