6 November Healthcare Deserts, Retail Competition, and the Uncertain Future of Drugstores November 6, 2024 By Melisa Rana Commercial Real Estate News, Property Investment, Property Maintenance building renocation, commercial real estate tenants, real estate trends, retail space, special purpose facility 0 HEALTH DESERTS, RETAIL COMPETITION, AND THE UNCERTIAN FUTURE OF DRUGSTORES November 6, 2024 | Commercial Real Estate News, Property Investment, Property Maintenance | real estate trends, building renovation, commercial real estate tenants, retail space, special purpose facility Walgreens made news this year when it announced its plans to close 1,200 locations over the next three years (per CNN), an exclamation point on the ongoing struggles of the retail drugstore industry. Far from the only chain feeling the effects of industry trends, CVS and Rite Aid have announced their own closures. This begs the question: is the modern drugstore still relevant? While some believe that the retail drugstore deserves a sunset, others are calling for much-needed reinvention. To project forward a bit, let’s take a look at why drugstores are battling these new pain points, and how that sector may shift in the future! Why Are Retail Drugstores Failing? Although not all of the modern issues for drugstores are of their own making, many are a direct result of mismanagement and overestimating their standing in the eyes of the public. Those that remember the public negotiation between Walgreens and Express Scripts (see CNN’s 2012 article) might recall needing to change pharmacies in order to maintain their access to prescription care. In short, Walgreens made a gamble that their customers’ loyalty to them was stronger than increased prices. Because of this strained relationship with insurers, drugstores have had to deal with lower prescription reimbursements, on top of other public opioid epidemic settlements, and the organization’s false claims to Medicare and Medicaid. Costs have gone up as public trust and overall business have dropped. COVID-19 vaccinations were a temporary boost, but the pandemic’s overall impact in making people more comfortable with online shopping has been another big hit to the neighborhood drugstore’s viability. Target and Costco aren’t the only competition anymore. Now Amazon provides an unparalleled level of convenience. All of these elements have led to rising costs at drugstores, staffing shortages, and an identity crisis that has many competing answers. The solution just might be going back to what originally made drugstores a staple in the community. How Are Retail Drugstores Answering the Call to Change? If you talk to drugstore industry insiders, the answer to their modern issues might be leaning more into the healthcare sphere, and further away from a “convenience store” feel. For example, some suggest that drugstores partner with primary care clinics or equip pharmacists with more training to address common and ongoing healthcare needs such as flu, strep, and COVID-19 diagnoses. This approach may end up being a boon to the wider healthcare worker shortage (see more from the American Hospital Association), an industry that was rocked by the pandemic more than any other. If drugstores could provide other services to their customers like monitoring blood pressure, managing diabetes, and encouraging an end to smoking habits, they’d be well on their way towards regaining more active roles in their communities. Many industry analysts say that the biggest need is simply a property “refresh,” updating signage, performing maintenance, and maybe bringing the business up to modern standards with online access and accessibility. A re-emphasis on being a resource to the community just might be the answer for drugstores in the future, but some property owners aren’t interested in battling through these growing pains. What Are the Options for Drugstore Property Owners? For those wanting to make a change in their tenants, drugstores convert fantastically over to many other types of businesses, with health and urgent care clinics, plasma collection centers, retailers, multi-tenant locations, and even restaurants as some of the most common conversions. Drugstores tend to prioritize highly visible, high traffic locations like those on the corners of primary intersections. Add on the fact that many drugstores already have a drive thru lane, there’s plenty of opportunity for change at these locations. The main drawback is that adaptive reuse can be expensive, time consuming, and potentially risky. Many property owners approach drugstore tenants as a low-maintenance investment that provides consistent, passive income. Making the transition from a hands-off property owner to an active developer is tough and usually not what the average drugstore property owner signed up for. Still, the opportunity is there for property owners willing to make the change! It’s unclear whether drugstores will see a major reinvention in the coming years, or if new, completely different options will arise to fill that space in CRE. Maybe Walgreens’ smaller-format concepts will revitalize the chain, as some hopeful prognosticators predict (see more from Mass Market Retailers). To follow this CRE trend and others, you’re in the right place! National Property Inspections is the premier brand for property inspections in the US! Let us know how we can assist your inspection needs. Comments are closed.