Investing in Pharmacy and Drugstore Real Estate

04/29/2025

Industry Insights

Pharmacies and drugstores have emerged as a distinct niche in net lease retail real estate, offering investors a blend of stability and long-term income. These properties—often leased on a triple-net (NNN) basis to national chains—are prized for their reliable cash flows and essential services. In the wake of COVID-19, pharmacies solidified their role as critical infrastructure, providing vaccines, medications, and healthcare products to communities without interruption. Investing in pharmacy real estate has therefore gained traction among those seeking recession-resistant assets with long lease terms and investment-grade tenants. In a macroeconomic context defined by uncertainty, drugstore properties stand out for their durability and steady demand, even as the broader retail sector evolves.

Industry Economics & Demand Drivers

The economic fundamentals of pharmacies are underpinned by powerful demand drivers:

Aging demographics: As the population ages, prescription volumes continue to rise. In fact, U.S. pharmacies dispensed 6.7 billion prescriptions in 2022, up from 6.1 billion in 2018, reflecting growing healthcare needs. A large senior population (nearly 73 million Americans will be 65 or older by 2030) ensures consistent demand for medications and medical advice.
Chronic disease prevalence: High rates of chronic conditions like diabetes and hypertension mean a steady flow of customers requiring regular prescriptions. Over 60% of Americans take at least one prescription drug, underscoring the ubiquity of pharmacy usage in daily life.
Retail health services: Pharmacies have expanded beyond pill dispensing. Many now serve as retail health hubs, offering on-site vaccinations, basic urgent care clinics (e.g., flu tests, minor illness treatment), and even telehealth consultation spaces. This diversification drives additional foot traffic as consumers seek convenient, one-stop healthcare.
Post-pandemic consumer behavior: COVID-19 heightened reliance on local pharmacies for immunizations and health supplies. Even after the pandemic, people value the accessibility of drugstores for health needs. Pharmacies administered millions of COVID vaccines and are expected to continue providing community health services, reinforcing their essential status.

However, not all trends are tailwinds. Online pharmacy services (including mail-order prescriptions and Amazon Pharmacy’s rise) are introducing competition, potentially reducing store visits for routine refills. Brick-and-mortar consolidation is also underway: major chains are re-evaluating store footprints in saturated markets, and independent pharmacies face pressure from thin reimbursement margins. Overall, the demand outlook for drugstores remains positive, but operators must adapt to changing consumer expectations and digital competition.

CRE Market Snapshot: NNN Investment Fundamentals

From a commercial real estate perspective, drugstore NNN properties are considered a stable investment class, but investors should be mindful of market fundamentals:

Lease Structures: The vast majority of pharmacy real estate deals involve long-term NNN leases. Typical base lease terms range from 15 to 25 years, often with multiple 5-year renewal options. Many of these are absolute NNN leases, meaning the tenant (e.g., CVS or Walgreens) handles all expenses – property taxes, insurance, maintenance, and even roof and structure – leaving the landlord with a truly passive income stream. Older leases (pre-2000s) might be double-net (landlord responsible for roof/structure), but modern deals usually pass on all responsibilities to the tenant. It’s common for rents to be flat during the primary term, especially in older Walgreens or CVS leases, which lack annual escalations. Some newer leases negotiate modest rent bumps (e.g., 5-10% every 5 years or small annual increases), but compared to other retail sectors, pharmacy leases often have minimal rent growth built in.

Cap Rates and Pricing: Investors are drawn to pharmacy assets for their credit stability, which is reflected in generally lower cap rates. As of late 2024, cap rates for prime drugstore properties average in the mid-6% range. Actual yields vary by tenant and lease terms: a brand-new CVS or Walgreens with 20 years remaining might trade in the 5%–6% cap rate range, whereas a shorter-term or lower-credit drugstore (for example, a lease guaranteed by a regional pharmacy or a struggling chain) could see cap rates in the high single digits (8%–9% or more). In rare cases, trophy pharmacy sites in top locations have sold at cap rates even below 5% when interest rates were low. On the other end, distressed situations (such as vacant former drugstores or Rite Aid locations amid its restructuring) can exceed 10% cap rates to attract buyers. Overall pricing is influenced by the tenant’s credit rating (investment-grade tenants like CVS Health and Walgreens Boots Alliance command premium pricing), the lease length, and whether rent increases are present.

Tenant Credit & Guarantees: The “Big Three” chains—CVS, Walgreens, and Rite Aid—have traditionally anchored this sector. CVS and Walgreens boast investment-grade credit (both rated around BBB), giving landlords confidence in long-term rent payments. Rite Aid, on the other hand, has faced financial challenges (culminating in a 2023 bankruptcy), making its leases higher risk. When considering a pharmacy investment, corporate-backed leases are preferable: most CVS and Walgreens leases are guaranteed by the parent corporation. Some smaller or franchise pharmacies may have only local or franchisee guarantees, which carry more risk. Investors should verify whether a given property’s lease is franchise vs. corporate; a franchisee-operated drugstore (or an independent pharmacy under a banner like Good Neighbor) might not have the same credit strength behind it.

Vacancy & Liquidity: One attractive aspect of this niche is historically low vacancy rates. Drugstores typically occupy strategic hard-corner locations with high traffic, and tenants invest significant capital in build-outs (drive-thru lanes, pharmacy labs), so they tend to stay for the long term. Even when consolidation leads to closures, as seen with recent Walgreens and CVS footprint reductions, many leases remain in place (tenants may continue paying rent on dark stores or sublease the site). Should a pharmacy go dark, the properties often enjoy strong re-leasing prospects due to their prime locations. Fast-food restaurants, dollar stores, and other retailers covet these high-visibility corners if they become available. Liquidity in the pharmacy net lease market remains healthy, supported by 1031 exchange buyers and institutional investors seeking defensive retail assets. Transaction volumes have moderated with rising interest rates, but there is still ample demand for well-located, long-term NNN pharmacy deals.

Construction & Development Pipeline

Development trends in the pharmacy sector are adjusting to new strategic priorities:

New store formats: Pharmacy chains are experimenting with smaller footprints and format innovation. For example, Walgreens has tested compact urban stores that emphasize pharmacy services and convenience pickup over extensive front-end merchandising. CVS is rolling out HealthHUB locations – redesigned stores dedicating more space to health clinics and wellness services. Future pharmacy prototypes are likely to integrate more clinic space, consultation rooms, and even areas for telehealth, while reducing excess square footage devoted to retail goods that shoppers now often buy online.
Drive-thru and curbside focus: Drive-thru pharmacies proved invaluable during the pandemic and continue to be a priority in new builds. Many new stores or remodels include multiple drive-thru lanes or dedicated curbside pickup parking to serve customers who order prescriptions via app and simply pick them up without entering the store. This emphasis on convenience is shaping site selection (larger lots for vehicle stacking) and building design.
Closures and relocations: Even as new stores are built, others are closing. Rite Aid’s bankruptcy-driven downsizing is the starkest example: the chain has shuttered hundreds of stores (roughly a quarter to half of its footprint) during restructuring. Walgreens and CVS have also announced strategic closures of underperforming locations – for instance, Walgreens has plans to close about 1,200 stores by 2027 (approximately 14% of its U.S. locations) as part of cost-cutting efforts, and CVS is in the midst of a planned 900-store culling (about 10% of its stores) announced in 2021. These closures are largely concentrated in oversaturated markets or where sales have migrated online. At the same time, both giants are relocating some stores to better sites within markets or moving into smaller spaces that are easier to operate. Developers and investors track these shifts closely, as a wave of closures can create opportunities to acquire second-generation pharmacy sites or to backfill vacancies with new tenants.
Urban vs. suburban strategy: Location strategies are evolving. In urban areas, high rents and changing consumer patterns are pushing pharmacies to refine their approach—some are closing city stores in favor of serving urban customers via delivery, while others are opening smaller format pharmacies inside groceries or big-box stores to maintain presence. In suburban and rural markets, large freestanding drugstores with drive-thrus remain the norm, but even there we see chains selectively choosing only the most promising corners. Medical office hybrids are emerging in some cases, where a pharmacy anchors a multi-tenant health center (for example, co-locating a drugstore with an urgent care or primary care office in the same development).

Overall, new development has slowed compared to a decade ago when chains were in rapid expansion mode. Today’s pipeline is more about strategic repositioning—optimizing store locations and formats for an omnichannel healthcare future—rather than sheer unit growth.

Lease Structures & Risk Factors

While pharmacy-anchored real estate is known for stability, investors should still diligence the lease details and market trends to understand potential risks:

Franchise vs. Corporate Leases: As mentioned, a lease guaranteed by a major corporate entity (like CVS Health or Walgreens corporate) carries far less risk than one signed by a franchisee or independent operator. Some regional pharmacy brands (or independent pharmacies under networks like Health Mart) may rent properties on a local basis. These non-corporate leases can expose landlords to credit risk if the local operator fails. Always verify the tenant entity on the lease – a corporate-backed NNN lease is generally as secure as the Fortune 500 company behind it, whereas a franchise lease might depend on the success of a single store owner.
Omnichannel Disruption: The rise of Amazon Pharmacy and mail-order services means customers have more ways to get medications without visiting a store. This omnichannel trend pushes drugstore chains to adapt, but it also raises the question of long-term foot traffic. Pharmacies are fighting back by integrating online ordering with in-person pick-up, offering same-day delivery, and leveraging their pharmacists as accessible healthcare providers. Investors should monitor how well a tenant is executing its omnichannel strategy – a pharmacy that successfully drives digital engagement (mobile app refills, loyalty programs, etc.) is more likely to retain its customer base and stay profitable.
Tenant Financial Health: Recent news in the sector underscores that even giants can face headwinds. Walgreens’ earnings have been under pressure due to lower reimbursement rates and shrinking front-of-store sales, prompting cost cuts and leadership changes. Rite Aid’s bankruptcy highlights the extreme of tenant credit risk – some landlords are now left with vacant, dark stores and ceased rent payments. Even CVS, despite strong financials, has been closing stores and adjusting its strategy due to changing margins. Investors should keep an eye on tenant credit ratings and financial reports. A downgrade or negative outlook from rating agencies could signal future store closure programs or a need for rent renegotiation.
Real Estate Quality and Reuse: The underlying real estate remains a crucial risk mitigator. Prime real estate can buffer many risks – a well-located property (hard corner, high traffic, good visibility) will attract new tenants if the pharmacy ever leaves. In contrast, a pharmacy in a sleepy location or with poor access could struggle to find a replacement tenant if vacated. The good news is that many pharmacy sites are high-quality retail locations by design. In cases where a large drugstore is too big for a new single tenant, owners have successfully redeveloped or subdivided the buildings for multiple tenants (for example, splitting a 14,000 sq. ft. drugstore into two or three storefronts). The flexible design (often simple open floor plans) means former pharmacies can be converted to other uses like medical clinics, dollar stores, grocery outlets, or fitness centers if needed.
Sale-Leaseback Considerations: Both CVS and Walgreens have frequently engaged in sale-leaseback transactions, where they sell their owned real estate to investors and lease it back. For investors, buying a sale-leaseback pharmacy can be attractive since the lease is structured by the corporation and often triple-net. However, one should consider the lease terms in these deals – sometimes sale-leasebacks have slightly above-market rents (since the company aims to maximize sale price), which could pose re-leasing risk at lease end if the rent is higher than typical market rents for that area. Nonetheless, sale-leasebacks generally signal the tenant’s commitment to the location (since they sign a long-term lease upon sale).

In summary, the risk profile of pharmacy real estate is relatively low compared to many other retail investments, but it is not risk-free. Diligent investors will look beyond the credit rating – examining location fundamentals, lease guarantors, and industry trends to ensure their drugstore asset will deliver returns throughout the lease and beyond.

Top Tenants & Brand Profiles

In the pharmacy real estate sector, a few major tenants dominate, each with its own corporate strategy and lease characteristics:

CVS Pharmacy

CVS Health is the largest pharmacy chain in the U.S., with roughly 9,000 retail locations (including its integration of Target’s pharmacies). CVS stores usually occupy freestanding or corner shopping center pads around 12,000–15,000 sq. ft. CVS typically signs 20-25 year NNN leases on new stores. Many CVS leases feature no rent escalations in the base term, though some newer deals have modest increases or percentage rent clauses. CVS boasts a strong credit profile (BBB+ rated) and a diversified business model (retail pharmacy, the Caremark PBM, Aetna insurance, MinuteClinic in-store clinics). In recent years, CVS announced a strategy to close about 900 stores (by end of 2024) to optimize its footprint and focus on a “healthcare destination” model at remaining locations. Despite these closures, CVS continues to be a sought-after tenant for investors, given its scale and importance in the healthcare ecosystem. Average rents for CVS stores can vary widely by location, but a ballpark figure might be in the $20–$30 per square foot range on a NNN basis for many markets (with absolute rent totals often in the $250k–$400k per year range depending on store size and market).

Walgreens

Walgreens Boots Alliance, operating ~8,500 Walgreens stores across the U.S., is another anchor of the drugstore real estate landscape. Walgreens has long favored freestanding corner locations around 14,000 sq. ft., usually with drive-thru lanes. Walgreens leases are often absolute NNN and historically were known for very long initial terms (20-25 years) with flat rent (no increases during the primary term). Some older Walgreens leases even extended to 75-year terms in certain ground leases, though that is not common in recent years. Walgreens carries a similar credit rating to CVS (around BBB) and has also been consolidating stores recently – the company revealed plans to shut approximately 1,200 underperforming stores by 2027 to cut costs. Despite short-term headwinds (including shrinking margins and a recent CEO change), Walgreens remains a blue-chip tenant for many net lease investors. Its average store rent is comparable to CVS in many areas, often mid-$20s per sq. ft. NNN, though absolute rent can be $300k+ annually for a typical store lease. Investors value Walgreens’ long operating history (founded in 1901) and broad customer base, but are also watching its strategic moves like the partnership with VillageMD for in-store clinics and its investments in digital pharmacy services.

Rite Aid

Rite Aid is the third-largest chain, though a distant third and recently downsized. Before 2023, Rite Aid operated over 2,000 stores, but a Chapter 11 bankruptcy filing in late 2023 led to the closure of hundreds of locations (with some estimates that roughly half of the stores will close or be sold off). Rite Aid’s standard stores are similar in size to CVS/Walgreens, often around 11,000–15,000 sq. ft. Rite Aid leases, where they exist as a tenant, have often included periodic rent bumps (for example, 5-10% every 5 years) to entice investors, reflecting its lower credit quality. The company’s financial struggles (even prior to bankruptcy) made Rite Aid-leased properties trade at higher cap rates. Post-bankruptcy, Rite Aid has emerged as a smaller, privately held company. Investors holding Rite Aid-leased properties must consider re-tenanting strategies given the uncertainty — many landlords have seen Rite Aid reject leases in bankruptcy or close stores, leaving dark buildings. On the positive side, some Rite Aid sites in strong locations have already been taken over by other pharmacies or retailers (Walgreens purchased prescription files for certain markets). In evaluating a Rite Aid property, the tenant credit risk is high, so the real estate fundamentals (location quality, alternate uses) become paramount. Rents for Rite Aid sites tend to be lower than CVS/Walgreens on average, and cap rates can be 100–200 basis points higher, pricing in the risk.

Independent & Regional Pharmacies

Beyond the big chains, thousands of smaller pharmacy operators exist, though they represent a minor share of NNN investment inventory. Networks like Health Mart (with over 4,500 member pharmacies) and Good Neighbor Pharmacy (around 2,500 pharmacies) consist of independent drugstores that are locally owned but receive branding and supply chain support from larger entities (McKesson and AmerisourceBergen, respectively). These independent pharmacies typically occupy smaller footprints (e.g. 1,000–5,000 sq. ft. in medical office buildings or neighborhood retail strips) and often lease space rather than own. For an investor, a single independent pharmacy location might not have a corporate guarantee, but could be an opportunity in certain cases (for example, buying a small pharmacy building in a town where it’s the only pharmacy). The credit and scale are not comparable to a CVS or Walgreens, so these are usually evaluated on a case-by-case basis for local market dominance.

Regional grocery chains and big-box retailers also play a role in the pharmacy sector. Grocers like H-E-B in Texas or Publix in the Southeast include full-service pharmacies in many of their stores. While these are not standalone pharmacy real estate investments (since they’re part of a larger supermarket), they underscore the integration of pharmacy services into other retail formats. Some grocery-anchored shopping centers consider the grocery’s pharmacy as a traffic driver for the center. There are also smaller regional drugstore chains (for example, Kinney Drugs in the Northeast or Thrifty White in the upper Midwest), but these chains often own some of their real estate or are privately held, resulting in fewer net lease opportunities on the open market.

In summary, the tenant landscape for pharmacy real estate is concentrated in a few big names, but investors should be aware of the full spectrum – from national giants to local independents – as each comes with different risk/return profiles and lease nuances.

Taxation & Depreciation Benefits

Investing in pharmacy and drugstore properties can offer several tax advantages and strategic benefits for investors focused on optimizing returns:

Depreciation and Cost Segregation: Pharmacy buildings (like any commercial real estate) are depreciable over 39 years. However, investors often perform cost segregation studies to allocate value to shorter-lived components (e.g., fixtures, parking lot improvements, equipment) which can be depreciated faster. Recent tax law changes allowed for bonus depreciation on certain property improvements. Through 2022, investors could take 100% bonus depreciation on eligible assets; this is phasing down (e.g., 80% in 2023, 60% in 2024, etc.), but still provides an upfront tax shield on portions of the investment. For a buyer of a drugstore property, capturing bonus depreciation on, say, the parking lot repaving or HVAC system can significantly defer taxes on rental income in the early years of ownership.
1031 Exchange Eligibility: Pharmacy NNN properties are popular targets for 1031 exchanges. When investors sell another property and have capital gains, swapping into a long-term NNN drugstore is a common strategy to defer those taxes. The appeal lies in moving equity from a management-intensive property (like an apartment or office building) into a passive, stable asset. Properties like CVS and Walgreens often check many 1031 buyer boxes: national credit tenant, long lease, no management hassles. As long as the timing and identification rules of Section 1031 are met, an investor can defer capital gains by acquiring a drugstore asset.
Triple-Net Pass-Through Benefits: In a true NNN lease, the tenant is responsible for property taxes, which means the investor-landlord isn’t directly paying those taxes out of pocket. However, the property tax is still being paid (by the tenant). One advantage is that the landlord’s reported income is the net rent after taxes/insurance/maintenance, simplifying accounting. Additionally, some investors use NNN structures to avoid unrelated business taxable income (UBTI) in certain situations, or to hold properties in structures like DSTs (Delaware Statutory Trusts) for fractional 1031 investments. The triple-net structure also typically means the landlord can write off any expenses they do pay (if any) and still take depreciation, while the tenant covers the operating costs, resulting in a cleaner, more predictable net income.
Estate Planning and Passive Income: Owning long-term leased properties can be advantageous for estate planning. The steady income from a well-leased pharmacy can fund retirement, and if held until death, heirs may benefit from a step-up in basis (potentially wiping out deferred gains). Moreover, having a passive income stream from an essential business tenant can be a lower-risk component in a diversified real estate portfolio, aligning with strategies to preserve wealth for the next generation.

As always, investors should consult with tax professionals to maximize these benefits, but generally pharmacy real estate investments align well with tax-deferral and income strategies common among private CRE investors.

Emerging Trends & Strategic Shifts

The pharmacy real estate sector in 2025 and beyond is shaped by several emerging trends that investors should watch:

Healthcare Partnerships: Pharmacy chains are increasingly partnering with healthcare providers to expand services. Walgreens and VillageMD have collaborated to open primary care clinics adjacent to Walgreens stores, turning some locations into one-stop shops for both prescriptions and doctor visits. CVS HealthHUB and MinuteClinic are other examples, where pharmacies blend with urgent care and chronic care management. These partnerships can make certain pharmacy locations more like medical office hybrids, potentially increasing patient foot traffic and making the real estate even more integral to local healthcare delivery.
Digital Integration and AI: The ongoing digital transformation means pharmacies are using more technology to streamline operations. This includes AI-driven inventory management, automated prescription dispensing machines, and robust mobile apps for customers. For real estate, this trend might reduce the need for large on-site inventory space (as automation can compact the storage needs) and allocate more area for service-oriented uses like consultation rooms or vaccination areas. Properties with strong data connectivity (for telehealth consultations or connecting to centralized prescription fulfillment centers) will be at an advantage.
Shrinking Footprints & Format Changes: We are seeing a shift toward smaller store footprints in some markets. Not every community needs a 14,000 sq. ft. drugstore now that a lot of front-of-store retail sales (like shampoo, greeting cards, groceries) have moved online or to big-box retailers. Chains are testing stores that might be half the size of a traditional pharmacy, focusing on the pharmacy counter and a curated selection of essentials. This could lead to subleasing excess space or redeveloping parts of large stores (for example, renting out half of a Walgreens to a complementary service like a vision clinic or a coffee shop). For new developments, smaller prototypes can fit into urban storefronts or dense shopping centers more easily.
Drive-Thrus and Express Pick-Up: The emphasis on convenience is driving expansion of drive-thru lanes, curbside pick-up, and express counters. Investors evaluating properties should note if a location has drive-thru infrastructure, as that feature has become almost a prerequisite for any suburban pharmacy and even many urban ones (where space allows). Some pharmacies are also introducing “vaccination drive-thrus” or drive-up clinic windows for quick services. Real estate that accommodates these trends (ample parking, drive-thru zoning) will remain in high demand.
ESG and Sustainability: Environmental, Social, and Governance (ESG) considerations are increasingly part of corporate pharmacy strategy. Walgreens and CVS have both implemented initiatives to reduce energy usage (such as solar panels on store roofs, LED lighting retrofits, and more efficient HVAC systems) and improve sustainability (like proper disposal programs for medications and reducing plastic bag use). From a real estate perspective, new pharmacy developments may seek green building certifications or incorporate sustainable design. Investors may find that properties with solar panels, EV charging stations, or LEED certification could have appeal to tenants and future buyers. Additionally, a focus on community health (social impact) means some pharmacies are adding services for underserved populations and designing stores to be more accessible.
Regulatory and Reimbursement Shifts: While not a physical trend, the landscape of pharmacy reimbursement (how pharmacies get paid by insurers and government programs) is shifting. Pressure on margins from Pharmacy Benefit Managers (PBMs) has been a hot issue. Should there be regulatory changes that improve reimbursement fairness for pharmacies, it could stabilize and improve the profitability of brick-and-mortar pharmacies, making them more secure tenants. Conversely, if reimbursement cuts continue, chains may accelerate cost-cutting and store rationalization. Investors don’t control this, but staying aware of healthcare policy trends can provide context for the actions of pharmacy tenants.

In essence, retail healthcare property trends indicate that pharmacies are evolving from standalone drug dispensers into multi-faceted health convenience centers. Properties that adapt to these changes—through physical layout, strategic location, and service offerings—will likely see the most success. Investors who understand these shifts can better assess which pharmacy assets are future-proof versus which might face challenges.

Brevitas Platform Integration

Brevitas, as a leading online marketplace for commercial real estate, provides tools and features to help investors discover and evaluate pharmacy and drugstore assets. Users can easily filter listings on Brevitas by property type and keywords using tags such as “Pharmacy”, “NNN Retail”, or “Medical Outparcel” to zero in on relevant opportunities. Each pharmacy listing on the platform typically includes detailed lease information (term remaining, rent escalations, tenant name and credit) and location insights, enabling investors to perform side-by-side comparisons.

For example, an investor interested in drugstore NNN properties can search Brevitas for active listings of CVS, Walgreens, Rite Aid, and other pharmacy-anchored real estate. By saving customized searches and setting alerts, buyers get notified when new pharmacy listings hit the market. Brevitas’ analytics and marketplace data can also shed light on trends like average cap rates for pharmacy deals and geographic hotspots for these assets.

Ready to explore current opportunities? Brevitas has a curated selection of pharmacy properties available. Use the platform’s search filters to find your next NNN pharmacy investment and take advantage of the robust due diligence resources provided.

Browse Pharmacy Listings on Brevitas