Part #3 – Retail Site Selection for Drug Stores

  • September 29, 2018
  • News

Written by J. Collier Thornton of SVN, GLL Commercial Real Estate – Baton Rouge, LA

Drug Stores Have Unique Characteristics

In the early 2000’s, the Drug Store war, for Class A corners, across the gulf coast began.  Between Rite Aid purchasing K&B, along with CVS and Walgreens aggressively competing for market share, the race was on.  I remember “Coming Soon” signs appearing almost weekly on the most prominent, infill hard corner locations here in Baton Rouge.  The majority of the Drug Stores that you frequent today, were likely built between 2000-2005.

drug stores and retail site selectionUnlike Convenience stores, that rely or traffic counts and or QSR’s that benefit from both traffic counts proximity to population, Drug Stores focus heavily on population or “warm bodies”; specifically because they fall into the retail category of being a “destination retailer”.

The rationale is simple; while a large portion of their customer base pick scripts up during their afternoon drive home, Drug Stores do not rely solely on “spur of the moment” purchasers that P.M. commuters create.

Extensive studies have shown that the majority of “script fillers” use the Drug Store that are located within a three (3) to five (5) mile radius of their home.  Further explained, 30%+ of their sales take place during “off-peak hours (including homemakers shopping during non “peak hours”, patients commuting after daytime doctors visits and the weekend customer).

While “existing population” is still a key factor in Drug Store in site selection process, Drug Stores have started purchasing sites in outlying/rural areas where projected growth is forthcoming.   In areas where new home sales (new apartment complexes) are prevalent, spikes in population are anticipated and infill locations have been exhausted, Drug Stores have started buying sites on prevalent hard corners.

In order to offset the loss in sales of locating in an areas where “warm bodies” are coming, preferred developers are often expected to provide a “below market” rental rate for the first couple of years in operation or land bank the site and include the anticipated carrying costs into the hard costs of the development.

Working with a site selection specialist that knows the market trends and projected growth patterns, can be an invaluable asset for any retailer looking for sustained growth in a market.

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