Cap rates for net-lease drugstores reach historic low

In the third quarter, national asking cap rates in the single-tenant drugstore sector compressed to 5.8 percent, according to the 2021 Net Lease Drug Store Report by The Boulder Group. This represented a 59-basis-point decrease when compared to the prior year.

“New historic low cap rates levels for CVS and Walgreens of 5.15 percent and 5.40 percent, respectively, were the primary driver of the compression,” said Randy Blankstein, president, The Boulder Group. “Investor demand for essential retailers carried over from 2020 into 2021, propelling cap rates for all three major tenants in the single-tenant drugstore sector lower.”

According to the report, Rite Aid cap rates compressed by 40 basis points to 7.40 percent but did not reach its prior historic low level (2008). The increased demand and transaction volume for drugstores in 2020 created a property supply issue in 2021. In the third quarter of 2021, the supply of single-tenant drugstores decreased