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Drug Store Cap Rates at Historic Low

CHICAGO—A tendency to sign extended leases and a limited supply has increased the competition among investors for Walgreens, CVS and Rite-Aid properties.

By Brian J. Rogal | Updated on April 29, 2014

CHICAGO—Cap rates for single tenant net lease properties have been trending down for quite some time, often hitting historic lows, but investors find few sectors as appealing as drug stores. And according to the most recent report from the Boulder Group, a commercial real estate services firm located in suburban Northbrook, IL, cap rates for top drug store brands have fallen since the third quarter of last year.

“Walgreens, CVS and Rite Aid single tenant properties experienced cap rate compression of 15, 17 and 25 bps respectively,” according to the new report. “Part of the compression can be attributed to the significant decline of 9% in the supply of drug store properties currently being marketed.”

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