As Boomers Age - Net Lease Pharmacies See Gains

Walgreen's recently posted a 4Q profit increase of 86% - an indicator of Walgreen's and the net lease pharmacy sector's health at large. Though Walgreen's saw some improvement in store sales outside of the pharmacy area, it noted a large reason for it's 4Q increased sales were the increased amount of prescriptions filled. This is potentially an indicator of where the pharmacy sector is heading - aging baby boomers, increased prescriptions (more foot traffic could mean more non-pharmacy sales) and higher pharmacy revenue.

To get an idea of where the net lease pharmacy sector may be headed in future America, let's look at it's presence in arguably it's most successful state - Florida. It's no secret that Florida's population is marked by a higher percentage of seniors than observed in other states. This fact is reflected in the amount of pharmacies in the state of Florida itself. Walgreen's currently has 857 locations in Florida - more than any other state, including larger states like California (633), Texas (700), and New York (491). The story is the same for CVS, with 679 stores in Florida compared to California (382), Texas (431), and New York (491).

From a net lease perspective, Florida pharmacies have consistently sold at lower cap rates than the national average. For instance - Florida pharmacy cap rates averaged 6.78% compared to 7.04% nationally in 2012 and 6.31% compared to 7.00% thus far for 2013. Florida offers net lease investors more opportunity for investment in the Pharmacy sector than any other state. Emily Cusmano - a net lease broker in Calkain's Tampa, FL office - commented "The net lease pharmacy sector has always shined in Florida. Due to the somewhat inelastic demand Pharmacies generate through providing essential medication and Florida's large population of seniors who require prescriptions (often subsidized by the government), net lease pharmacies have been a stable, recession proof investment. With baby boomers continuing to age and, though it may sound morbid, medical advances that are keeping seniors alive longer, the demand will undoubtedly continue to grow - in Florida and beyond."

Florida provides an excellent window into the future of net lease pharmacies because we can evaluate what a large state with a high percentage of seniors looks like compared to the rest of the country. As baby boomers continue to age and states across America, in essence, take on similar demographic profiles to Florida - we can expect similar shifts in their economies. For the net lease market - this means an increased demand for medical services and the type of tenants who provide them. Pharmacies, Dialysis Centers, Medical office - all seem set to expand their presence and profitability. For the net lease investor interested in the growing pharmacy market, their one thought must be - "you stay aging America".

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Special thanks for the help and insight provided by Emily Cusmano - for further information on Net Leases in Florida, you can reach her at 813-282-6000.

For a detailed research overview of Net Lease Pharmacies view our exclusive Phamracy Report.