CVS and Walgreens are in a constant battle for the biggest share of the market. CVS acquired Omnicare and Target’s pharmacies last year and Walgreens is in the process of acquiring Rite Aid by the end of this year. Both, in total, dominate the Drug Store industry. A recent Cap Rate Report released by Calkain shows quarter-by-quarter average national cap rates.
Q4 2015 cap rates stayed in the high 5% range for both pharmacies. Walgreens showed a stable uptick in cap rate for Q1 2016 with an average of 5.68%. The slight increase is a result of REITs maturing and an influx of Walgreens hitting the market. Meanwhile, CVS’s average cap rate for Q1 2016 was at 6.03%, due to the limited sale of CVS deals in the data set, and some outlier transactions resulting in a higher average cap rate. The national average cap rate for Q2 2016 remained constant for both retailers, with CVS at 5.60% and Walgreens at 5.62%.
As we see increasing numbers of Americans growing older and in need of health care, both CVS and Walgreens should make for stable, income-producing net lease investments.