Swimming against the tide

The pharmacy real estate market is staying strong, but has divided into two tiers during COVID, says Natalie Sirianni

As a pharmacy business broker, and someone who spends a lot of time with existing and aspiring pharmacy owners, the question that I get asked most often is, “How is the pharmacy market performing?”

The reason for this is obviously that I’m working with the market day in and day out, but also because, for most pharmacists, their pharmacy business is the (or one of) the largest assets that they own. Therefore, it’s always important to keep up to date with pharmacy values and how the market is performing.

On the flip side, if you’re not thinking of selling, then you’re choosing to reinvest in your business. A wise person would want to know how much they are reinvesting!

Overall, the pharmacy business sales market is very strong and possibly the strongest I have experienced in my eight years as a pharmacy business broker and my 15 years working in pharmacy. Pharmacy businesses are selling quickly and there is very strong demand from pharmacy buyers. But what we are seeing is there is a two-tiered market, mostly based on the location of the pharmacy and how the business has performed during COVID.

We are seeing very strong demand in the market from pharmacy buyers for all price ranges, but particularly the larger pharmacies with higher sale prices. Supply is currently relatively low compared to historical levels, but all signs indicate that supply is likely to increase this year. However, only time will tell.

The key factors

So, what is keeping the market so strong during these uncertain economic times?

There are three main factors:

  • COVID – while there was significant variance across different pharmacies in their financial performance during COVID, in general, pharmacies were able to operate throughout COVID lockdowns and were able to continue trading at reasonable levels. Some pharmacies financial performance improved and some decreased. The key factor that we saw impact the pharmacy business sales market during COVID was that pharmacy buyers can very clearly see the strengths and relatively low risk of a pharmacy business compared to other small to medium sized businesses. This has led to strong demand from pharmacy buyers throughout Australia.
  • 7CPA – the signing of the 7th Community Pharmacy Agreement in mid-2020 provides certainty to the pharmacy market for the next 5 years. This certainty is a positive for the pharmacy market and generally we always see an increase in demand for pharmacies once the Agreement has been signed. This is certainly what we saw in 2020.
  • Record Low Interest Rates – current interest rates are at record lows and given most pharmacy buyers borrow money for their purchase, this means that pharmacy owners are now getting better returns. This again has resulted in strong demand for pharmacies throughout Australia.

Remember, community pharmacy is generally counter cyclical in economic terms. That is, pharmacy performs well in tough economic times.

So in response to the question, “How is the pharmacy market performing?”, my answer is very well!

If you would like to discuss the pharmacy market in your area, or are considering selling your pharmacy, contact me for a confidential discussion on 0406 919 860. I look forward to discussing with you further!

Natalie Sirianni is director, Attain Business Brokers

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