What Happens to Drugstore Real Estate When Walgreens Leaves?

There are approximately 9,000 Walgreens drugstores in the U.S.

Most are in excellent locations -- visible, high traffic “main and main” intersections -- and include a drive thru lane.

But has been closing stores - approximately 1,000 during the past 5 years alone - and is testing smaller spaces and other real estate formats.

So what happens to the real estate when Walgreens leaves?

For some tenants - like Dollar Tree Stores , Oak Street Health , and CSL Plasma - the former has been key to their growth strategy.

While others - like Feeders Pet Supply , Harley-Davidson Motor Company , and Clean Express Auto Wash - have converted former drugstores into creative and unique adaptive re-uses.

With locations in all 50 states, Walgreens drugstores are among the most accessible real estate to the majority of the U.S. population.

They are like a “last mile” distribution network – thousands of corner stores in (almost) every town USA.

Approximately 78% of the U.S. population lives within 5 miles of a Walgreens.

Most Walgreens are 13,000-15,000 square foot, freestanding stores with relatively proportional frontage and depth.

The stores are located on 1.5 - 2 acre parcels, generally on premier "hard corners" - or signalized intersections with high traffic flow and good access.

They are typically set close to the street and feature prominent signage, a dedicated parking field, and a drive thru.

But Walgreens has recently focused on downsizing its real estate footprint - both by closing existing stores that are located too close to one another or that are no longer economically viable.

In some cases it has also been subletting space in existing stores to physicians, lab testing companies and health insurance providers to provide more healthcare access to customers and make for more productive use of the space.

Walgreens has also opened nearly 200 small drive-thru pharmacies that average a mere 1,800 square feet - and has plans to add 50-60 of these smaller stores each year, principally in areas that can no longer support a full-sized store.

With thousands of former drugstores out in the market, what has been the most common re-use of a former Walgreens?

Dollar stores - which occupy hundreds of former Walgreens.

Why?

Dollar stores are aggressively expanding; over 7,000 have opened in just the past 5 years and dollar stores made up roughly one-third of all U.S. retail store openings in 2022.

Additionally, dollar stores target the same neighborhood and small town population that has historically been the focus of drugstore real estate.

Health and urgent care clinics are also a popular Walgreens re-use.

Like those operated by Oak Street Health which operates 169 medical centers in 21 states (and which, ironically, is about to be acquired by Walgreens competitor CVS Health ).

At least a dozen Oak Street Health sites are located in "2nd generation" real estate, including many former Walgreens.

Tenants in the fast growing plasma collection industry have been another common taker of former drugstore real estate.

Over the past seven years the number of plasma collection centers in the U.S. has more than doubled to over 1,000.

Many of these plasma centers have opened in former Walgreens drugstores throughout the country.

Even conventional retail users - like pet supplies stores - have popped up in several former Walgreens.

For instance Louisville-based Feeders Pet Supply , a 50+ unit pet supplies chain, has opened in several former drugstores, including a former Walgreens in Lexington, Kentucky.

The former drugstores are larger than most stores located in shopping centers - but the added space has enabled the retailer to add other features to its retail operation including a grooming salon, self-serve dog wash, obedience training area, boarding and even veterinary services.

Converting a former freestanding Walgreens to multi-tenant use is not common.

The cost to demise is high and it can result in irregular, difficult to lease spaces.

But this former Walgreens in Grand Rapids was converted to multi-tenant use and now houses a Pizza Hut and Panera Bread .

In addition to more common dollar store, health clinic and plasma center uses, there have also been several "unconventional" Walgreens re-tenantings.

Like this former Walgreens in Staten Island, NY that was transformed into a Harley-Davidson Motor Company dealership.

Or this former Walgreens building in Cleveland which was renovated and modified into a car wash!

Even though over 1,000 Walgreens drugstores have been vacated in the past several years (with more to likely come), many have been backfilled by fast growing tenants or developed for adaptive re-uses.?

So opportunities abound for Landlords, real estate brokers, retailers and others seeking to re-tenant or repurpose former drugstore real estate.

They may just need to be creative!