Overview

While baby boomer and senior citizen markets are growing in numbers, CVS continues to experience growth in retail pharmacy operations. They are able to consistently offer real estate opportunities for net leasing investors, with statistical sales reaching $840 per sq. ft. per year. When compared with market sector averages around $680 for competitors, they are considered to be lower risk, with marketable value, and backed by a solid company guarantee. In fact, CVS currently achieves a higher credit rating than its competitor Walgreens, which was not always the case historically. Factoring in that there are certain CVS locations with more robust sales figures that can demand more rent increases, CVS retail pharmacies tend to be attractive in terms of net lease agreements. Typically these are structured with flat rent fees, since the real estate itself can affect returns. Each lot will generally be situated on one to two acres. The variations in CVS leasing over the past ten years have seen both NN and NNN leasing structures. In earlier years, lease agreements were normally based on NN fee simple. Such leases may now see rent escalations every five years. NN leasing also makes the landlords accountable for structure and maintenance costs, which sometimes extends to include property maintenance and upkeep. In more recent years, NNN leasing is being used and for initial terms, standard flat rental rates are offered. There are sometimes exceptions made with certain high traffic locations.