Posted on 08 November 2011.

The increasing trend towards ‘one-stop shops’ is heralding a change in the way that pharmacy rents are calculated. Traditional ‘retail based’ valuations are increasingly being discarded in favour of more accurate ‘value based’ valuations.

The benefits of having a pharmacy adjacent to or within primary medical premises are now well established and many of our clients have taken advantage of this when developing new premises.

Traditionally the rental value of pharmacy premises has been calculated on the same basis as conventional retail units: on a rent per square foot/per square metre calculation with suitable adjustments to take account of frontage and depth of the retail area, with a secondary rate applied to storage space to the rear or on upper floors.

However there is an increasing and significant trend towards ‘one-stop shops’ where not just pharmacy but dentistry, optical and other compatible uses work side by side with primary care activity. This has led to increasing competition from pharmacy operators for the best pitches.

Rents are now increasingly influenced by the size of the practice, the number of patients on the list, the ability of the practice to expand its range of services and the future growth prospects for residential development in the immediate area.

We have been involved in a number of these competitive situations and have collated a substantial database of rentals paid. This has shown that there is a clear trend for rents to be based on patient numbers rather than the size of accommodation available to the pharmacy operator.

These rents can be substantially higher than those paid for retail premises in or in close proximity to the medical/surgery property.

In addition, one-off premium payments at the commencement of the term are not uncommon.

There is no doubt that this is a long term trend. Clients with leases to pharmacy operators that may have outdated rent review provisions now have the opportunity, with the right professional advice, to restructure terms in order to take advantage of this movement in values.