Pharmacy Rents

Medici Capital recently developed a new measure for use in assessing fairness and equity of tenancy arrangements. Following publication of the approach in the PharmacyNews arising from my presentation at the 2007 APP, a major clothing manufacturer/retailer has adopted the Medici Capital measure for all its rent negotiations worldwide. The measure is a new approach to an age old problem.

Who takes the risk? Whose business is it?

Most pharmacy owners and managers know that pharmacy rents and occupancy costs are a significant and increasing cost. Generally occupancy costs are the third highest expense (after Cost of Goods & Salaries). In some locations, they may be the second highest expense.

Pharmacy often pays the highest rent in a centre!

Based on Medici Capital data the 2006 Australian Average Pharmacy Rent & Outgoings per square metre per annum was $522.54 (95% confidence interval ranges from $479 to $566) and the Average Rent % of Turnover 3.97% (95% confidence interval ranges from 3.61% to 4.33%).

Rent & Outgoings per square metre

The distribution of rents is highly skewed, with a few pharmacies paying well above the average rent and outgoings of $523. Any industry benchmark analysis is highly misleading, as the median (50% mark $406) is significantly lower than the average. Chart 1 illustrates the rent and outgoings per square metre. In simple terms, the vast majority of pharmacies pay less than the average, and the average is skewed by a number of pharmacists that pay extraordinarily high rates of occupancy costs - up to 6 times the average.

Any effort to bring pharmacy rents up to the average is misguided. Landlords should be examining industry median levels as well as averages to make a fairer assessment. Any alternative approach places enormous pressure on the viability of such businesses.


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Pharmacy Rent Report 2009 Released

The following media release was issued by The Pharmacy Guild of Australia to announce the release of the Pharmacy Rent Report for 2009. The report was compiled in associated with Medici Capital and can be obtained through your local state branch of The Pharmacy Guild.

29 September 2009

Media release Release of Rentals Report 2009

The Pharmacy Guild of Australia has released its Rentals Report for 2009, in the interests of promoting a deeper understanding of the issues that have an impact on pharmacy rents, leases and viability.

read more

Pharmacy Rents - dealing with your landlord in this climate

The economic and financial climate has added further pressures to pharmacy rents

Medici Capital will shortly be releasing the 2009 Pharmacy Rental Kit which includes the data for the year ended June 30, 2008.

Synopsis

Pharmacy rents are a major cost for all pharmacies. Careful negotiation and consideration of the benefits provided by a particular site must be taken into account when analysing the:

Total occupancy costs (inc. outgoings) The terms of the lease (inc. security of tenure, exclusivity to the centre, escalation or indexation, options, and review periods/methods) The resultant share of profits derived by you and your landlord
Dealing with your Landlord in this Economic Climate
read more

Pharmacy Rents - dealing with your landlord in this climate

The economic and financial climate has added further pressures to pharmacy rents

Medici Capital will shortly be releasing the 2009 Pharmacy Rental Kit which includes the data for the year ended June 30, 2008.

Synopsis

Pharmacy rents are a major cost for all pharmacies. Careful negotiation and consideration of the benefits provided by a particular site must be taken into account when analysing the:

Total occupancy costs (inc. outgoings) The terms of the lease (inc. security of tenure, exclusivity to the centre, escalation or indexation, options, and review periods/methods) The resultant share of profits derived by you and your landlord
Dealing with your Landlord in this Economic Climate
read more

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