The Pharmacy Sector is Contracting. Here's What Net Lease Holders Need To Know.

For decades, net lease drugstores sites were viewed as dependable, low-maintenance additions to real estate portfolios. National tenants, long-term leases, high-traffic corners—these assets checked all the boxes for 1031 investors seeking stable, passive income.

But the landscape may be shifting dramatically.

Walgreens is in the process of being taken private by Sycamore Partners and plans to shutter hundreds of locations. Rite Aid is navigating a second bankruptcy with a potential full liquidation. CVS has also announced plans to close over 270 stores. In total, more than 2,000 drugstore sites may go dark in the next year alone.

That’s a significant wave of vacancy—and for many private investors, it’s hitting closer to home than expected.

A Hidden Concentration of Risk

Many of these sites were acquired by private individuals and families via 1031 exchanges. At the time, these deals were hard to argue with:

• Creditworthy tenants
• Long lease terms
• Triple-net structures requiring little oversight

Now, those same properties may be underperforming or at risk of default—with few obvious paths forward.

What Investors Should Be Thinking About

If you hold one of these assets—or are advising someone who does—there are a few key questions to ask right now:

• What are my actual rights under the lease?
• What encumbrances exist on the title?
• What’s my exit strategy?

Legal & Structural Risks to Watch

In many cases, these aren’t “bad” properties—they just need a new strategy. But before jumping into redevelopment, subleasing, or selling at a loss, make sure the fundamentals are clear.

Common issues may include:

• Environmental concerns from pharmacy or legacy operations
• Use Restrictions that limit future uses of the property
• Loan obligations tied to credit strength or continuous occupancy/operations
• Lease language that seems straightforward—but isn’t

Where the Opportunity Lies

Many of these sites sit on fantastic corners in growing areas. There is significant opportunity in repositioning former drugstores as:

1. Retail convenience grocery stores
2. Medical and dental offices
3. Quick-service restaurants with drive-thrus
4. Micro-retail centers with multiple tenants
5. Public sector uses like job centers or community outreach hubs

Strategic Legal Support for the Road Ahead

If you’re holding a net lease drugstore—or considering one as a turnaround play— let’s talk. We work with investors, brokers, and developers to:

• Evaluate legal exposure under lease and loan documents
• Clean up title, survey, or environmental red flags
• Explore redevelopment strategies aligned with zoning and land use laws
• Connect clients with trusted brokers, partners, and market intelligence

Let’s Review Your Position Before the Market Does It for You. Don’t panic, plan. Reach out today for a confidential consultation.