COVID-19 will increase average pharmacy prices in 2021, say brokers
The average price of a pharmacy will increase in 2021, thanks to the sector's heightened role in the COVID-19 pandemic, property brokers Christie & Co have predicted.
Due to pharmacy’s “increased profile” and “tremendous response to support primary care services over lockdown”, 50% of contractors can expect an increase in the average price paid for a pharmacy in 2021, Christie & Co said.
Pharmacy has “fared well” in comparison to other businesses during the COVID-19 pandemic, with Christie & Co noting a 9.5% increase in sales agreed in 2020, compared with 2019. Its own price index saw pharmacy property sales stabilise after a drop of 3.6% in 2019, according to its business outlook, published yesterday (January 26).
Tony Evans, head of pharmacy at Christie & Co, told C+D that despite seeing “quite strong growth” in pharmacy sales since 2013, “struggling” pharmacies in 2019 had led to a reduction in the prices the broker had seen that year. However, he found it “encouraging” that price indices had sustained at their current level despite the pandemic, he said.
“A significant amount of people [80%] buying at the moment are first-time buyers,” Mr Evans said.
“But pharmacy has seen its profile develop significantly over the course of the pandemic and that has actually brought other people into the marketplace, looking for opportunities. We are seeing more activity and more discussions with private investors looking to the sector.”
This “increased purchaser appetite” also saw the return of competitive bidding – with an average of between three and four offers per pharmacy sale in 2020 – resulting in stronger asking prices. Specifically, appetite was strongest for properties in London, the South East and Scotland, Christie & Co said.
More sales and closures
With such a buoyant year for pharmacy sales, Christie & Co suggested that an easing of the latest national lockdown would “fuel further sales activity” in the sector in 2021, as pharmacies take on an increasingly important role in the rollout of the COVID-19 vaccine.
Further closures from the multiples is “likely”, but “the appetite is there” for smaller multiples and independents to “snap up their next” premises, the brokers added.
There were “reduced volumes” of completions during the first lockdown, with deals “hampered” by professional advisors moving to home working and banks focusing on facilitating Coronavirus Business Interruption Loan Scheme (CBILS). This had meant fewer staff working on “mainstream lending” during the first lockdown, Mr Evans said.
“Primary Care Support England’s temporary suspension of its market entry processes also slowed deals,” Christie & Co added.
However, this had begun to return at the end of 2020, with a 14% increase in completions by the end of the year, it said.
Mr Evans told C+D: “People are now accustomed to the lockdown processes…and we [take] comfort from the fact that people still want to transact; either sell or purchase in 2021.
“So, we have people wanting to sell, buyers wanting to buy and got banks wanting to fund – now that should make for a positive market in 2021,” he added.
Last week, property brokers Hutchings Consultants said the number of parties looking to purchase pharmacies increased “substantially” in 2020, as the COVID-19 pandemic reinforced the perception the sector is a worthwhile investment.