PHILADELPHIA -- An escalating war between drug store chains, banks, gas stations, convenience stores, coffee shops and donut shops for high-visibility locations is driving up corner lot sales, according to a report by The Intelligencer, citing real estate brokers.
Companies such as Commerce Bank, of Cherry Hill, N.J., and Wawa Inc., of Wawa, Pa., are increasingly willing to part with $2 million, or more, for land at busy intersections, the report said. And those prices are for the land only, they don't include construction costs. Other banks and drug [image-nocss] store chains such as Walgreens, CVS and Rite-Aid are paying top dollar for long-term land leases on corner lots owned by real estate investors.
There's no question that values are being pushed by the Walgreens and CVSes of the world, but other users are having an effect, too, Marshal Granor, a partner at residential and commercial developer Granor Price, told the newspaper. Corners, and it's only certain corners, have become a real hot commodity.
In the past year, several prime area corner lots have sold for $2 million or more, said the report.
It's amazing, some of the numbers some of these banks paid, added Matthew Devine, senior advisor at commercial real-estate brokerage Grubb & Ellis.
Finding these prime corner lots has really been the key to our success, Carol Hively, a spokesperson for Walgreens, Deerfield, Ill., told the paper. Walgreens wants to be at Main & Main the busiest intersection in an areato give the company a leg up on other chains in the scramble for the time-pressed consumers' convenience dollar, Hively said.
We're all looking for the same kind of intersection, she added. Being on major traffic routes has really been important to our business, as have the drive-through pharmacies.
Walgreens sees prominent corners near hospitals, doctors' offices or retirement homes as the best locations, she said. But the company is always looking for three key factors, at minimum: An intersection where two busy streets come together; a highly visible location at that intersection, preferably right on the corner; and easy access from both streets.
Most commercial buyers want an intersection with traffic signals, Kurt Eisenschmid, president of Penn's Grant Realty, told the Intelligencer. In part, that is because people stuck at red lights are more likely to see the store. That all plays into visibility, he added.
The highest paid for a corner lot in recent months has been $2.8 million, by Wawa, for a gas station and c-store site in Warwick, Pa. Wawa is also extending one of the roads. They're creating a corner property by putting the road through, Gail Weniger, Warwick's township manager, told the paper.
It is not always easy to tell what companies like Walgreens are willing to pay for a site, the Intelligencer said. Walgreens, CVS and other drug and banking chains lease their land, when possible, from real estate investors. They incur all costs of building their stores themselves. The leases are typically long, carrying a 25-year initial term and five, five-year options.
Jon Kushner, a partner at Fameco Real Estate in Plymouth Meeting, said drug stores in the area are paying annual ground rents of $350,000 a year, on average, a 25% increase from five years ago. Banks, in contrast, are paying ground rents of $200,000, on average, he said.
The banks and the drug stores have separated themselves, Kushner told the paper. No one else can get into the fray.
Hively said, The prime locations have always been the prime locations. But as the area has built out, the most desirable locations have been snapped up. Sometimes, it's a matter of waiting out leases, she said.
Also, as the population has aged, demand for pharmacies has boomed and people working longer hours put a premium on being able to get in and out of a store in a hurry, said the report. One of the biggest factors driving drug stores and banks out of strip centers and into corner locations, has been their desire for drive-through lanes, said Eisenschmid. They say two drive-throughs is the preferred minimum, Kushner added.
Drug chains have also changed their view of how many stores an area can support, said Kushner. Years ago, a chain would want at least 15,000 people within a certain radius, which could range from a mile and a half in an urban area to three miles in a suburban area, he said. That meant two drug stores would locate nearby only if the number of residents within that radius was 30,000 or more, he said.
These days, drug stores have found that they can still make money with only 5,000 to 7,500 residents within that radius, Kushner said. That changing analysis is yet another factor driving the mad scramble for corner lots, the report said.
There's definitely more of a demand now, probably among the drug stores, over the last two years, three years, Tom Skiffington, a Realtor in the commercial division of ReMax, told the paper.
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