A Current State of the Pharmacy Market
As I am writing this, I am a few days out from a planning and strategy (full day) session on the future of community pharmacy. So it’s timely I give you my current thoughts on where the market is at the moment.
Like any industry, uncertainty builds negativity at times. So whilst we await the release of the King Review interim report, and final report in May 2017, that uncertainty of what the future of pharmacy will be creates some negative mind sets. I see this in some of the conversations I have had with pharmacists and pharmacy owners. Some have suggested they cannot make a long term investment in pharmacy ownership at the moment whilst this uncertainty still exists. They are adopting the “wait and see” approach.
In saying that, we are seeing some sub $3million pharmacies selling for premiums recently. Certainly in the $1m to $2m category there continues to be strong demand and premiums are occurring at times. But only for those pharmacies where the location is good and the owner can takeover and make changes. A dog will always be a dog though.
Demand for these pharmacies continues as the smaller groups, mid tier groups and larger groups are looking to increase their numbers. These groups, together with the first time owners continue to create the demand. So whilst there is the uncertainty, the demand still outstrips supply.
Capitalisation rates still hover around the 16% mark. But only for the sub $5m pharmacies. For those above $5m mark, the demand isn’t as strong and cap rates accordingly are likely to be higher.
In spite of some uncertainty, we continue to get enquiries from young pharmacist’s looking to get their first opportunity. These young, ambitious pharmacists are quite often forgotten about and overlooked when new opportunities come up. But they are the next generation of owners and the future of the industry. There are some great potential owners here and would be a valuable asset. They just need a chance and an opportunity.
The next 6 months will be a very interesting time for pharmacy. It will be interesting to see the final reports in the Pharmacy Review, what the implications are to community pharmacy, and how the industry responds.
Strategies and planning for the future of your pharmacy is a vitally important function, and unfortunately there is not enough of it being done at the moment.
If you wish to discuss any of the above points please contact me on 0408 884 312.
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