The pharmacy market in the north of England is strong, say Oliver Brown and Oscar James, business agents - medical at Christie & Co.
With HS2, the government’s commitment to infrastructure investment in the ‘Northern Powerhouse’ cities, and comparably reasonable rent and business rates, the North continues to be an attractive proposition when it comes to buying a pharmacy.
Unlike the hospitality, leisure and retail sectors, demand for pharmacy opportunities in the north of England mirrors what we are seeing in other areas up and down the country. Our regional offices in Manchester, Leeds and Newcastle cover the whole of the north of England, and over the last year we have seen significant activity and demand in the pharmacy market. This has been fuelled by short supply and resilience in the face of the funding cuts.
Since the cuts were announced last October, we have completed on 10 sales in the north region. With a further seven currently under offer, the market continues to be strong, which is very much in line with other areas of the UK. This is a testament to the hardiness of the pharmacy market and the continued confidence that prospective purchasers see for the future of independently run and owned pharmacies. While there is much concern over the impact that funding changes may have on value, we have seen no evidence of a slowdown in the market nor a reduction in sale prices. On the contrary, values continue to rise as first-time buyers and multiple operators compete for units. One of our recent sales in Manchester, a standard hours community pharmacy dispensing 3,200 items a month, received 26 viewings and 11 offers. The competitive tension this sale generated is typical of what we see for all pharmacy types across the north of England.
Who is buying?
A breakdown of our 5,000+ UK pharmacy applicants shows that 55 per cent have an appetite to buy across the north of the country. Of these, 81 per cent are first-time buyers. With locums seeing a reduction in hours due to operators looking to cut costs, many are combining savings to invest in a site of their own. As financial lending is readily available and ‘the bank of mum and dad’ is still prevalent, the decision to buy a site seems simple, but beating the competition is less so. One Christie & Co sale of a standard hours site in Liverpool generated 13 offers and achieved 130 per cent of its asking price – a result that shows the continued fervent interest in pharmacy businesses.
The most obvious casualty of the cuts was presumed to be the small, independent community pharmacy, often already competing with a corporate neighbour or providing limited extra services. However, small pharmacies have continued to be popular businesses to purchase, with a 1,055 item pharmacy for sale in Lancashire receiving six offers in February of this year. While we are not suggesting that smaller sites are not or will not be affected by the funding cuts, operators can take some comfort in knowing that should they want to sell, there is still an appetite in the market for them. We have put three sites in the North doing less than 4,500 items a month under offer since October last year, two of which received several offers.
While many of the corporate pharmacy operators remain sleeping giants, regional multiple operators and smaller national chains are still very active in the northern market. Cohens, for instance, continues to extend its reach with its recent acquisition of JN Murray Ltd, an operator of 16 pharmacies in Cumbria. Similarly, smaller groups are trading among themselves – as exemplified by the Hub Pharmacy taking six Living Care sites in Halifax late last year.
Multi-site operators are often willing to travel a good distance for the right addition to their portfolio. This increases the competition for sites, and there are many entrepreneurial operators in the North who will be looking to pick off early retirement sales in the wake of the funding changes.
The North remains a vibrant market for pharmacies, with first-time buyers and all sizes of chain operator active. While the cuts are a serious concern for all in the sector, the value of pharmacies remains as yet unaffected, with demand serving as a catalyst for year-on-year increases in average sale prices.