Vacant pharmacies are holding back NYC retail

In the comments section of that article, the writer (Stefanos Chen) listed a few additional reasons for corporate landlords to maintain the status quo:

The tax benefits for landlords who keep a space vacant may be overstated. While it's possible that the property owner can sometimes find a tax advantage to keeping the space empty, there are a number of other scenarios that incentivize them to keep a building empty.

For example, some owners are waiting out the leases of adjacent tenants in the same property, so they can resell or redevelop the entire lot. They're betting that they will make more from a mixed-use apartment building than they would from commercial rent alone.

Others owners are simply in a holding pattern, because they are still collecting rent from a corporate tenant and have no incentive to move quickly. I've heard of a number of cases where the pharmacy landlord received appealing offers from well known brands, but turned them down, because they don't want to spend the money to reconfigure or subdivide their space.

I used to live in NYC. Down the street from me was the cheapest supermarket in the area. Why was it cheap? They had some lease from the 1970s or 1980s and were paying a rumoured $5000/year. Now Manhattan supermarkets aren't that "super" but still it's ridiculously low.

While I lived there that lease ended and the new "market" rate was reportedly $250,000/year. The supermarket shut down. It's been 10 years. I thought it had been empty the whole time. I just looked through historical Street View and saw there was briefly a business there. IT's again vacant though.

The point is that high housing prices kill everything. Commercial real estate is distinct but the two are related. There are two problems:

1. Landlords can be unwilling to accept a lower rent because it lowers the book value of the property. Many commercial property owners own a huge portfolio. It doesn't really matter if some of it is vacant. In fact, it's expected; and

2. As prices go up the types of businesses that can survive there rapidly diminish. You could simulate a supermarket. There's only so high you can rise the prices before demand goes down. There's only so high the rent can go before it kills that business.

I realize the zombie stores here are the opposite problem: landowners are understandably just cashing the checks from above-market rents the owners are obligated to pay.

If someone comes along and says "I'll pay 50% of the current lease", the owner could go to the current leaseholder and say "I'll let you out of your obligation if you pay 60% of the remaining rent" (discounting for present value).

But what if the new business doesn't survive? It's a risk for the owner where CVS's rent checks are no risk at all. Plus even if you get past that, you've also just lowered your property's value on paper.

The solution here is probably for the city (or, more likely, the state) to make such long-term leases unenforceable. For example, if you abandon the property then after 1 year or 2 years or whatever, the lease just terminates.

Usually these market inefficiencies have some market-based solution to mitigate the problem. I wonder why the pharmacies don't sublease, or buy themselves out of the remaining lease at a discount. IOW - I feel like there's a way for SOMEONE to make a bit more money by putting the space to use.

It could be that the original lease doesn't allow subleasing. And maybe there is also a mortgage that would get called if the rents fall (by subleasing or buying out the existing lease). I don't know - just seems like there must be some kind of reason.

Big box drug stores are dinosaurs, and eventually their leases will expire or they'll exit bankruptcy. How is this different from any other category of real estate that's gone out of favor?

You can get practically everything by mail now. On Amazon you can "subscribe" to your regular consumables, so they send you some regularly and you don't have to go to Rite-Aid for it.

For the rest of us: https://archive.ph/2f2T5

> Pharmacy companies are seeking to cut their losses by shuttering unprofitable stores that have high labor costs, Mr. Hill said, but in most cases they are obligated to continue paying the rent long after the store closes, or goes dark.

> Most of the pharmacies that have closed in recent years were signed to 10-, 15- or even 20-year leases, at rents that often exceed today’s rates, brokers said.

> In these cases, a landlord has almost no incentive to seek a new tenant, allowing the store to sit empty for months or years, said Aric Trakhtenberg, an associate director at Newmark, a real estate firm.

This seems odd to me. Sure they're stuck paying rent but I imagine they could buy out their lease to some mutually agreed upon sum or sublease it. I just don't buy it that this is the reason. I'm waiting for the NY real estate guy to reply how this article is completely backwards and reference Gell-Mann amnesia [0] .

https://www.epsilontheory.com/gell-mann-amnesia/

Why are pharmacies closing?

Pharmacy benefit managers (PBMs), which reimburse their own pharmacies at a higher payout rate than independent pharmacies, are causing smaller ones to go out of business:

https://www.medpagetoday.com/pharmacy/pharmacy/111338

Those obvious antitrust violations exacerbate the record prescription drug shortages we're experiencing, as customers hop between pharmacies trying to get drug refills:

https://www.cnn.com/2024/04/12/health/drug-shortage-record-h...

Which are caused by artificial limits on the quantity of drugs manufactured, specifically ones popular on the black market like Adderall, which are stopped by an out of control War on Drugs:

https://www.additudemag.com/adderall-shortage-dea-stimulants...

Leaving smaller pharmacy owners forced to sell many drugs at or even below cost, which they can't get anyway, so their customers leave for bigger chains and online sellers at Amazon etc.

Driving prescription drug hoarding behavior when patients can't get the medication they need and skip days in order to save up for eventual shortages. Is it ironic that the DEA doesn't seem to mind creating addiction this way? I don't know, I'm not surprised by anything anymore.

So the wealthy and powerful people driving this catastrophe outside of law enforcement because they lobbied through regulatory capture to legally have this monopoly are making bank while the rest of us suffer.

Which is just exactly the situation I find myself in as I scramble to find treatment for my ADHD symptoms. I can't believe it's come to this in the good old US of A, but here we are.

Edit: I meant to add that if you're in a similar situation, it's worth seeing if raising your dopamine level helps, and not just medicating a hormone receptor issue. You can boost your levels by eating L-phenylalanine and L-tyrosine, which the body uses to make dopamine (every hormone comes from a specific protein, which you can find by asking an LLM like https://iask.ai). I have had success with eating a 2-4 egg and bacon breakfast every day, taking L-theanine, and supplementing with maca root and hormone balancers like RESTOR from Nutrishop (no affiliation). It also helped a great deal to reduce inflammation by addressing low thyroid, adrenal fatigue and high cortisol levels by taking supplements for those (you might need to see a nurse or doctor) and turmeric powder. My symptoms feel like having depression and anxiety simultaneously, and I've found that they've worsened with age as testosterone levels naturally decline, which is often caused by having too much belly fat, which contains aromataze which converts it to estrogen. So weight training is extremely beneficial, along with reducing stress through meditation. Healing the gut with a giant looseleaf lettuce salad and a cup of kefir every day also helps raise serotonin levels for better mental health. Just give yourself 2-6 weeks to feel improvement, and keep a journal. Hope this helps someone.

Gift link (fixed): https://www.nytimes.com/2024/08/06/nyregion/pharmacies-vacan...

LOL. That's not even close to the root cause. The root cause is soft on crime DAs who allow thieves and violence to go unpunished.

TLDR: The tennants are mostly still paying their Monthly leases, and the rates are often higher than what a small company, or a company that wants to partially use that space would pay.