Market Update – 4 months into the pandemic.
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It has been four months since the nationwide lockdown. Our lives certainly have changed compared to pre-pandemic days. However, it was interesting to see that the appetite for pharmacy acquisition during that time did not appear to abate at all. I guess being a pharmacist on the frontline and actively working day to day doesn’t allow time to over-analyse the situation as we, in lockdown, would. Very evident during that time was the lack of pharmacies for sale. A combination of the pandemic, end of financial year and the 7CPA being ratified at nearly the 11th hour was responsible for the shortage. I am seeing evidence though of a turnaround as increasingly requests from owners are received for appraisals and for my opinion on the state of the market.
Initially, in the early part of the pandemic, some lenders pulled back on lending. Some even closed their books (i.e. did not take on any new borrowers) for pharmacy lending. But they are all back in play now. This could change as the effects on the economy become more evident as government stimulus is wound back. But, for the moment, it’s good. If an intending purchaser, and the pharmacy they’re buying stacks up, lenders are lending.
The pandemic has affected different pharmacies in different ways. CBD pharmacies have suffered greatly. I visited a pharmacy in Sydney’s CBD late last year at the request of the owner. It is situated in one of those extremely high foot trafficked underground walkways leading to a train station. I’ve never encountered anything like it before despite having lived in Sydney for nearly 25 years. It was peak hour on a Thursday afternoon. Trying to get from one side of the mall to the other was akin to weeding my way through a stampeding herd. It was nuts. I recently spoke to the owner. He said now you could drive a truck through the mall and not hit anyone. In a recent article in Pharmacy Daily, a broker commented that this is the time to negotiate your lease if you’re located in a shopping centre. Shopping centres have taken a big hit in the lockdown and are not, of course, back to what they were. But others, on the other hand, have thrived. It’s all about location, competition and point of difference.
All in all, demand is still strong. If you are a first time buyer and have a strong financial backing by way of a good cash deposit (the days of 20% deposit are gone for now for first time buyers) and/or property assets, you stand a very good chance of getting funding. The ones who are already established usually get preferential treatment. However, whether you have a relationship with your lender or not, it is always a good idea to deal with an experienced specialist health finance broker rather than limiting yourself to one lender. In the banking industry things change constantly. Finance brokers are usually across these changes as they evolve. Makes sense to not only give yourself the best chance of getting a loan but also possibly getting a loan with great terms. Please feel free to contact me at any time. I’m always happy to share my opinion on all things pharmacy.