The pharmacy retail sector—long prized by commercial real estate investors for its stability and essential service offerings—is undergoing a profound transformation in 2025. Major players like Walgreens and CVS are aggressively reshaping their footprints, creating both challenges and new opportunities across the real estate landscape.
Here’s a closer look at what’s happening right now and why it matters.
Walgreens Struggles Spark a Strategic Pivot
Walgreens, which operates about 8,500 stores across the U.S., has been grappling with mounting challenges—including tighter prescription reimbursement rates, rising operational costs, and intensifying competition from online giants like Amazon and retail heavyweights like Walmart and Target. Financial pressures have taken a visible toll: in January 2025, the company reported a net loss of $67 million for its fiscal first quarter, though that marked an improvement from the $3.7 billion loss posted a year earlier. New CEO Tim Wentworth acknowledged that Walgreens is navigating “a challenging consumer backdrop” as it reassesses its business strategy.
In response, Walgreens had already begun pivoting away from its traditional retail pharmacy model, placing a greater focus on healthcare services and scaling back its retail footprint. This strategic shift set the stage for one of the biggest real estate moves of the year.
Last month, Walgreens Boots Alliance announced a definitive agreement to be acquired by Sycamore Partners in a transaction valued at up to $23.7 billion, including approximately $19 billion in debt and $2.3 billion in equity investment (source). Under Sycamore’s ownership, Walgreens plans to close approximately 500 stores in 2025, part of a broader plan to shutter 1,200 underperforming locations by 2027.
CRE Opportunities (and Risks) Taking Shape
Walgreens’ real estate shift is already sending ripple effects through the CRE market. “When a tenant the size of Walgreens starts closing stores, landlords and lenders both have to recalibrate,” said Manus Clancy, head of Data Strategy at LightBox. “There’s a real risk of vacancy spikes in some markets—but there’s also opportunity for repositioning prime real estate in high-traffic locations.”
The company’s involvement in over $3.7 billion in CMBS loans adds another layer of complexity, particularly for securities backed by Walgreens-leased properties. Sale-leaseback activity could also pick up as Walgreens looks to optimize its footprint, offering CRE investors new acquisition opportunities—at potentially attractive pricing.
CVS Health: Downsizing and Redefining Retail
Following Walgreens’ headline-making sale, CVS Health is also reshaping its real estate footprint. While CVS faces many of the same industry headwinds—including pressure from Amazon, Walmart, and Target—its store closures reflect a strategy first announced in November 2021 to rebalance store density and realign with consumer needs. Unlike Walgreens’ broader struggles, CVS’s moves are part of a longer-term pivot toward healthcare services and smaller, pharmacy-only formats.
CVS, which operates about 9,100 stores nationwide, has closed more than 1,000 locations since 2022 and plans to shutter another 270 stores in 2025. Yet even with the reductions, CVS notes that 85% of Americans will still live within 10 miles of a CVS Pharmacy (source). Meanwhile, CVS is selectively opening around 30 new stores in high-demand areas this year, focusing on healthcare-first formats that reflect a major strategic pivot.
The new locations are about half the size of traditional CVS stores and focus solely on pharmacy services—ditching the front-end retail sections that once sold snacks, greeting cards, and consumer staples.
“Shrinking the footprint may lower operating costs, but it doesn’t solve the bigger challenges CVS faces,” said Clancy. “Competition from digital players and aggressive discounters is reshaping consumer expectations—and smaller stores alone won’t be enough to defend market share in a rapidly evolving retail landscape.”
CRE Impacts: A More Surgical Reshaping
While the scale of CVS closures may sound dramatic, the real estate impact will likely be more surgical compared to Walgreens. CVS is actively optimizing its portfolio, which could create backfill challenges in some markets but opportunities in others—especially for landlords able to reposition former CVS sites for medical, retail-medical hybrid, or community-based uses.
“Unlike Walgreens, CVS is moving with a scalpel, not an axe,” noted Clancy. “The footprint shifts are targeted, not systemic—which means CRE investors need to look closely at location fundamentals before assuming a vacant CVS site is a distressed one. In the right submarkets, these could quickly become highly competitive spaces.”
As CVS leans into healthcare services and right-sizes its locations, Clancy noted that its newer sites are likely to drive steady demand for specialized retail space designed for health, wellness, and community service tenants.
Vacancy and Repurposing: Opportunity or Headache?
In addition to the closures at Walgreens and CVS, the retail real estate market is also absorbing vacancies left behind by Rite Aid’s bankruptcy. Following its Chapter 11 filing in late 2023, Rite Aid has shuttered more than 800 stores nationwide as part of its restructuring efforts, creating another layer of pressure on landlords already navigating a wave of pharmacy downsizing.
All of these closures are resulting in a growing inventory of vacant properties—often in prime, high-traffic locations. But challenges remain. Clancy warned that shuttered locations still have active leases in place, complicating efforts to reposition or re-tenant the space. In addition, the typical pharmacy layout—usually between 10,000 and 15,000 square feet—”does not always fit the needs of today’s evolving retail tenants, making adaptive reuse a complex process,” he said.
Still, there are signs of creative reuse emerging. In San Francisco, a former Walgreens was successfully transformed into Casa Guadalupe Supermarket, serving a fast-growing Latino market segment. Former Rite Aid locations are also offering case studies in both the challenges and opportunities ahead: In Cheshire, Connecticut, a closed Rite Aid was converted into a second location for Cheshire Wine & Spirits, while in Bloomfield Township, Michigan, Plum Market expanded into a former Rite Aid space to grow its footprint after nearly two decades at the site.
While some landlords have been able to move quickly, many others are facing longer vacancy periods—especially in oversaturated retail corridors or secondary markets where demand for large-format space has softened.
Clancy noted that even well-located former pharmacy sites aren’t guaranteed quick turnarounds. He emphasized that while strong demographics and traffic patterns can help backfill some properties quickly, the broader reshuffling will take time. Clancy expects that 2025 will be a “sorting year,” with landlords needing to reposition assets creatively and investors sharpening their focus on sites that can support healthcare, grocery, or service-oriented tenants. He also pointed out that active lease structures and evolving consumer patterns will make flexibility and strategic reinvestment critical to successfully repositioning former pharmacy locations.
Transaction Trends and Investor Outlook
Despite the uncertainties reshaping pharmacy retail, the sector remains attractive to investors seeking essential-service tenants with historically strong performance. Cap rates for NNN-leased CVS properties averaged approximately 6.44% in Q1 2025, reflecting wider spreads amid a volatile Treasury market (source). Meanwhile, 1031 exchange buyers, family offices, and private equity firms remain active, although underwriting has become notably more cautious.
Looking ahead, Clancy noted that investors will need to be far more selective than in past cycles. As Walgreens and CVS optimize their portfolios through store closures, sale-leasebacks, and realignment efforts, retail landlords and investors should focus on four key areas:
- Portfolio Optimization: Non-core real estate disposals could create acquisition opportunities at adjusted pricing.
- New Leasing Dynamics: Former pharmacy sites may require creative repositioning or new tenant mixes.
- Retail-Healthcare Convergence: Properties supporting healthcare services beyond traditional pharmacy use could command premium valuations.
- CMBS Exposure: Investors should monitor ripple effects in securities markets tied to pharmacy portfolios, particularly in secondary markets.
As Clancy pointed out, pharmacy retail is no longer a passive bet. Location fundamentals, tenant credit, and adaptability will be the defining factors for success as the sector transitions. For investors willing to dig deeper and stay nimble, the disruption of 2025 could open the door to some of the most compelling opportunities the retail market has seen in years.
Want to explore how LightBox location intelligence can help you uncover pharmacy retail opportunities? Request a free demo or get in touch with our team.
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