Many pharmacy owners are currently finding trading conditions tough, with relentless cost increases against a backdrop of flat funding for many years putting even the best businesses under pressure.  For most pharmacy owners investing in new premises is the last thing on their minds.

However, it is worth spending a few moments every so often to consider potentially relocating your pharmacy to ensure your business is in the best position for the future.

One benefit of the current difficult trading conditions for retailers is that in many towns and cities there are more empty businesses premises available than usual.  It may, therefore, be a good time for pharmacy owners to negotiate favourable terms with landlords who are keen to fill their vacant properties with reliable tenants.  At the same time the profession is changing. There is a greater focus on providing services and a move away from the traditional model of co-location with doctors, so pharmacies that have been in the same place for many years may find that this is no longer optimal.

Triggers

There are two main triggers that could prompt pharmacy owners to consider whether it’s a good time to relocate:

Lease expiry

If your lease is coming to an end, then this is an ideal time to consider whether your pharmacy is located in the best place.  Whilst there can be some costs associated with vacating a property, moving at the end of a lease will save you having to pay rent on empty premises. Conversely if you have a lengthy period remaining on your lease you will need to bear in mind that you are likely to have to pay rent up to the end of the term unless you can find a new tenant to take the premises over.

Refit

If you are planning to refit your current premises, before making a large investment you should consider whether you would be better looking at an alternative property. One key benefit of this is that you can refit the new premises before relocating so you don’t have to worry about working around customers. This can actually reduce costs in some cases as it will make the fit-out much more straightforward.

Key considerations

If relocating your pharmacy might be an option, we have considered some of the key factors you should bear in mind.

Where?

The usual starting point is “where do I want to move to?”.  The answer may depend on why you have decided to move in the first place.  If footfall levels have dropped at your current location, do you know what has drawn customers away and where have they gone? Are the new premises you are considering located in a more prominent position to attract new customers? If you have competitors nearby, what will be the effect of moving either closer to them or further away from them?

Costs

If rents have gone up significantly, what cheaper alternative premises may be available, and will they still be accessible for your patients?  This is often applicable at health centre pharmacies where rents may have risen to unaffordable levels. The advantage of EPS is that patient nominations can usually be retained provided the new premises are still easy for patients to get to.

If you are looking at higher levels of rent at the new premises, how confident are you that you will be able to cover the additional costs with improved profits?  Don’t forget that if your rent increases, your business rates are also likely to be higher.

Size

How does the space at your existing premises compare to what you would ideally need?  If you have large unused stockroom space, then downsizing may be the right solution.   Alternatively, if lack of space is limiting your ability to grow services, for example, then there may be a strong business case for moving to larger premises, provided the extra rent and fit-out costs are covered by additional income.

Length of lease

Most leases are protected within the Landlord and Tenant Act 1954, which means that tenants have a right to renew the lease when it ends (subject to certain conditions being met).  Larger companies therefore often take shorter leases (sometimes for as little as 5 years) to give them flexibility to make future changes more easily.  Bear in mind that if you are borrowing to fund the costs of your refit your lender will want the lease length to be for at least as long as the loan repayment period.

Regulations

Pharmacy is unusual in that owners need to apply to the NHS to relocate their business, and consent will only be granted if the application meets the relevant legal requirements.  The regulations do not specifically consider the distance you wish to relocate the pharmacy; instead, they look at the implications for your existing patients.  It is important to take specialist advice on this matter before you start incurring property or legal costs.

What next?

As outlined above, relocating your pharmacy is not necessarily straightforward as there are number factors to take into account, so the process can be both complicated and lengthy.

At PSC we can provide you with advice on all the matters discussed above, so if you are considering relocating your pharmacy please contact us for an informal chat.