Lebo: Welcome, Walgreens Part Deux

Why does Walgreens want to build a store next to St. Clair Hospital, across the street from an existing Eckerd?

From the June 6, 2005 "Drug Store News":

"Meanwhile, as Rite Aid and Brooks-Eckerd smashed heads, Walgreens was pulling the old end-around, quietly opening its first store in the Pittsburgh suburb of Crafton, Pa., just before last Thanksgiving. It was one of the last of the major cities in the United States in which Walgreens had been absent. The plan is to ramp up quickly and develop critical mass in the market within a few years--the same way Walgreens enters every other market.

"If you look at the largest metropolitan areas of the country that we are currently not in, Pittsburgh would be near the top of the list," explained Walgreens spokesman Michael Polzin. "There is a lot of opportunity there and a lot of population to serve. And we think the sites are available for us to be successful."

In addition to Brooks-Eckerd and Rite Aid, Walgreens also has the likes of CVS, the No. 3 chain in the market in terms of share of pharmacy sales, a most formidable player to say the least. With 10 fewer stores operating in the area in 2004, CVS drove 15.5 percent of local pharmacy sales versus Rite Aid's 13.5 percent share. And while Pittsburgh may not always have been a major priority for CVS, that is starting to change, noted James Kelly, vice president of investments and retail at Grubb & Ellis, a major commercial real estate advisory firm.

Still, many believe that not only is there more than enough business to go around at present, there's more still on top of that. Pittsburgh is a growing market. "We are underretailed still, apparently to the tune of about 4 million square feet in this market," Kelly explained. "The retail dynamics are excellent right now."

Framing that opportunity, Kelly said is a large senior population and a mass influx of young professionals and new families--something the area hasn't seen in quite some time.

"We had a perception of young people at one point leaving [Pittsburgh]," Kelly said. "A lot of that had to do with [Pittsburgh's transformation] through an industrial ]economy] to a service economy."

But younger people are coming back into the area, he said, crediting the region's strong university system for attracting a more youthful vibe to the area.

And as interest in the market has grown, so, too, has the value of commercial real estate in Pittsburgh in the last few years. The city has attracted the interest of several real estate investment trusts, a trend that is expected to continue, according to Grubb & Ellis. "[Since] Walgreens came in, the prices [for retail real estate] have gone through the roof, and the competition for the best sites is wild," Kelly said.