To own or lease your pharmacy

There is little debate around the high leasing costs of your pharmacy. At an industry level, it is reported that rental increases have stabilised over recent years. However at an individual pharmacy level, the reality can be quite different. As a general rule of thumb leasing costs should be around 5% of your gross margin, this can be as high as 10% if you are in a major shopping centre.

Increasingly, we are talking with more owners who have purchased or are considering purchasing their own building as a way to manage leasing costs.

It is easy to spend money very quickly on getting the building ‘Fit for Purpose.’ All too often we see owners who have budgeted for the building purchase and left very little in the kitty for this activity. We have compiled a list of unseen and potentially unknown issues to be mindful of and most importantly to factor into your overall financial considerations and budget if you are considering purchasing your own premises.

Have a clear idea of what services and facilities you want to have as part of your pharmacy operations. This will set the framework for the scope of works needed. Remember it is more costly to re-work and make changes once works are in progress.

What type of building foundations do you have? Strip, raft, pad, column are some of the variations out there. Some foundations are easier to work with than others when it comes to moving services like plumbing and power. Making significant changes may require consultants to become involved to ensure that the integrity of the structure is maintained.

Many older buildings (pre 1985) had asbestos in materials for strength and durability. This may include vinyl floor tiles, cement sheeting, roof sheeting, roof ventilators, electrical switchboards, downpipes, flashings, door mouldings, gutters, awnings and cladding. These are not dangerous if they are in good condition and remain undisturbed. However, you are likely to be upgrading the areas and your builder will need to be qualified to remove asbestos or bring in someone who is. They will need to safely dispose of the materials which comes at a higher cost than general building materials.

Upgrades and modifications to utilities infrastructure e.g. electrical and plumbing. The services you are putting into your pharmacy along with heating and cooling requirements may require an electrical switchboard upgrade and an increased capacity compared to what is currently there. From a plumbing perspective, plumbing for sinks and toilets are a consideration and costs will be driven by your foundation type.

If your building is heritage listed or has any heritage overlays this may impact what you can do to the exterior and interior of your building. You may need to shore up the existing features and may have limitations around the façade and internal design elements. Working around the various elements may take additional funds.

Upgrade to current Australian building standards. There are loads of resources which you can access to understand the details and what is applied in various situations. The general rule of thumb ‘Fit for Purpose’ is applied, and a reputable builder and designer will understand what is required in your situation. Generally, you will need to think about disability access, ingress/egress, plumbing and electrical.

Consultants, consultants and more consultants. With the level of regulation, certification and compliance there appears to be an entire industry of consultants in place to support the building industry and lay off risk! This includes building engineers and private certifiers. Make sure you allocate some funds support, they can be worth their weight in gold, ultimately saving you time and money.

Moving your pharmacy – there are rules which apply to re-locations which can vary by state. It is important to know what paperwork and plans need to be submitted and build this into your overall timeframe.

General fit out costs. Make sure you have enough in reserve to appropriately for out the building. There is a lot to think about here and costs will be in part linked to the services your pharmacy offers. We have provided a summary of factors which impact costs here considerations here: How much will a refit cost

Planning permits and Council approvals all cost money – know which ones you need and make sure you build this into your budget.

Be aware of your Landlord responsibilities and the ongoing responsibilities including maintenance and repairs, rates and yearly subscriptions which will include an annual fire safety check such as portable fire extinguishers, fire blanket, emergency lighting, exit lights, smoke alarms, fire hose reels.

Remember, nothing is impossible – you can do anything if you have the appropriate budget in place from the outset.

Your accountant or financial advisor are in the best position to be able to provide you with the appropriate financial advice. Further to this the Guild has excellent resources.