Walgreens After Sycamore: What Shrink-to-Core Means for Retail Real Estate

Thousands of Walgreens corners are about to be repriced. Sycamore Partners closed its take-private of the drugstore chain on Aug. 28, ending Walgreens’ public run. Media reports peg the equity value near $10 billion, with some citing totals in the low $20 billion. 

What Sycamore really bought is control of some of the country’s most visible intersections and the right to decide how those corners get repositioned. For years, long leases and corporate guarantees made Walgreens a default net-lease anchor. That assumption is now in play.

Walgreens’ slide came from years of overreach and underperformance, not one dramatic failure. The 2014 Alliance Boots acquisition shifted leadership overseas, while the failed Rite Aid merger added overlap and weaker sites. Costly health care ventures like VillageMD drained capital without fixing store operations. By 2024, dividend cuts and a $5.8 billion impairment made clear that the model was breaking down.

By the early 2020s, service was uneven, labor disputes grew, and closures mounted. Customers felt the change when they walked through the door, and confidence slipped with it.

Sycamore isn’t trying to rebuild the old Walgreens post-acquisition. The plan is for a leaner, more disciplined company. That means fewer stores, tighter cost controls and sharper focus on the most productive corners. Overlapping or underperforming sites are likely to close. Non-core operations could be spun off. Even long leases once considered untouchable may come back to the table.

What remains unclear is the pace. Sycamore could push a disruptive wave of closures or take a phased approach. Most market watchers expect a midterm pace, which could chip away at investor confidence as the store count shrinks.

Why does this matter for commercial real estate? Walgreens has long been one of the most common tenants in single-tenant net-lease portfolios. Original leases often ran 20 to 25 years, though many now average closer to 10 to 15. Those corporate guarantees once gave investors and lenders a strong sense of security, but that perception is shifting.

Pricing tells the story. Cap rates that hovered in the mid-6 percent range during 2024 are moving into the 7 percent range and higher in 2025, with spreads widening by market, lease term and credit. As of March 2025, roughly $6 billion of CMBS exposure ties directly to Walgreens, keeping lenders on alert as renewals approach.

At the same time, each closure creates an opening. CVS is positioned to capture prescription transfers. Grocery chains have taken share during prior pharmacy exits. Behavioral health, urgent care and nonprofits such as Goodwill have also backfilled boxes where occupancy costs pencil. Prime corners remain attractive to daily-needs users. Sentiment is split, but the pattern is clear: Strong sites backfill, weaker ones do not.

Prime corners remain attractive to daily-needs users. Urgent care, dental, QSR, discount grocers and value retailers are active backfill candidates. But sentiment is split. Some see resilient demand and quick reuse at Class A sites. Others warn that renegotiations and credit pressure will ripple through portfolios. Both views point to the same outcome that strong corners backfill, while weaker ones do not.

Not every box will backfill the same way. Infill sites can be subdivided for multiple tenants or repositioned into medical, grocery or mixed-use projects. Municipalities will shape speed and feasibility. As more sites convert into ground leases, entitlement processes become pivotal, and cities may need to rethink zoning when visible corners sit dark.

Here are some signs to track: 

• Credit standing: Ratings changes will move pricing.
• Geographic concentration: Closures are likely clustered in the Midwest and coastal markets with higher occupancy costs.
• Lease renegotiations: Early recasts will set benchmarks for term, rent and spreads.
• Backfill velocity: The pace at prime intersections will set the tone for lenders and investors.
• Municipal response: Entitlements and zoning will determine how long prominent corners sit vacant.

Landlords should model rent resets, review maturities, and prepare for subdivision or reuse. Lenders need to stress-test portfolios with shorter lease certainty. Investors should focus on infill with strong tenant depth, budget for capex and evaluate conversions where zoning allows.

The Walgreens reset is bigger than one tenant. Sycamore’s strategy could play out as a disruptive wave of closures or a slower pullback. Either way, investor confidence will erode gradually as more locations come offline.

The impact won’t be isolated to Walgreens. Their footprint has shaped net lease fundamentals for decades, and this reset will influence underwriting standards across the sector. The fallout isn’t catastrophic, but it will change how decisions get made.

Bryn Feller is senior vice president and managing director of the Chicago office of capital markets firm Northmarq.