Agenda - Planning Commission - 01/04/2000

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In the wave of chain drugstore expansion, numerous cities and towns have faced the choice between economic development and their historic architecture, between jobs and downtown character. If prepared ahead of time, a community should not have to forfeit either. Success in working out better solutions with the chains almost always depends on having the right land-use controls or design review ordinances in place before the chain drugstore arrives. In historic districts or commercial areas with the necessary planning and zoning regulations, the chains have done a much better job. In some major cities, such as New York and Philadelphia, drugstore chains have voluntarily occupied historic buildings instead of supplanting them. Drugstore History An aging population and the rise of managed health care are largely responsible for the extraordinary growth of the drugstore industry--growth characterized by acquisitions of other chains, both large and small, by the opening of hundreds of new stores, and the relocation of many existing stores to larger, more prominent spaces. Until recently, drugstore chains often located in strip shopping centers frequentl)~ anchored by supermarkets. As some supermarkets began to open pharmacy departments, these locations naturally became less attractive to the drugstores. The search for desirable new sites led the chains to high-traffic intersections downtown, or the corner of "Main and Main," as the real estate industry often describes the most prominent downtown commercial crossroads. Both Walgreens and Rite Aid officials have used the term to characterize their prime locations. The freestanding store with a drive-through window, introduced by Walgreens in the 1990s, has now become the industry standard, adopted by even the smaller regional chains. The typical new store has a footprint ranging from 10,500 to 15,000 square feet, can be found on conspicuous corners, and has plenty of on-site parking. Walgreens spokesperson Yvette Venable says, "Our goal is to offer convenience. A parking lot in front of the store allows customers to pull up to the front door, get in, get what they need, and get on their way." Walgreens leads the industry in sales, generating more than $17.8 billion in fiscal 1999, up more than 16 percent from the year before. CVS ranks second, even though the corporation operates about 1,300 more stores than Walgreens (approximately 4,100 CVS stores compared with approximately 2,800 Walgreens stores). The CVS chain is actively engaged in an ambitious development program with plans to open about 440 stores this year. Meanwhile, Rite Aid, which, according to its 1999 annual report, "continued the most aggressive real estate expansion program in the history of the drugstore industry," is beset with rumors on Wall Street that it may merge or downslze. Since last spring, the corporation has withdrawn from a number of projects, some of which generated considerable local controversy. During fiscal t999 (ended March 31) the company opened 578 stores. The Rite Aid 1999 annual report states: "Our plans for fiscal 2000 call for a more manageable program of 300 store openings." Walgreens has chosen to forgo the acquisition of other drugstore chains, a strategy its competitors have pursued vigorously. The Anne Stillman is the aut/~or of Better Models for Chain Drugstores, pttbtished this year by the National Tr~tst for Historic Preservation. company concentrates instead on building and relocating its own stores and has a goal of operating 3,000 stores by 2000. In 1997, CVS more than doubled its size by acquiring Revco, adding approximately 2,400 stores, while Rite Aid bought Thrifty Payless, a large western chain with more than 1,000 stores, the same year. CVS, Rite Aid, and Eckerd have added smaller drugstore chains to their corporations. On its web site, Walgreens characterizes this activity by its rivals as a "feeding frenzy." Site Plans and Store Design The Walgreens web site also states: "We... go to great lengths to see that our new stores preserve the visual integrity of the surrounding area." The web site illustrates this statement with a photo of Walgreens on Market Street in a busy section of downtown San Francisco. The drugstore occupies a storefront on the ground floor ofa multistory 1908 building designed by noted bay area architect Louis Hobart. The building abuts the sidewalk in keeping with the other buildings on the block. An aging population and the rise of managed health care ore largely responsible for the extraordinary growth of the drugstore industry Large display windows reflect the street activity, i~nd the upper floors contain offices. Nevertheless, the web page depicts a typical Walgreens site plan as one with an asphalt parking lot surrounding the structure. But changes are afoot in one big city. In a landmark arrangement, the Walgreen Company signed an agreement with the city of Chicago in April. The corporation, with headquarters in the Chicago suburb of Deerfield, agreed to a series of "design elements" as "minimum standards for construction of Walgreens stores" in Chicago.