Walgreens Store Closures Fuel Lease Resale Market

Walgreens store closures are creating a fresh wave of retail lease sales as one of the industry’s busiest restructuring firms pivots from bankruptcy work to out-of-court downsizing assignments. A&G Real Estate Partners is now marketing 78 Walgreens leases and owned real estate assets nationwide following the pharmacy chain’s decision to shutter roughly 1,200 underperforming US stores.

According to CoStar, the assignment underscores how scarce retail space has become even as major chains continue trimming footprints. Landlords, off-price retailers, healthcare operators, and investors are all competing for a shrinking pool of available boxes, especially in established suburban trade areas.

A Restructuring Specialist Expands Beyond Bankruptcy

A&G has become one of the most recognizable names in retail restructuring after advising on several high-profile Chapter 11 cases, including Rite Aid, Bed Bath & Beyond, Party City, Big Lots, Joann, and The Container Store. The Melville, New York-based firm typically handles lease disposition work when retailers close stores during bankruptcy proceedings.

But Walgreens represents a slightly different playbook. Instead of restructuring in court, the pharmacy giant is shedding locations outside Chapter 11 as retailers increasingly avoid the rising legal and operational costs tied to formal bankruptcies.

That shift is becoming more common across retail. A&G executives told CoStar News they are also handling downsizing-related lease sales for Sleep Number, Leslie’s Pools, and SoulCycle outside bankruptcy court.

The Walgreens Portfolio Hits The Market

The Walgreens portfolio includes 60 leases and 18 owned properties spanning 27 states and Puerto Rico. According to A&G, the available properties range from 2,070 to 23,509 SF, while undeveloped land parcels stretch from less than an acre to roughly 21 acres.

Many locations sit in dense suburban corridors or central business districts. Others include inline and end-cap retail spaces. Walgreens accelerated its store reduction plans after Sycamore Partners agreed to acquire the company in a $10B take-private deal.

A&G has spent the past several months pitching the portfolio to retailers, investors, and lenders, including at this week’s ICSC Las Vegas conference. The firm expects interest from many of the same tenants that pursued former Rite Aid stores, including discount chains, specialty grocers, and medical users.

Barnes & Noble has already backfilled at least one former Walgreens location, according to A&G Principal Joe McKeska.

Former Drugstores Remain Tricky Retail Conversions

Despite healthy demand, former Walgreens stores come with operational hurdles that limit the buyer pool. Drugstores were built for pharmacy traffic patterns, not necessarily modern retail merchandising or logistics.

Many locations lack loading docks, feature unconventional parking layouts, and carry lower parking ratios than traditional big-box retailers prefer. McKeska told CoStar News that drugstores often provide roughly three to three-and-a-half parking spaces per 1,000 SF, while many retailers target at least 4.5 to five spaces.

That mismatch can complicate reuse strategies, particularly for larger-format chains. Still, limited retail development and years of store closures have tightened supply enough that many tenants are becoming more flexible on layout constraints.

According to CBRE’s 2026 retail outlook, US retail vacancy remains near historic lows as new construction continues to lag demand in many markets.

Rite Aid’s Lease Sales Set The Benchmark

A&G is leaning heavily on its recent Rite Aid track record to market the Walgreens portfolio. The firm handled more than 1,000 Rite Aid lease dispositions after the drugstore chain’s bankruptcy and wind-down last year.

According to A&G, more than 1,700 parties pursued Rite Aid locations, generating approximately $95M in lease-sale proceeds. Buyers included Dollar Tree, Five Below, Burlington, Ross Dress for Less, Ace Hardware, and several grocery operators.

The firm also sold 50 Rite Aid-owned properties to investors seeking redevelopment opportunities or new retail tenants. Specialty retailers including Hobby Lobby, Michaels, Cavender’s, Books-A-Million, and Barnes & Noble also acquired former Rite Aid and Party City real estate through A&G-led auctions.

That activity highlights how aggressively expanding retailers are pursuing second-generation space instead of waiting for new development.

Why It Matters

Walgreens store closures are becoming another major source of recycled retail inventory at a time when new construction remains constrained nationwide. Per CoStar data cited in the report, nearly 100M SF of retail space came back to market between September 2024 and December 2025 through restructurings and downsizing efforts.

For landlords, these lease transfers can create tension over tenant quality and center positioning. Earlier this year, a landlord objected in bankruptcy court after Burlington Stores bid on a former Saks Off 5th location, arguing the replacement tenant would damage the center’s luxury image.

Still, demand for well-located retail boxes remains strong enough that many owners are prioritizing occupancy over perfect merchandising alignment.

What’s Next

A&G expects bidding activity for the Walgreens portfolio to rise through mid-2026. Retailers are now finalizing expansion plans after the ICSC convention. Off-price chains remain the most active buyers. Discount retailers, healthcare providers, and grocers also continue pursuing second-generation space.

Walgreens’ downsizing strategy could influence other national retailers. More chains may shrink footprints without entering bankruptcy court. Retail vacancies also remain tight across many US markets. At the same time, replacement costs continue climbing. As a result, lease-sale firms like A&G could take a larger role in future retail restructurings and occupancy shifts.