Apótekið er við hliðina á bankanum.

In Icelandic, the is usually attached to the end of the noun instead of being a separate word.

• apótek = pharmacy
• apótekið = the pharmacy

The same thing is happening later in the sentence with bankanum, which means the bank in a case form.

Er means is. It is the present tense of the verb að vera (to be).

So:

• Apótekið er ... = The pharmacy is ...

Við hliðina á is a very common fixed expression meaning next to or beside.

Literally, it is something like by the side of, but in normal English you would usually translate it as:

• next to
• beside

It is best to learn við hliðina á as one whole chunk.

Because við hliðina á is an idiomatic phrase built from several parts.

A rough literal breakdown is:

• við = by
• hliðina = the side
• á = of/on/at, depending on grammar and context

But learners usually do better if they treat the whole thing as one unit:

• við hliðina á + dative = next to

So you do not need to translate each word separately every time.

Here, hliðina is the form required by the expression.

More specifically, it is the definite accusative singular form of hlið in this phrase. That happens because við takes the accusative here.

So:

• við hliðina á = next to

For a beginner, the most useful thing is simply to memorize the full pattern rather than trying to rebuild it from scratch each time.

Because the noun after á in this expression is in the dative.

The base noun is:

• banki = bank

But after við hliðina á, you need the dative form:

• banka = bank in dative
• bankanum = the bank in dative

So bankanum is not a random form; it is the grammatically correct case after this phrase.

A very common Icelandic pattern is:

• accusative for movement toward a place
• dative for being in a place or location

Here, nothing is moving. The sentence describes where the pharmacy is located relative to the bank. That is why the location part uses the dative.

So a useful rule is:

• við hliðina á + dative = next to

Yes. This is a very natural, neutral sentence order:

• Apótekið = subject
• er = verb
• við hliðina á bankanum = place/location phrase

So the sentence is structured like:

• The pharmacy
  • is
    • next to the bank

You can also move the location phrase to the front for emphasis:

• Við hliðina á bankanum er apótekið.

That is still grammatical, but the original version is the most straightforward.

A few helpful points:

• ð is usually like the th in this, although at the end of a word it can sound very light.
• hl in hliðina is a special Icelandic sound. Many beginners approximate it with a plain l at first.
• Icelandic stress usually falls on the first syllable of the word.

A rough beginner-friendly pronunciation might be:

• Apótekið ≈ ah-PO-teh-kith
• er ≈ ehr
• við ≈ vith
• hliðina ≈ HLI-thi-na
• á ≈ ow
• bankanum ≈ BAN-ka-num

These are only approximations, but they are enough to get you started.

You could, but it would not mean exactly the same thing.

• við bankann = by the bank / at the bank
• við hliðina á bankanum = next to the bank

So if you want to say specifically that the pharmacy is beside the bank, the full phrase við hliðina á bankanum is better and clearer.