Here’s a fun fact: According to the 2024 American Pet Products Association National Pet Owners Survey, 82 million U.S. households own a pet. Another fun fact? These households spent $39.1 billion in veterinarian care and product sales.

Increased demand for veterinarian medical services is one reason commercial real estate investors are eyeing veterinarian clinics and practices as additions to their portfolios. Connect CRE reached out to Terravet Real Estate CEO Daniel Eisenstadt for additional insight on this asset type.

Connect CRE: How are veterinary practices defined from a real estate perspective?

Daniel Eisenstadt: Veterinary practices are a very niche form of commercial real estate, encompassing characteristics of all of the traditional asset classes. They are medical offices in the sense that they have unique and costly build-outs and are in sticky locations. Yet general practices, which are the majority of veterinary locations, also have good curb appeal and tend to be in major retail corridors with relatively good visibility.

Specialty/Emergency animal hospitals are more destination locations; they’re more sought out in the case of an animal medical emergency versus retail, where convenience is a major factor. These clinics are often found right off major traffic corridors, highway intersections and sometimes even in light-industrial settings.

Connect CRE: How is the veterinary sector shifting?

Daniel Eisenstadt: The sector has experienced significant changes in recent years, particularly with increased demand for veterinary and boarding services driven by the rise in pet ownership. Property owners have seen a growing interest from institutional investors, including private equity funds, due to the consolidation within the veterinary industry as a result of an influx of private equity investors on the practice side. While the practice side of the business is less split, the real estate side continues to be extremely fragmented, with the majority of veterinary real estate being held by veterinarians who own one or two locations.

Connect CRE: What makes veterinary real estate attractive to investors?

Daniel Eisenstadt: Veterinary real estate is attractive to investors because of the sticky nature of the tenants. Animal hospitals, specifically general practice locations, often derive their patient base within a five—to ten-mile radius of their location. Once a practice is established and profitable, the last thing a hospital wants to do is move, especially when considering the extensive build-out that a modern veterinary practice requires. In short, moving is expensive and can threaten a practice’s patient base.

Connect CRE: So, what should investors consider when evaluating this real estate type?

Daniel Eisenstadt: Like most net leased real estate, the evaluation of a veterinary practice should be comprehensive and consider location, lease and credit considerations. Curb appeal, rent and price-per-foot relative to market should be considered, along with credit of the underlying guarantor of the lease and lease instrument structure, all of which are incredibly important. Given the heightened demand for veterinary services and the trend toward purpose-built facilities, the needs of the practice are also important to consider – will the practice need to expand? Does the current site allow for expansion? How many full-time veterinarians are employed at the facility, and what is their production? These are all things to consider when evaluating the practice.

As for Terravet, we plan to continue expanding our portfolio of high-quality veterinary real estate. This includes growing Terravet REIT, which offers a tax-advantaged solution for veterinary real estate owners and provides an opportunity for diversification.

Connect CRE: What is your outlook for this sector and why?

Daniel Eisenstadt: The outlook for the veterinary real estate sector is positive. The continued increase in pet ownership and demand for boarding and veterinary services, combined with the sector’s resilience and the interest from institutional investors, suggests ongoing growth and stability in this market.