The veterinary industry is at a pivotal moment. With challenges, such as relatively high interest rates, labor shortages, increasing regulatory oversight, and climate impacts, 2025 presents both hurdles and opportunities for veterinary practices. Now more than ever, as interest rates appear to be on the downtrend, it is important to consider what the year brings for both real estate investors and veterinary practice owners. To succeed in this evolving landscape, veterinary professionals must innovate and stay ahead of transformative forces. Quality animal care is only one piece of the pie. The veterinary industry has become a complex business environment that requires strategic thinking, and a practice’s real estate may be far more valuable above and beyond its monetary value. Rising interest rates, labor shifts, and climate challenges present obstacles and opportunities; by staying informed and fostering supportive work environments, veterinary property investors can protect asset value while serving communities and pet owners. Photo courtesy Terravet Real Estate Solutions A more focused investment approach Higher interest rates have increased borrowing costs, creating financial pressures for real estate investors. However, veterinary real estate remains resilient compared to other sectors due to the essential nature of veterinary services. According to comparable real estate information available through major brokerage houses,1 it appears there were more veterinary real estate transactions between January 2023 and now compared to the entirety of 2021 and 2022. Considering early 2023 was the beginning of the high-interest rate period we have been experiencing, this is a further testament to the resilience of veterinary real estate. The increasing need for pet care, driven by rising pet ownership and longer pet life, continues to stabilize the market despite fluctuations in cap rates. This demand creates opportunities for both veterinary investors and practice owners to get creative. Specialized properties, such as emergency care centers and specialty clinics, can provide a buffer against broader commercial real estate market instability. Further opportunities exist because of financial strain in other industries. Over the coming years, desirable real estate previously occupied by pharmacies and other retail outlets experiencing distress may result in advantageous relocation opportunities for animal hospitals when compared to undertaking new construction projects. In 2024, Walgreens announced the closure of 1,200 stores over the next three years, making a large supply of high-quality real estate available.2 Often, it is far more economical to reposition an existing box into a veterinary hospital rather than build a new facility, which could create massive opportunities for specialty hospitals looking for refreshed space or to outgrow their current footprint. Additionally, climate change is reshaping investment strategies as extreme weather events increasingly impact property values and insurance costs. According to the National Centers for Environmental Information,3 there were 24 total loss events in the United States that totaled $1 billion or more, and the issue is no longer isolated to hurricane events, as 18 of the 24 major losses have been related to convective storms in the Midwest. Due to the increase in these types of events, there have been huge changes to wind/hail deductibles, and many policies now refuse to cover cosmetic hail damage. These events affect existing buildings and affect the cost of constructing new buildings, and older clinics age into obsolescence. To mitigate these risks, investors focus on properties in less vulnerable locations and upgrade existing facilities, such as reinforcing structures, improving drainage systems, and ensuring backup power sources. These measures can help reduce long-term vulnerabilities while maintaining property value. By aligning real estate strategies with evolving care needs and prioritizing resilience, veterinary real estate owners can navigate current economic and environmental challenges while positioning themselves for long-term growth. Strategic positioning amid regulatory shifts and workforce dynamics Corporate veterinary groups are moving the industry toward a more regulated healthcare model. They leverage their financial strength to expand through sale-leaseback transactions, which investors often prefer for the stability and scale they offer. Veterinary groups can secure more favorable lease terms, giving them an advantage over independent practices, especially in a market where credit quality and financial health drive investment decisions. New environmental and healthcare guidelines set precedents in bellwether states like California that impact veterinary operations and property investments nationwide.4 Clinicians must now account for more rigorous standards from waste management to energy efficiency. Facilities that proactively adopt sustainable practices to meet compliance while appealing to investors and eco-conscious clients will provide long-term operational savings. Additionally, today’s labor challenges underscore the need for facilities that attract and retain top veterinary talent. Non-compete clauses are becoming unenforceable across more states,5 meaning professionals have greater flexibility in choosing their work environment, raising the stakes for clinics to offer competitive and comfortable spaces. Real estate plays a central role here—modern, accessible, well-equipped facilities with features, such as ergonomic workspaces, natural lighting, and quiet treatment areas can boost morale and retention. Despite fluctuations in cap rates, veterinary real estate remains stable and resilient given the essential nature of veterinary services. Photo courtesy V1 Real Estate Photography & Video In 2022, Terravet and Brief Media sent an electronic survey to more than 4,500 contacts to get their opinion on veterinary real estate and its influence over recruiting and retention. According to the respondent pool, 96 percent said real estate was influential in recruiting talent, while 80 percent said it was more than somewhat influential in recruiting talent. Nearly 50 percent of respondents said something related to the building itself mostly impressed potential job candidates. Yet, despite those responses and opinions, 59 percent of respondents still believed their hospital was not configured in a way that would support the practice’s long-term needs. Surely, as recruiting continues to be a bottleneck and as interest rates come down, veterinarians and practice owners should be laser-focused on this. This ahead calls for strategic foresight and adaptability in the veterinary real estate sector. Rising interest rates, labor shifts, turmoil in other industries, and climate challenges bring both obstacles and opportunities for growth. By staying informed, planning proactively, and creating thoughtful work environments that attract and retain talent, veterinary property investors and owners can protect long-term asset value while continuing to support the essential services that communities and pet owners rely on. Daniel Eisenstadt is the founder and CEO of Terravet Real Estate Solutions. Before founding Terravet, Eisenstadt was a co-founder of Community Veterinary Partners, serving as president and chairman. Community Veterinary Partners has grown into a regional corporate operator of veterinary practices with more than 100 hospitals primarily located on the East Coast. Dan Feinberg is the president at and has more than a decade of experience in the healthcare and real estate sectors. He spent five years with the New York City-based NNN Pro Group, where he gained valuable experience underwriting net leased assets, negotiating leases, managing due diligence processes, and understanding how the institutional net leased marketplace perceives single-tenant, net leased real estate. Peter Kilkelly is the chief veterinary development officer for Terravet Real Estate Solutions and has more than a decade of experience in the animal health care and public accounting sectors. He began his career in the animal healthcare industry at Burzynski & Company, a veterinary-specific accounting firm, where he worked with veterinary practice owners across the U.S. to improve their practice’s financial health and maintain compliance with federal and state tax regulations. Most recently, he worked with VCA Animal Hospitals as a director of acquisitions. References Matthews Real Estate Investment Services. Northmarq. (2024). Walgreens Boots Alliance. (2024, October 15). Walgreens closing 1,200 stores over next 3 years, 800 more under evaluation. Yahoo! Finance. Billion-dollar weather and climate disasters. Billion-Dollar Weather and Climate Disasters | National Centers for Environmental Information (NCEI). (2024, November). California Veterinary Medical Board. (n.d.). Veterinary Medicine Practice Act. Noncompete agreements: What veterinary professionals need to know. American Veterinary Medical Association. (2024).
