How Veterinary Real Estate is Quietly Becoming the Next Defensive Net Lease Play

Over the past year, I’ve seen more buyers asking about veterinary-occupied real estate than ever before. I’ve closed two vet clinic transactions and have another currently on the market. Each has offered cap rates above 7% and drew multiple offers within a week.

Investors are looking for yield that still comes with credit. These properties tend to check both boxes. They offer stronger tenancy than typical mom-and-pop retail but better returns than many corporate net lease tenants today.

What’s interesting is how resilient these assets have been, even when the story isn’t perfect. Older buildings, shorter remaining lease terms or double net structures aren’t scaring off qualified buyers if the location and operator make sense.

Why Investors Are Paying Attention

Higher interest rates have forced investors to look for places where they can still capture returns without moving too far down the credit curve. Veterinary properties have become one of those spaces.

A few reasons stand out:

• Balanced yield: Nationally, veterinary real estate trades at an average cap rate near 7%. My own listings have all been above that level. 
   
• Stable demand: Pet ownership has held steady at about two-thirds of U.S. households, supporting consistent spending on veterinary care. 
   
• Defensive tenant base: Clinics are service-driven, location-bound and can’t be replaced by e-commerce.

Buyers are telling me they see these assets as a way to find yield without taking on volatility. Many of them were previously active in retail or single-tenant medical and are now diversifying into the veterinary space.

For lenders, these assets also offer attractive fundamentals. Veterinary operators typically maintain healthy rent coverage and consistent occupancy, giving underwriters comfort even in a higher-rate environment. Debt quotes have remained competitive for well-located, credit-backed tenants.

Case Study

Earlier this year, I listed a vet care center property in the Mid-South region. The clinic sat across from a $160 million mixed-use redevelopment. It had just 4.5 years of term remaining and a double net (NN) lease structure where the landlord covered roof, structure and HVAC.

Ordinarily, that would have limited interest, but the opposite happened. We received several offers within two weeks, including both local and out-of-state buyers. The property ultimately closed near asking price after competitive bidding.

The site had operated as a veterinary clinic for many years, and that longevity mattered. Buyers saw it as a business that wasn’t likely to leave—a tenant who had built loyalty, invested in its space and tied itself to the community.

What Buyers Want Right Now

Deals that get attention share a few key traits:

• Credit: Tenants with strong financials or multi-unit platforms. One of my current listings in Chattanooga is leased to a 108-unit operator with 15 years of term remaining. 
   
• Fundamentals: Good real estate in growth corridors or near complementary uses like medical or retail. 
   
• Yield: Cap rates higher than 6.5%. With current debt costs, pricing under that level is tough to make work.

When all three line up, we tend to see multiple offers within days.

The current environment is also creating new sale leaseback opportunities as operators use real estate to free up capital.

Where Buyers Hesitate

Even with growing demand, these transactions come with some pushback. The main concerns I hear are:

• Credit visibility: Buyers want to know who’s really behind the lease—whether it’s a single clinic or part of a larger group.
   
• Capital expenditures: Many veterinary sites are older buildings. Buyers often ask about the roof, parking and HVAC condition. When tenants are responsible for those systems, it helps mitigate concern. If not, make sure the property condition report is ready early so buyers can factor it into pricing. 
   
• Pricing gaps: If someone comes in too low, competition helps reset expectations. Having multiple offers keeps pricing realistic.

Transparency tends to solve most issues. The more we front-load information, the smoother the process goes. 

Markets and Momentum

Most of the buyer demand I’m seeing is in the Southeast and Midwest, where markets remain landlord friendly and supported by steady population growth. Investors continue to be cautious about states with less favorable tax treatment or complicated landlord-tenant laws.

Outside of vet deals, I’m also tracking opportunities in dental real estate. There’s a similar consolidation trend underway, and that could become another area where owners benefit from sale leaseback demand in the coming years.

The Bigger Picture

Private equity continues to play a large role in this space. More than 20 active PE-backed veterinary platforms are still expanding, and over $45 billion has been invested in the sector since 2017, according to a PitchBook analysis. That consolidation supports the credit side of these leases and keeps transaction volume moving.

It also creates some new considerations. As these roll-ups mature, we may see standardization in lease terms and more sale leaseback activity, but also a need to watch concentration risk if a single platform controls too much market share.

This environment reinforces the value of a coordinated approach between investment sales, debt and equity and loan servicing teams. Consolidation is accelerating liquidity events, and understanding both the capital stack and tenant landscape helps position owners and investors ahead of the next wave of activity.

What This Means for CRE Strategy

Veterinary assets are proving to be one of the few net lease categories where yield and credit are still aligning. For investors, they offer diversification and defensive income. For lenders, they present stable, financeable cash flow with proven occupancy trends. For developers and owners, they create opportunities to unlock equity through sale leasebacks while maintaining strong tenancy.

As demand builds, collaboration between investors, operators and financing partners will determine which assets outperform. Northmarq’s integrated platform helps align those perspectives to support smarter decisions across the cycle.

Final Takeaway

Veterinary real estate sits in a rare position right now, offering higher yield, essential services and long-term tenant stability. These aren’t speculative assets. They’re community-based businesses with customers who return year after year.

For investors, that combination has been hard to find in today’s market. It’s why more buyers are adding vet clinics to their portfolios, and why I think the momentum we’re seeing today will carry well into next year.