Current Market Overview
The veterinary real estate market remains active in 2025, though it’s evolving in response to broader economic conditions. Rising interest rates, limited inventory in high-demand urban and suburban corridors, and the ongoing consolidation of veterinary practices by corporate buyers have added new layers of complexity to real estate transactions in this space. Demand for standalone veterinary-appropriate properties, particularly those that include specialized buildouts like surgical suites, kennels, and treatment areas—remains strong. As a result, real estate is playing an increasingly strategic role in both practice sales and succession planning, with ownership decisions often tied directly to long-term financial goals, operational flexibility, and transition strategies.
In this environment, veterinary professionals must be equipped not only to evaluate real property in traditional terms, but to understand how real estate decisions impact the value, function, and transferability of their practices. Below are key legal and strategic considerations that veterinarians and industry stakeholders should keep in mind.
1. Dual Nature: Real Estate and Practice
Veterinary real estate transactions often involve both the underlying property and the practice itself. These deals can be structured as bundled transactions or as separate sales, but in either case, distinguishing between the value of the real estate and the value of the business is essential. This distinction impacts tax treatment, financing, and the overall deal structure.
Strategic Tip: Engage a law firm—or an attorney—with experience in both real estate and corporate veterinary practice sales to ensure proper valuation allocation and seamless coordination between the property and the business components of the transaction.
2. Zoning and Use Restrictions
Veterinary practices face unique zoning challenges, especially in mixed-use or urban areas. Clinics may require special use permits due to concerns around noise, animal boarding, waste disposal, or parking. Failure to address these issues early can delay or derail transactions.
Legal Consideration: Conduct thorough due diligence on zoning classifications, current and grandfathered use rights, and any restrictive covenants or HOA limitations that may affect the property’s use as a veterinary facility.
3. Environmental Considerations
Veterinary facilities often involve the handling and storage of pharmaceuticals, biological waste, X-ray chemicals, and other regulated substances. Older facilities may raise concerns regarding historic waste disposal practices or onsite crematoriums.
Strategic Tip: Address environmental issues proactively by commissioning a Phase I Environmental Site Assessment early in the process and negotiating indemnities or remediation obligations where appropriate. Buyers, sellers, and lenders all benefit from clarity in this area.
4. Lease, Purchase, or Sell?
Each option comes with unique legal and financial implications:
Leasing:
Offers flexibility and lower upfront capital requirements—ideal for early-stage or growing practices. However, lease restrictions, annual escalations, and lack of long-term control may limit growth or profitability.
Purchasing:
Provides equity growth, stability, and tax advantages, including depreciation and mortgage interest deductions. Ideal for established practices with long-term goals. However, capital requirements and market volatility can pose risks.
Selling:
For practice owners nearing retirement, selling the real estate (alongside or separate from the practice) can be a key part of exit strategy planning. Owners may also choose to retain the property and lease it back to the buyer for continued income post-sale.
Strategic Tip: Consider tax planning, timing, and market conditions when deciding how to structure real estate transfers in conjunction with practice transitions.
5. Negotiating Favorable Terms
For Purchasers and Sellers:
Well-drafted purchase agreements should address zoning compliance, environmental assessments, inspection contingencies, and clear financing timelines. Sellers must be prepared to disclose material defects and potential compliance issues.
For Tenants and Landlords:
Veterinary leases must reflect the specialized nature of the business. Buildout needs for equipment-heavy spaces—such as surgical rooms and kennels—should be considered in tenant improvement allowances and lease length.
Key Clauses to Consider:
- Use Clause: Ensure broad language to allow for general veterinary services, including overnight boarding and specialty care.
- Assignment/Subletting: Critical for future practice sales. Language should permit assignment to qualified buyers without undue landlord approval.
- Renewal Options & Rent Escalations: Secure predictable terms to maintain location stability.
- Repair & Maintenance: Clearly allocate responsibility to prevent disputes related to equipment, HVAC, or structural issues.
Strategic Tip: Work with legal counsel familiar with veterinary operations to draft or negotiate leases that protect the long-term viability of the practice.
6. Lender Considerations
Lenders typically require appraisals, business performance data, and environmental reviews. When a real estate transaction is coupled with a practice acquisition, lenders may demand separate collateral agreements for each asset class and require first-position security interests.
Strategic Tip: Engage with lenders early to align deal terms and closing timelines. Ensure legal documents accommodate lender requirements related to liens, guarantees, and title insurance coverage.
Veterinary real estate transactions are far from routine. They demand a nuanced understanding of not only real property law but also the operational and financial realities of running a veterinary practice. Whether you’re buying, selling, or leasing, a well-informed, strategic approach—grounded in legal experience specific to the veterinary industry—can prevent costly surprises and set the stage for long-term success.
Engaging a full-service law firm with deep experience in veterinary real estate and practice transitions ensures that both the property and the practice are positioned for growth, compliance, and profitability.
