Vets Go Upscale to Care for Pets (and Their Owners)
Vets Go Upscale to Care for Pets (and Their Owners)
When Allegra Brochin and her boyfriend adopted Sprinkles, a feisty white Maltese, last year, they set about finding pet care.
“I immediately started looking,” said Ms. Brochin, 23, who works as a communications coordinator for Michael Kors in New York.
She saw ads for Bond Vet pop up on her Instagram feed, and when she took in Sprinkles for her shots, she was won over by the look and feel of the clinic, “especially when it’s for a pet you care about and feel responsible for,” she said.
Ms. Brochin is not alone in her devotion to her pandemic pet. More than 12.6 million households adopted animals from March to December of last year, according to the American Pet Products Association, helping to propel an increase in visits and revenue to veterinary offices, as new owners took pets in for their first checkup.
The heightened demand for veterinary services has drawn investors and others to the market. Landlords — who might previously have spurned tenants associated with unpleasant odors and noise — are more amenable to leasing to the clinics after a year when the vets paid their rent while other businesses fell behind. And architecture firms that specialize in the design of vet space are busier than ever.
Tech-savvy start-ups like Bond Vet are promising a reinvention of the experience, with phone apps, round-the-clock telemedicine and boutique storefronts where refreshments (for pet owners) run to LaCroix and cold brew.
The pet care business is riding a growth spurt: Morgan Stanley projected that it would be a $275 billion industry in 2030, up from $100 billion in 2019, with vet care the fastest-growing segment over the next decade.
“Ten years ago, there was a baby boom,” Arash Danialifar, chief executive of GD Realty Group, a California company that has leased space to a veterinary start-up, said about the proliferation of shops selling children’s fashion. “Now it’s all about pets.”
Start-ups make up fewer than 1 percent of the more than 28,000 vet practices across the country, but they are growing quickly.
In New York, Small Door Veterinary recently announced it had raised $20 million and planned to go from a single location to 25 by 2025. The firm operates on a membership model, with 24/7 telemedicine and waiting areas with arched, white oak-paneled alcoves that give owners and their pets an intimate place to chill before appointments. Designed by Alda Ly Architecture, the clinics are rented storefronts of 2,000 to 3,000 square feet and cost about $1 million to kit out, said Josh Guttman, Small Door’s co-founder and chief executive.
Bond Vet, another New York start-up, models itself on CityMD clinics; it recently raised $17 million and now has six offices, including its first suburban location, in Garden City on Long Island.
And in Los Angeles, another membership-based company, Modern Animal, has an office in a high-end shopping district in West Hollywood, with three more to come in the city by year’s end and a dozen clinics in California by 2022, said the company’s founder and chief executive, Steven Eidelman.
“I don’t think as a landlord I would have been encouraged to have a vet clinic 15 years ago, but today I would,” said Mr. Danialifar of GD Realty, Modern Animal’s West Hollywood landlord.
Rebecca Hilton, 34, who lives in Santa Monica, Calif., joined Modern Animal after adopting two kittens, Pinot and Lula, last year and has made use of the company’s app to communicate with the office. She has talked to the doctor via video-chat and has used the app to ask questions and send photos.
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“I may have called at 2 a.m. once when one of the cats was acting weird,” she said. “It’s helpful not to have to go in every time.”
The health system for pets is advancing in other ways that mirror human health care. Meridian Veterinary Real Estate, a developer founded in Dallas in 2016, builds animal hospitals of 10,000 to 25,000 square feet with departments for surgery, oncology, internal medicine and other specialties — often equipped with as much as $10 million in equipment for things like X-rays, CT scans and M.R.I.s.
Such developers work with architecture firms versed in vet design, including Rauhaus Freedenfeld & Associates, which is fielding twice as many calls for new business as it did before the pandemic, said Warren Freedenfeld, a principal at the firm.
His business and others design interiors with materials that absorb noise — both high frequency (howling) and low frequency (barking) — and without free-standing columns or sharp corners that might invite a dog to lift a leg. Clinics are designed to be “fear free” with soothing colors and, often, separate zones for cats and dogs.
Although there may be a flurry of activity now, veterinary real estate has been evolving for decades.
Traditionally, vets owned their own practice as well as the building that housed it — often an actual house. That started to change in the 1980s and ’90s with the advent of corporations, known as consolidators, that began to buy up veterinary practices, attracted by the stability of the businesses. The corporations, often backed by private equity or other investment funds, typically take charge of back-office functions such as payroll and the ordering of supplies, leaving the clinical side of the practices to the vets.
Around 25 percent of veterinary practices “have been sold to corporate,” said Karen E. Felsted, a veterinary consultant. Some consolidators own hundreds of pet hospitals — “the McDonald’s of the vet space,” said Brian Wine, founder and chief executive of the Wine Group, a brokerage firm that specializes in veterinary real estate.
But most consolidators have not been interested in the actual buildings. The vets thus became landlords, receiving rental income from the corporate groups and retaining the ability to sell their buildings to associates on retirement.
Now, however, the animal doctors have other options for their properties.
Some private equity firms and real estate investment trusts have divisions devoted to veterinary real estate. And increasingly, companies dedicated to it are springing up.
Terravet Real Estate Solutions, founded in 2016, now owns more than 100 buildings in 30 states, many of them housing practices owned by consolidators. For instance, Terravet owns the building housing CountryChase Veterinary Hospital in Tampa, Fla., and the American Veterinary Group, which operates practices across the South, owns the business.
Hound Properties, founded two years ago, has been buying buildings with an investor-backed fund. And Vetley Capital, started this year, has a portfolio of 20 buildings in nine states, most of them on the small side, ranging from 2,500 to 4,000 square feet and costing around $1 million, said Zach Goldman, the company’s founder and president.
The price of real estate has risen, but the returns are generally modest. “It’s the ultimate slow and steady income,” said Tripp Stewart, co-founder and chief executive of Hound Properties, who is also a practicing vet.
Despite the interest, there are obstacles to opening pet hospitals. Zoning sometimes limits their locations. In Pasadena, Calif., GD Realty had to request a zoning change for Modern Animal.
Because such businesses revolve around animal doctors, who are in demand as veterinary companies expand, there are shortages of vets in some parts of the country, according to the American Veterinary Medical Association.
The improvements in vet facilities are thus aimed not only at pets and their owners, but also at the doctors themselves, who can choose where they want to work.
“It used to be that when you went to a vet, it was a family vet who worked out of a kitchen in an old house,” said Dr. Stewart. “Today, you’re not going to attract new young vets to an old house.”