The Most Recession-Resilient Real Estate
Why Healthcare and Veterinary Assets Are a Safehaven in 2025 Despite Market Correction
In an era marked by economic uncertainty, commercial real estate investors are gravitating toward asset classes that offer stability and consistent returns. The recent week’s news of the 500,000 gap between residential seller listings in the U.S. and active buyers has sent shockwaves to values, and the mounting CMBS debt maturity issue I have written about at length previously here, here, and here, have catalyzed even more interest in this gravitational pull to stable and quality cash flows.
However, as I placed my original bets over two decades ago on the healthcare and veterinary property niche, they have continued to emerge as standout performers in 2025, demonstrating resilience amid market fluctuations. Today’s article delves into the factors driving this trend and explores how investors can capitalize on these opportunities.
The Allure of Stability in Unstable Times
The commercial real estate landscape has faced challenges, including rising interest rates and shifting tenant behaviors. However, healthcare and veterinary properties have remained steadfast, offering investors:
Essential Services: Demand for medical and veterinary services persists regardless of economic conditions.
Long-Term Leases: Tenants, often backed by substantial capital, commit to extended lease terms, ensuring consistent cash flow.
Triple Net Leases: These arrangements place the responsibility of property expenses on tenants, reducing landlord liabilities.
Low Vacancy Rates: The specialized nature of these facilities leads to high tenant retention and minimal downtime.
According to CBRE, inflation-adjusted consumer spending on healthcare goods and services is projected to rise by 2.5% in 2025, outpacing the 1.9% growth for overall consumer spending. (cbre.com)
A related, in-depth post at the end of this article is from my archives on these demographic forces, if you'd like an additional detour after this piece.
Demographic Shifts Fueling Demand
The aging U.S. population is a significant driver of healthcare real estate demand. By 2030, all baby boomers will be over 65, resulting in a significant increase in the senior population to 20% of the U.S. total. This demographic is expected to account for 37% of national healthcare spending, necessitating the expansion of outpatient centers, specialty clinics, and senior living communities. (globenewswire.com)
Veterinary Real Estate: An Overlooked Gem
The veterinary sector is experiencing robust growth, with industry-wide revenue projected to reach $69.4 billion in 2025. Private equity interest remains strong, with firms focusing on practices that demonstrate solid financial performance and operational efficiency. (ibisworld.com, martilawgroup.com)
Real estate plays a strategic role in veterinary practice transactions. Practices with underutilized space or facilities that can be easily converted into additional exam rooms are in higher demand. (martilawgroup.com)
Case Study: Delray Beach Medical Office
Alliance Consolidated Group's acquisition of a medical office in Delray Beach, Florida, exemplifies the potential of healthcare real estate investments:
Location: Prime suburban area with growing demand for medical services.
Occupancy: 100% leased to tenants, including primary care, imaging, and behavioral health clinics.
Lease Terms: Ten-year agreements with annual rent escalations.
Investment Strategy: Stabilized core asset with projected returns of 22–25% IRR.
This off-market deal was secured through Alliance's extensive network, highlighting the importance of relationships in accessing premium investment opportunities.
Navigating Off-Market Opportunities
Access to high-quality healthcare and veterinary real estate deals often requires insider connections. Alliance sources its investments through:
Direct Relationships: Engaging with physician owners and specialized brokers.
Sale-Leasebacks: Providing liquidity to operators while securing long-term leases.
Industry Networks: Leveraging established contacts to identify and evaluate potential acquisitions.
Each property undergoes rigorous analysis to assess tenant strength, lease durability, and growth potential before being presented to investors.
Scaling with Precision
Alliance's strategy focuses on:
Target Markets: Top 100 MSAs with population growth and healthcare demand.
Deal Size: Investments ranging from $3 million to $25 million, often overlooked by larger institutions.
Asset Criteria: Properties with 100% medical or veterinary tenancy, long-term leases, and built-in rent escalations.
This approach aims to deliver consistent quarterly cash flow and a targeted 2.5x equity multiple over a five-year hold period.
~Ben Reinberg, CEO of Alliance Group of Consolidated Companies
Join the Conversation June 11th, 2025, on the Alliance Academy Monthly Webinar at 1 pm EST!
To delve deeper into recession-resilient real estate strategies and explore exclusive investment opportunities, join Ben Reinberg in an upcoming webinar. Gain insights into the nuances of healthcare and veterinary real estate investing and learn how to position your portfolio for stability and growth.
Related post mentioned earlier:
Demographics & Data Driven Investments That Drive Double-Digit IRR
When it comes to investing in medical office buildings (MOBs), both human and veterinary, the data paints a compelling picture. At the Alliance Fund, we've been bullish on this asset class for over two decades, and our returns speak for themselves. But like any investment strategy, there are two sides to the coin. While the positive demographic trends s…
Sources
CBRE 2025 U.S. Healthcare Real Estate Outlook
Forecasts a 2.5% rise in inflation-adjusted consumer spending on healthcare goods and services in 2025, surpassing the 1.9% growth for overall consumer spending.
cbre.comU.S. Healthcare Real Estate Market Report 2025–2030
Highlights that by 2030, all baby boomers will be over 65, increasing the senior population to 20% of the U.S. total, and this age group is expected to account for 37% of national healthcare spending.
globenewswire.comCBRE Press Release: Long-Term Healthcare Trends
Indicates that the market for U.S. medical outpatient buildings (MOBs) is poised for lower vacancy and higher rents, leasing activity, and sales transaction volume in 2025.
cbre.com
IBISWorld: Veterinary Services in the U.S.
Reports that industry revenue has grown at a CAGR of 1.7% over the past five years, reaching an estimated $68.7 billion in 2025.
ibisworld.com+1ibisworld.com+1Marti Law Group: Veterinary Practice M&A Trends in 2025
Discusses how the veterinary M&A market has reached a level of cautious stability in 2025, with regulatory bodies closely monitoring market concentration and pricing practices.
martilawgroup.comMarti Law Group: Trends in Veterinary M&A
Explores key trends in veterinary M&A, noting that the veterinary sector has attracted substantial acquirer interest due to rapid industry growth and high profit margins.
martilawgroup.com
Business Insider: Commercial Real Estate Sales Decline
Reports that commercial real estate sales have sharply declined in April 2025, signaling the end of the anticipated "Trump bump" in the industry.
businessinsider.comCBRE U.S. Real Estate Market Outlook 2025
Provides insights into various sectors of the real estate market, including expectations for the office up-cycle and retail vacancy rates in 2025.