Christie & Co: Investor appetite for nurseries remains resilient

Specialist business property advisor, Christie & Co, has today launched its Childcare & Education: 2022 Mid-Year Review report, which analyses the childcare markets so far in 2022, including day nurseries, specialist education and looked after children, and independent education.

Christie & Co begins by highlighting the buoyancy of market activity so far this year, citing that it has seen a 51 per cent increase in business owners deciding to sell in the first half of the year.

Despite naming a multitude of reasons why many business owners are selling, including emotional drain of having traded through a global pandemic, ongoing economic insecurity and increased operational costs, Christie & Co said that owners of businesses demonstrating recovered revenue and earnings have plenty of reasons to be confident, as the best businesses continue to achieve heady prices.

The specialist business property advisor reports that, from 2021 to 2022 YTD, across its childcare sectors, it has seen a 47 per cent increase in the number of inspections, 51 per cent increase in new instructions, 50 per cent increase in businesses sold, and a 34 per cent increase in viewings. 99.5 per cent of asking price is also being achieved, which is an increase on the previous year.

Looking globally, buoyancy is seen across ECEC markets, with active buyers in Europe and further afield seeking acquisition opportunities. Outlook for the remainder of the year looks positive, and Christie & Co expects the markets to remain resilient and for consolidation to continue.


Activity in the day nursery market

Christie & Co is seeing a highly competitive market with first-time buyers competing head on with experienced buyers for high-quality settings with recovered occupancy, stabilised earnings, and established staff teams with few vacancies. It has also witnessed multiple portfolios and high-quality single settings transact.

There is a continued appetite from existing operators keen to grow their portfolios, and an increase in operators of smaller nursery groups (typically with one to four settings) whose businesses have fully recovered to pre-pandemic levels of trade, that are keen to expand.

Real estate investors wishing to acquire continue to see the value in the day nursery sector, and an increasing number of investors are keen to partner with high-calibre management teams to facilitate new businesses to be grown via buy and build strategies. This is fuelled by the dynamics of the sector and the consolidation opportunities available.

Development opportunities for day nursery buyers

During the first half of this year, Christie & Co saw a slight slowdown in demand from buyers for brownfield nursery development sites as well as lower levels of interest in properties with vacant possession and those in need of extensive refurbishment. This is largely due to strong upward pressures associated with the cost of construction materials, teamed with material and trade labour shortages, and supply and logistic problems.

Going forward, prime development opportunities will remain sought-after by buyers, but tertiary locations are likely to see more sedentary levels of interest from buyers due to the cost of capital and timescales for ROIs increasingly being at the forefront of buyers’ minds.

The Building Cost Information Service (BCIS), as published by the Royal Institution of Chartered Surveyors (RICS) in February 2022, predicted that construction tender prices are expected to slow over the second half of this year.

Nick Brown, director & Head of Brokerage – Childcare & Education, commented: “The appetite to acquire high-quality settings – from single assets through to larger groups – has never been greater. The combination of a slightly limited supply, consolidation plans, a number of new entrants to the market, and the increased profile of the sector has seen us rise the bar on prices being achieved for sellers.”

For the full Childcare & Education: 2022 Mid-Year Review report, visit: https://www.christie.com/news-resources/publications/childcare-education-2022-mid-year-review/