Nursery sector sees increased interest from private equity led capital

The nursery sector is attracting interest from private equity led capital, with £57 million worth of transactions reported in 2021, an increase of 54% on the previous year and over seven times more than 2019, according to leading global property adviser Knight Frank’s Childcare & Special Educational Needs Overview 2022.

With approximately 3.9 million children below the age of four in the UK, the fragmented nursery sector benefits from a diverse range of business types, structures and sizes. This, as well as its robust performance despite economic downturns has resulted in increased investment from investment trusts and fund managers with LXi REIT Plc and AEW both investing in portfolios in the third quarter of 2021.

Knight Frank’s research found that over 150,000 pupils are in schools which are focused on special education needs, the provision of services to pupils with high learning needs, with the sector’s estimated market value at £4bn as of 2020. .

The Department of Education continue to recognise the growing importance of the sector which is evident through the consistent and increased funding allocation as well as review of current support levels. The number of young individuals being highlighted as needing additional educational support has also increased through the issue of EHC Plans which has grown into a fundamental driver over the last ten years.

Knight Frank’s research also highlights that alongside the consistent strong public sector penetration in special educational needs, the independent providers are continuing to attract private equity capital. The higher spending levels within the independent sector is due to the increased focus on individuals with more acute educational needs.

Julian Evans, head of Healthcare at Knight Frank, commented: “With economic uncertainty forecast to continue with the cost-of-living crisis amongst other disruptive factors, the resilient and sustainable growth of these childcare sectors is encouraging. The continued population growth and the increasing identifications of individuals requiring additional educational support indicate the sustained demand for these service providers.”