Christie & Co, has released its Childcare & Education: Market Insight Report 2024 which analyses the childcare markets so far in 2024, including children’s day nurseries.

The report begins with an analysis of leasehold versus freehold childcare and education business sales. The proportion of leasehold sales increased in the first six months of 2024, with the split in H1 2024 sitting at 78% leasehold and 22% freehold, up from 67% and 33% respectively in 2023. There are a number of factors which contributed to this, including an increase in the number of sellers choosing to retain their properties and enjoy a rental income stream. With the cost of capital having increased, some buyers also prefer to take on a new lease rather than acquiring the underlying freehold interest in the property which, in some locations, would command a substantial expense.

UK early years market

In the first six months of 2024, Christie & Co noted:

• A 6% increase in the number of inspections
• A 23% increase in the number of offers
• A 16% increase in the volume of day nurseries available for sale through Christie & Co
• 90% of asking price has been achieved on children’s day nurseries.

Christie & Co reports a positive start to the children’s day nursery market in 2024, with a number of high-profile nursery deals completed across the country, including the sale of Pippa Pop-ins Nursery Schools in London, Kingfisher Nursery Group in the Midlands, and Muddy Boots Nurseries in Devon, to name a few. This activity was coupled with the ongoing demand from buyers keen to seek out exciting new opportunities in a spread of locations, which contrasts historic activity where there has been a notable concentration of buyers for settings located in London and the South East.

While the market for operational businesses has remained positive, nurseries are continuing to close their doors and cease trading, often because of financial challenges. Where nursery closures have occurred, there has been no shortage of other providers offering employment opportunities to experienced, well-trained staff, and local settings have, in many cases, been able to enrol children from closed settings, thus enabling them to improve their occupancy where provision has allowed.

Comparing the first half of 2024 with the first half of 2023, we saw a 9% increase in acquisitions by group operators and a reduction in acquisitions by single settings, small groups and first-time buyers. Following the trend seen across corporate group acquisitions in 2023, there has been a rise in larger capacity settings being acquired by smaller operators, a 32% increase in the size of settings acquired by independent and first-time buyers (from 53 places to 70 places), and a 37 per cent increase in those acquired by small group operators (from 62 places to 85 places).

Looking at the largest providers by number of day nursery settings, Christie & Co highlights Busy Bees (with 366 settings), Bright Horizons Family Solutions (with 271 settings), Kids Planet Day Nurseries (with 192), Bright Stars (with 112) and Partou (with 106 settings) as the largest groups in the UK.

International comparisions

So far in 2024, the international ECEC market activity has been largely subdued. Over the past 12 to 18 months, many global providers chose to prioritise existing operations and adopt measures to gain further efficiencies and improvements within their businesses. As those adaptations start to evidence positive outcomes, optimism around further prospects for growth gathers pace across domestic and international ECEC markets.

Christie & Co highlights notable international deals so far this year, including Avathon Capital’s acquisition of seven Magical Beginnings Learning Centres in January, Embark Early Education’s acquisition of a portfolio of nine ECEC centres in May, and Wendel Group’s acquisition of Globaleducate in June.

ECEC providers continue to address a myriad of workforce challenges, however, for many these are less acute compared with a year or so ago. A notable focus of 2023/24 has been providers’ initiatives around staff recruitment and retention, the enhancement of recognition, benefits packages, career progression opportunities, and other employee incentives. Against the backdrop of a turbulent and globally challenging financial landscape, many international ECEC providers have also seen changes in early years national, state, and provincial funding arrangements. Increasingly, providers need to have the ability to pre-empt and adapt nimbly to regulatory and funding changes in order to maintain successful, sustainable operations.

Funding

A recent Christie Finance sentiment survey revealed that 86% of funders/banks surveyed have a positive outlook for the year ahead. Christie Finance says that, whilst many lenders view the childcare sector as a worthwhile funding opportunity, their willingness to support operators is largely dependent on factors such as occupancy levels, sustained profitability over an extended period, and a secure regulatory framework.

Christie Finance has also witnessed a 50% increase in funding queries in the last 12 months. Enquiries related to first-time buyers looking to acquire a setting, experienced operators looking to buy additional nurseries to expand their groups, as well as businesses purchasing assets, completing refits and fulfilling their cashflow needs. Many groups in the sector have been looking to expand rapidly across all parts of the UK, resulting in operators dipping into cash reserves or looking for alternative funding options.

Commenting on the UK children’s day nursery market, Nick Brown, director & Head of Brokerage at Christie & Co, said: “The recent change in government brings a level of uncertainty, and having to sift through the vote-winning rhetoric and get down to what is going to be delivered can sometimes be hard for operators. We are, however, optimistic that the positivity in market conditions seen through the first six months of this year will continue throughout the second half of 2024 as the cost-of-living crisis somewhat eases, and the sector’s staffing challenges continue to be addressed.”

Commenting on the international ECEC markets, Courteney Donaldson, Managing Director – Childcare & Education at Christie & Co, said “Throughout 2024, we have seen many international organisations focussing intently on their own operations ahead of contemplating wider expansion. For all ECEC businesses, retention and continuity of appropriately qualified staff, academic and experience-based staff, in hand with their workforce’s engagement, health and wellbeing, happiness, fulfilment, fair remuneration and rewards are key to a setting’s success and therefore the success of the overall portfolio.”

For the full Childcare & Education: Market Insight Report 2024, visit: https://www.christie.com/news-resources/publications/childcare-education-market-insight-report-2024/