Nursery providers should focus on areas where new housing is planned when considering where to build new settings, according to research from estate agents Savills.

The report found that for every 855 new homes built, one new average-sized day nursery offering a minimum of 54 places is required. The researchers calculate that the government’s target of 1.5 million new homes over the next five years implies a need for around 1,754 new day nursery settings across England, although more may be required to meet the pledge of providing 100,000 new nursery places.

Leeds, North Northamptonshire, and London’s Tower Hamlets and Wandsworth have the highest number of existing planning applications for large new residential sites, according to Savills, and are likely to be in need of additional nursery places. The researchers found that 3,694 new day nurseries were registered with Ofsted between January 2019 and January 2024, and 15% of these were located within 0.5 miles of residential developments of over 50 houses.

Jennifer Gill, director in Savills Leisure & Trading team, said: “While the UK day nursery market remains largely fragmented with the majority of settings operated as independents, the sector is rapidly evolving and we’re seeing continued consolidation of the market by corporate groups. This type of nursery operator tends to embrace leasehold tenure structures, as it allows them grow at speed opposed to investing in buying property assets. This model lends itself to pre-letting non-domestic space in large new housing developments for use as day nurseries, so we expect this trend to increase as we seek to deliver the number of places needed to fulfil the demand from more residential development.”