The specialist business property adviser’s 2025 report, reflects on the themes, activity and challenges of 2024 and forecasts what 2025 might bring for the day nurseries sector.
David Eaves, director of childcare and education, Christie & Co, said that investors are 'increasingly' evaluating their portfolios with an environmental, social and governance (ESG) lens, moving toward investing in sectors that have a 'social/ethical angle and do good for society', such as day nurseries that provide high-quality childcare.
'Such investments are good both from an ethical standpoint and are likely to attract an increasing amount of parents who, themselves, are conscious of ESG and would therefore prefer to send their children to a setting that mirrors their values, thus there is also a profitability angle there, too,' he added.
Examples cited include Tops Nurseries, which is moving to net-zero by installing solar panels and carbon offsetting, and Fremman Capital, investors in Kids Planet, which states in its 2024 Sustainability Report that investing in the education and environmental awareness of children is 'the most effective way to provide a sustainable environment into the future'. Eaves said that the fact that ‘97 per cent of the workforce is female, there are lots of females in senior roles and there is a small gender pay gap looks great for [Fremman Capital’s] ESG credentials’.
Meanwhile, demand from investors seeking ‘platform acquisitions’ by acquiring high-quality, larger capacity settings continued into 2024. One example is the Kindred Nurseries group of over 50 nurseries, which was sold to private equity house Living bridge, who will invest into the group and use it as their platform to grow their portfolio.
But Courteney Donaldson, managing director of childcare and education at Christie & Co, pointed out that despite continued interest, private equity invested in UK nurseries still amounts for an 'incredibly small proportion of the overall market'.
Business Outlook
While 2023 was dominated by acquisitions by larger groups such as Family First, the past 12 months has seen more activity among medium-sized regional groups acquiring single settings or groups of two. There has been a 'slight tempering' of the volume of activities for first-time buyers, Donaldson said, which was partly driven by the 'settling of the bank funding levels and the economy'.
From September onwards, many owners saw a 'significant increase in parental demand' and Donaldson said there was a 'noticeable increase' in medium-sized groups making selective acquisitions to expand their regional footprints. 'Primarily this involved expanding and buying vacant properties to convert into nursery space,' she added.
The trend of the past few years to purchase leasehold properties continued into 2024, largely driven by nursery groups’ desire to expand faster. 'The capital outlay required to buy a leasehold is much lower than buying a freehold. So it enables them, if they have a funding pot, to buy and expand to a larger degree than they would by buying freeholds,' Donaldson explains.
Exceptional prices have continued to be achieved for high-quality and desirable locations. London and South East remain highly sought after but buyers now are looking nationwide, in Staffordshire, Bristol, Leamington Spa, Edinburgh or Newcastle or York, which are 'all areas where there's a demand for childcare', Donaldson says.
Last year saw a stabilisation of the marketplace, as interest rates and inflation became more under control. And with better visibility of the funding rates over the year ahead, some settings in strong locations have seen their occupancy grow and are 'performing quite well financially' Donaldson says.
Although she admitted that it is a 'mixed picture' as some smaller settings are still having challenges, particularly those in deprived locations where fewer parents seek childcare in excess of their entitlements.
Nick Brown, director and head of brokerage – Childcare & Education at Christie & Co, said that 2025 has already begun 'at a fast pace' and they expect that appetite will continue to grow for high-quality settings.
