The business property adviser has reported ‘positive movement’ in the acquisition activity of small regional group providers in its mid-year market insight report.
Comparing the first half of 2024 with the first half of 2023, the organisation has seen a 9 per cent increase in acquisitions by group operators and a reduction in acquisitions by single settings, small groups and first-time buyers.
Buyers are also opting to acquire nurseries that are larger in size, it finds.
Nursery closures
However, overall nursery acquisitions are down by 20 per cent on last year, according to Christie & Co's managing director of childcare and education, Courteney Donaldson.
Nurseries are ‘continuing to close their doors and cease trading’, often because of financial challenges.
Donaldson said that since the election outcome, and in the lead up to it there has been ‘further increase in owners talking to us about their exit plans, so they are expecting ‘quite a busy second half of the year’.
The report states that 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’.
Speaking to delegates at the webinar launch of its 2024 Childcare and Education report yesterday (11 July), Donaldson explained that there has been ‘very positive movement’ in terms of ‘9 per cent growth in the number of smaller regional groups with between three and 20 settings’ that have been ‘very acquisitive this year’.
But while 33 per cent of transactions this time last year were from first time buyers and smaller groups, this year it has diminished to 16 per cent, largely because of the cost of capital increasing and first-time buyers having less experience.
Leasehold vs Freehold
Analysis of leasehold versus freehold childcare and education business sales reveals that leasehold sales have increased, and now sit at 78 per cent leasehold and 22 per cent freehold, up from 67 per cent and 33 per cent respectively in 2023.
A number of factors have contributed to this, says the report, including an increase in the number of sellers choosing to retain their properties and enjoy a rental income stream.
Also, with the cost of capital having increased, some buyers 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, the report states.
Another trend has been the increase in size of the average nursery setting being sold. In the past six months there has been a 32 per cent 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.
‘We are seeing a move towards places like Norfolk and Suffolk’
Nick Brown, director and head of brokerage at Christie & Co, also highlighted how buyers are moving towards places like Norfolk and Suffolk now, whereas activity has historically been concentrated in London and the South East.
He said, ‘As areas get dominated by nursery operators, such as London, it becomes harder to find quality settings, and the competition is harder. We are definitely seeing a move towards places like Norfolk and Suffolk, where there's huge opportunity to consolidate and to add on to nurseries from where they would already have a strong foothold.’
