Parents are creating a boom in a lesser-known but fast-growing subsector of commercial real estate — the child-care market.
Citing a report by CRE brokerage B+E, CNBC reported that parents’ demand for early education is on the rise and that the sector is so undersupplied that it’s become increasingly attractive to both developers and investors.
“This is the stuff that banks love to lend on,” B+E Chief Executive Officer Camille Renshaw said. “It shows you that the vast majority of stuff coming on the market is developers finally getting a new tenant. That is coming to the market for investors and is very exciting.”
Let’s look at the numbers.
B+E, which specializes in net leasing, said that the U.S. child-care market is valued at $65.2 billion and is projected to grow to $109.9 billion by 2033. B+E, cited data from Grand View Research. The report said that the surge is driven by return-to-office trends for parents, advancements in educational technologies, and increased government funding — particularly for single and working mothers.
Many Child-Care Operators Lease Their Properties
Since the end of 2024, CNBC reported that the number of early education properties available for sale has grown by 14%, reaching a total of 158, according to B+E. Some operators own their facilities, B+E said, but a significant number of centers, especially large national chains such as KinderCare and The Learning Experience use net lease structures, in which tenants are responsible for property expenses such as taxes, insurance, and maintenance.
Citing B+E, CNBC reported that the number of available properties with more than 10 years remaining on their lease terms increased by 12% this year.
CNBC said that during the pandemic, many families moved to more rural areas that had fewer child-care facilities. It said that developers want to capitalize on these so-called “child-care deserts.”
Fortec, a national developer specializing in early childhood education projects, recently announced a partnership with Equiturn, a global financial advisory firm, to launch a $100 million early education real estate fund, CNBC said.
“The first thing that we want to do with this fund is to institutionalize this sector,” Fortec Chairman Pablo Barreiro said. “A lot of people that invest in triple net [a type of net lease], in a lot of real estate, they’ve never heard about this sector, and it’s a very good sector, because you have really good tenants with good credit.”
CNBC reported that there is a fundamental supply gap.
It said that of the 14.7 million U.S. children under the age of 6 who need daily care, only 8.7 million currently are enrolled in formal programs, leaving a 6 million child shortfall, according to U.S. Census Bureau data. CNBC said that waitlists to enroll a child average six months, and 13% of families wait a year or more, according to the data.
Even partial catch-up would materially lift center demand, despite a modest population decline in the under-6 cohort projected through 2030.
REITs Own Some Child Care Facilities
“Fifty-one percent of areas in America are what is called a child-care desert. A child-care desert means basically that [there] is three times the demand for every seat of supply that is available,” Barreiro said.
CNBC said that until now, early education real estate largely has been a fragmented, local business, similar to single-family rental housing. There are REITs that own some early education properties, but child care is usually a very small portion of their total holdings.
The sector has yet to be defined as its own asset class and scaled, CNBC said.
Fortec said it has completed more than $230 million in transactions across 13 states over the past five years, and the new fund expands that footprint.
The post Niche Real Estate Sector Draws Big Money for Little Kids’ Care first appeared on The MortgagePoint.
