We’re currently seeing a high demand for childcare centers. The COVID-19 pandemic caused many childcare facilities to close their doors leaving a shortage of childcare centers when the country went back to work. The market share concentration is low and the industry is very fragmented. Only 5.5% of the 120,000+ facilities are made up by the early education “major players”. Connected Real Estate Magazine notes that “childcare is becoming the new anchor tenant for shopping centers and retail properties.” This would mean that this asset class now brings enough traffic to shopping centers to draw other tenants. This is becoming increasingly attractive to real estate owners and investors.
Key Drivers of the Childcare Center Industry Growth
The childcare industry in the United States has seen steady growth over the last 5 years, with an average increase of 4% annually. The current market size is $61B, and expected to reach $100B by 2026. This growth is projected to continue in the coming years due to:
- The growth in dual-parent working households
- An expansion in federal subsidies
- An increase in disposable income
- An anticipated increase in children ages 9 and under
A Low-Risk Investment Opportunity
If you’re looking for a low-risk investment opportunity, investing in childcare centers is a great place to look. Many factors contribute to the success of investment properties but childcare centers check all of the boxes.
Low Tenant Turnover
They have a lower tenant turnover rate compared to other types of commercial real estate. Once parents have established a relationship with the facility and its staff, they are less likely to move their children from one daycare to another.
They have long-term leases, which means a more stable and predictable income as the property owner.
They are generally recession proof. Even during economic downturns, parents still need to work and continue to require childcare services for their children.
They can generate income through government subsidies. Many parents receive financial assistance from the government to pay for childcare services. This ensures that daycare facilities can enjoy a stable source of income even during tough economic times.
Plus, the tenants are responsible for maintaining the property, which minimizes your maintenance costs.
Ready to Invest in Childcare Centers?
What are we saying? Childcare centers are a growing industry market with high demand and low risk. It could be the perfect investment opportunity for those looking to diversify their portfolio and secure a stable source of income.
If you’re interested in investing in childcare centers Sands Investment Group (SIG) has a team of Early Education experts ready to find the best investment for your portfolio. Contact this crew today to get started.