Market Report: Early Education

Q4 Market Summary

Early learning and day care assets have continued their trend of compressing cap rates. On market listings in Q4 feature a higher number of properties with 10+ years of remaining term and a larger average offering price. Historically, early learning assets have traded at higher cap rates in comparison to other net lease assets such as QSRs. This has shifted as the reputations and creditworthiness of the larger early learning tenants have steadily grown, alongside the expansion of their businesses and nationwide footprints. Investors favor the internet-resistant nature, long lease terms, quality underlying real estate, and strong/growing demand for these assets. This has amalgamated to record-low on-market cap rated in Q3 2022 for early learning assets, with the average finally breaking 6% at a 5.99% cap. The major players in this space continue to have the majority of listings, with The Learning Experience, KinderCare, Childtime, Guidepost Montessori, and Kiddie Academy leading the way. The high levels of development of new early learning assets show no signs of slowing as demand from customers in this segment is sky-high and growing. Due to the reputation-based aspect of this industry, the larger operators outshine smaller operators due to their proven success, programming, organization, quality staff, and safety for the children who attend. According to GlobeSt, early learning sales have soared to $884 million in the past 12 months – a 396% increase over a five-year period.