In a Volatile Market, Investors View Early Childhood Education Centers with Greater Interest

This trend 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, Ceresnak says.

Market listings for such assets during the fourth quarter featured a higher number of properties with more than 10 years of remaining lease term and larger average offering prices, B+E notes.

Investors favor the internet-resistant nature, long lease terms, quality of underlying real estate and growing demand for these assets, Ceresnak says. This has amalgamated to record-low on-market cap rates in the third quarter, with the average breaking the 6.00 percent threshold at a 5.99 percent cap, he adds.

“Early learning assets have tended to trade at higher caps, largely because of their smaller guarantees,” Ceresnak says. “But more and more investors and lenders have become familiar with the growing players in this market, which has helped their growth in popularity.”