The pandemic has changed the way we live – we wash our hands more than ever, wear masks in public, and reassess our income property investments. As the pandemic took effect back in the Spring, many investors began to wonder about the effects on certain investment properties and sought help in looking elsewhere for risk-averse properties with stable returns. Many are sick of hearing about COVID and want to know how they’ll make money in 2021 – that’s where we come in.
Why Are Childcare Investments Heating Up?
After discussing with three CFO’s, we found that daycare facilities have proven to be resilient through this pandemic. Attendance at these facilities continues to be ±70% and revenues are at ±90%, relative to pre-COVID levels.
Additionally, as families have encountered the struggles in balancing working with kids at home, the demand for daycare facilities has increased. This new challenge parents are facing shows how essential these facilities are to families, confirming their long-term stability as investment vehicles.
The Present
The US childcare services industry includes about 54,000 commercial facilities with combined annual revenue of $27 billion, plus about 21,000 facilities run by nonprofit organizations with combined annual revenue of about $14 billion. There is a depth of opportunity for investors and competition is heating up.
At the height of the pandemic in the midst of an industry-wide credit downgrade, cap rates for daycare facilities in the southeastern region recorded between 7-8%. They have now stabilized back in the 6-7% range.
One last piece to note when considering these investment vehicles, childcare facilities typically have longer term leases overall and generally more consistent returns. This makes gives investors confidence in this asset class because they can be optimistic that these deals will produce strong returns through this pandemic and beyond.
The Future
So, what does this mean to you? There is a clear demand for childcare facilities as an attractive income property, with the childcare industry projected to reach a jaw-dropping $52.5 billion by 2025.
Moreover, for the first time, analysts have noted that women in their 30’s are having more children than those in their 20’s. As older parents have a better ability to pay for childcare services when compared to the younger parents in the past, this trend is good news for the childcare and learning sector’s revenues even beyond the pandemic’s timeline.
The real estate market cycles – investment firms and lenders have taken notice and daycares will be in high demand in 2021. Whether you want to buy or sell in 2021, I’d like to have a conversation with you about your investment goals.
Click the link below to learn more about what your day care property might be worth!
Sources:
https://theurbandeveloper.com/articles/investors-childcare-centre-demand
https://connectedremag.com/newsletter/is-childcare-the-next-big-move-for-real-estate-owners/
https://www.globest.com/2020/10/08/child-care-assets-offer-best-of-both-worlds-for-net-lease-investors/?slreturn=20201005150619
https://www.cpexecutive.com/post/why-net-lease-child-care-early-education-assets-are-retaining-their-value/
https://www.sbdcnet.org/small-business-research-reports/daycare-business
https://theconversation.com/modelling-finds-investing-in-childcare-and-aged-care-almost-pays-for-itself-148097