2025 is set to be no different. Here we summarise the key events and factors that we think will most impact the day nursery property market over the next 12 months.
The UK education sector has experienced considerable change in the past few years.
Investment activity will remain subdued
Lots of investment opportunities with good quality covenants came to the market at the end of 2024 in the day nursery sector, particularly those covenants which have improved over the last few years, as the various groups active in the sector have grown and established themselves as major operators or brands in the market. However, to our knowledge, none of these opportunities have completed yet and some have had limited interest. The buyers which are looking, are generally opportunistic and predominantly new entrants to the sector looking to create value over the period of their hold, with many appearing to be sensitive to anything that may detract from a nursery asset being ‘prime’, especially if a property is deemed over-rented. 2024 was generally a cautious year for the investment market, and we’re of the opinion this will continue while wider economic forces affect investor decisions, the cost of debt remains high, and there is less competition in the market for acquisitions.
More nursery mergers and acquisitions
We expect to see continued demand and mergers and acquisitions activity in the day nursery sector in 2025, with some groups concentrating on acquisitions and others focusing solely on organic growth; the latter is likely especially among those nursery operators with very strong brands and design requirements. Nursery operators are set to benefit from the final round of local authority funding in September this year which will continue to boost their occupancy rates and could instigate further consolidation of the market. However, staffing remains a significant operational problem and barrier to providing childcare and an increased number of childcare places in some locations.
Fewer new-build nurseries
With build costs still very high and disproportionate to the gross development value for lots of settings, we foresee fewer standalone new developments starting this year, with most new build facilities only happening as part of wider housing schemes or local centre developments, usually as part of a planning application requirement. But several nursery projects involving the conversion of appropriate redundant offices, pubs, or warehouses, started in 2024 and we expect to see more of these in 2025 as they allow developers to create value while spending less on build costs.
Further information
Contact Jen Gill or Jenny Nicol
Free childcare hours and the impact on day nurseries
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