Early education properties attract a lot of money to care for young children

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Increased demand from parents for early education is creating a boom in a small but rapidly growing subsector of commercial real estate. This sector is in short supply making it increasingly attractive to both developers and investors.

The U.S. child care market is currently valued at $65.2 billion and is expected to grow to $109.9 billion by 2033, according to a report by CRE brokerage B+E, citing data from Grand View Research. This rise is due to trends of parents returning to the office, advances in educational technologies, and increased government funding – especially for single and working mothers.

Real estate is a big part of the story.

Since the end of 2024, the number of early education properties available for sale has increased by 14%, reaching a total of 158 properties, according to B+E, which specializes in net leasing. While some operators own their facilities, a large number of centers, especially large national chains, love them Kinder Care The learning experience uses net lease structures, where tenants are responsible for property expenses such as taxes, insurance, and maintenance

The number of available properties with more than 10 years on a lease term rose 12% in 2025, according to B+E.

“These are the things banks love to lend on,” said Camille Renshaw, B+E CEO. “It shows you that the vast majority of things coming to the market are developers finally getting a new tenant. This is coming to the market for investors and it’s very exciting.”

During the pandemic, many families moved to rural areas, where there are fewer childcare facilities. Developers are looking to capitalize on so-called childcare deserts.

Fortec, a national developer specializing in early childhood education projects, has just announced a partnership with Equiturn, a global financial advisory firm, to launch a $100 million early education real estate fund.

“The first thing we want to do with this fund is to institutionalize this sector,” said Pablo Barreiro, Chairman of Fortec. “A lot of people are investing in the triple network [a type of net lease]In a lot of properties, they’ve never heard of this sector, and it’s a very good sector, because you have really good tenants with good credit.”

In addition, there is a fundamental gap in supply. Of the 14.7 million American children under age 6 who need daily care, only 8.7 million are currently enrolled in formal programs, leaving a shortfall of 6 million children, according to U.S. Census Bureau data. The average waiting list to register a child is six months, and 13% of families wait a year or more, according to the data. Even partial catch-up would raise demand for centers significantly, despite the modest decline in the under-six population expected until 2030.

“Fifty-one percent of the areas in America are what are called child care deserts. Child care desert basically means just that [there] “The demand for every available seat is triple,” Barreiro said.

Until now, early education real estate has been a largely fragmented local business, much like single-family rental housing. There are REITs that own some early education holdings, but child care is usually a very small portion of their total holdings. The category has not yet been defined as its own asset class and measured.

This is very similar to what residential or medical offices were before they were recognized as institutional real estate sectors, according to Fortec, which is looking to legitimize the subsector through its new fund.

Fortec has completed more than $230 million in transactions across 13 states over the past five years, and this fund is expanding that footprint. Equiturn is a leader in fundraising and investor outreach.

Investor interest in early childhood investment has previously been more significant among single-family and multifamily offices, indicating their economic resilience. A recent memo from The Aceana Group, a Florida-based single-family office, highlighted continued demand in the sector and strong unit economics as well as growing recognition of child care as essential infrastructure rather than a discretionary service.

“Larger centers typically generate multi-million-dollar annual revenues, with double-digit profit margins once occupancy stabilizes,” the Aceana note said. “Most operators lease their facilities under long-term three-way agreements with built-in annual escalations, shifting expenses to the tenant and providing landlords with bond-like income streams.”

This provides a hedge against inflation, making it particularly attractive in today’s environment. Institutional investors are starting to take notice.

“A lot of major institutions are investing in the operational side of early education,” Barreiro said. “I’m starting to see some of these larger institutions starting to look at this now, but in order for them to invest, we need to build a product that’s also aligned with the numbers they’re looking at and also with the risk they’re looking at.”