The Childcare and Independent Education sectors have witnessed a flurry of activity in recent months, fuelled by interest from overseas private equity and infrastructure investors attracted to the strong demand fundamentals, a chronic shortage of supply and the potential to achieve strong operational returns.
CBRE advised Nexus Group on the disposal of the Pine Portfolio earlier in 2017, which attracted strong investor interest. Bright Horizons and Busy Bees, the leading operators owned by Bain Capital and Ontario Teachers’ Pension Plan respectively, are both expanding aggressively across London and the regions.
The operational market continues to grapple with the government’s increased ‘free’ childcare promise which launched officially in September and was targeted at working parents of 3 and 4-year-olds. The scheme has been beset by teething problems, many of which have been administrative. Furthermore, operators are not bound to participate fully in the scheme and roughly half have opted out entirely, asserting that it is impossible to break even based on proposed reimbursement rates.
The Independent Education sector is a growing focus for private equity, with a number of investors partnering with existing or start-up operators to establish groups of schools catering to varying age groups. This sector has historically proven to be highly resilient to economic cycles, and annual fee growth across the UK has been strong for the last decade.
Focus is mainly on London and the South East, where existing private schools of good academic standing are in some cases as much as five times oversubscribed.
CBRE are seeing development projects that include improved sports facilities, classrooms and new boarding facilities. Based on the ISC Annual Census 2017, boarders accounted for 13.4% of all pupils which showed a marginal decrease from 13.6% for the previous year. Based on our experience, schools that develop boarding often opt for purpose built, energy efficient buildings rather than utilising existing buildings that can be dis-proportionally expensive to convert; present operational challenges and inefficiencies.
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For more information please contact David.Mathieson@cbre.com