Early Childhood Education Real Estate Emerges as Hot Investment Sector
The surging demand for childcare is fueling a boom in a previously overlooked corner of the commercial real estate market, attracting both developers adn investors seeking stable, high-yield opportunities.
The U.S. childcare market is currently valued at $65.2 billion and is projected to reach $109.9 billion by 2033, according to a recent report from CRE brokerage B+E, citing data from Grand View Research.This growth is being driven by a confluence of factors, including the return to office work for parents, a rising birth rate among millennials, and increasing female labor force participation.
While some operators own their facilities, many – particularly large national chains like KinderCare and The Learning Experience – utilize net lease structures, where tenants are responsible for property expenses such as taxes, insurance, and maintenance.
The availability of properties wiht lease terms exceeding 10 years has also risen, increasing by 12% in 2025. “this is the stuff that banks love to lend on,” stated a senior official at B+E. “It demonstrates that the majority of properties coming onto the market represent developers securing new tenants, a very exciting prospect for investors.”
The pandemic-induced migration to more rural areas has exacerbated existing childcare shortages, creating what developers are calling “child-care deserts.” These areas present a meaningful prospect for expansion.
Fortec, a national developer specializing in early childhood education projects, recently announced a partnership with Equiturn, a global financial advisory firm, to launch a $100 million early education real estate fund. “Our primary goal with this fund is to institutionalize this sector,” explained Pablo Barreiro, chairman of Fortec. “Many investors in triple-net leases are unfamiliar with this sector, but it offers a compelling investment profile due to the strong creditworthiness of its tenants.”
A basic supply gap underscores the sector’s potential. Data from the U.S. Census Bureau reveals that only 8.7 million of the 14.7 million U.S. children under 6 years of age who require daily care are currently enrolled in formal programs, representing a shortfall of 6 million children. Waitlists for enrollment average six months, with 13% of families waiting a year or more. even a partial reduction in this shortfall would substantially increase demand for childcare centers, despite a projected modest decline in the under-6 population through 2030.
According to Barreiro, “Fifty-one percent of areas in America are considered child-care deserts, meaning there are three times more children needing care than available seats.”
Historically, early education real estate has been a fragmented, localized business, similar to the single-family rental market. While some REITs hold early education properties, these typically represent a small portion of their overall portfolios. the sector has yet to be formally recognized as a distinct asset class and scaled accordingly.
Fortec believes this is analogous to the evolution of senior housing and medical offices before they gained recognition as institutional real estate sectors, and the new fund is designed to legitimize the subsector. Over the past five years,Fortec has completed over $230 million in transactions across 13 states,and this fund will further expand its reach. equiturn is leading fundraising and investor outreach efforts.
Investor interest has primarily come from single- and multifamily offices, drawn to the sector’s economic resilience.A recent analysis from Aceana Group, a Florida-based single-family office, highlighted the sector’s consistent demand, strong unit economics, and growing recognition as essential infrastructure, rather than a discretionary service.
“Larger centers typically generate millions of dollars in annual revenue, with double-digit profit margins once occupancy stabilizes,” the Aceana note stated. “The majority of operators lease facilities under long-term, triple-net agreements with built-in annual escalations, shifting expenses to the tenant and providing landlords with income streams resembling bond yields.”
This structure provides a hedge against inflation, making it particularly attractive in the current economic climate. Institutional investors are beginning to take notice. “Many large institutions are already investing in the operational side of early education,” said Barreiro.”We are now seeing some of these institutions explore direct investment in the real estate component, but to facilitate this, we need to create a product that aligns with their financial metrics and risk tolerance.”
