Individuals and businesses won't soon forget 2020. It has proven to be the ultimate stress test for families and businesses nationwide, with the child care industry at the epicenter.
According to Procare Solutions, 60% of large scale child care centers closed due to COVID-19. By April 2020, average enrollment was down 13% compared to pre-pandemic levels nationwide, with many child care centers still struggling to stabilize. Government funding helped many franchisors and in-home providers through PPP funding, whereas 500+ employee corporate providers like Bright Horizon, KinderCare and Learning Care Group were not eligible.
Child Care Aware estimates that 9% of licensed child care programs, including both child care centers and in-home operators, have permanently closed their facilities since the pandemic began. Other reports show as much as 20% of the nation's child care capacity has not reopened. A recent survey by the National Association for the Education of Young Children (NAEYC) found that one in three schools still operating are considering closing. This is staggering considering that local chains and single-site operators account for 95% of child care providers.
This has left the door open for national operators like The Learning Experience, KinderCare, Learning Care Group, and Bright Horizons to sweep in and buy closed or closing child care facilities and grasp market share.
The child care industry is still not out of the woods. The NAEYC reports four in five child care centers are understaffed with 78% of child care operators citing low wages as the primary cause. Low wages are also blamed for higher turnover rates and increased hiring and onboarding expenses. On top of limited staffing, payroll costs are the highest in history.
These increased costs are reflected by higher tuition rates which are passed down to the parents. In September 2021, more than 300,000 women in the US left the workforce, many to ease the burden of child care expenses. Reports estimate 1.6 million women with children under the age of 17 have dropped out of the workforce.
Child care costs were already in the spotlight pre-pandemic. In January 2019, the Council for a Strong America reported an annual economic cost of $57 billion in lost earnings, productivity and revenue for working parents, employers and taxpayers.
Lack of available funds for early childhood education may be part of the problem. According to the New York Times, high income countries contribute an average of $14,000 per year for Pre-K care compared to only $500 in the US. A 2019 study by the National Institute For Early Education Research (NIEER) found that only 5.9% of 3-year-olds and 34% of 4-year-olds were enrolled in state-funded preschool during the 2018/2019 school year. President Biden's American Families Plan may offer hope. The Universal Pre-K provision of the plan allocates $200 billion to provide free preschool for 3- and 4-year-old children with an average savings of $13,000 per family. Additionally, the plan limits child care expenses to 7% of family income for qualifying families making up to 1.5 times the respective state's median income. This equates to an estimated annual savings of $14,800 for child care expenses. What this means for the private child care industry is still unknown.
The need for private child care will not change. However, with the issues facing the child care industry, it is my opinion that the national, well-funded child care groups are better equipped to handle operational and governmental changes, making it a great time to capture a larger market share from in-home providers that are closing. As well, established child care groups will likely take advantage of this transition to acquire top tier talent by offering higher wages. I also believe that parents will look for providers that are at the cusp of addressing and implementing upcoming governmental changes.
The child care industry is extremely volatile right now, facing challenges of higher payroll costs, increased turnover, rising tuition rates and potentially greater governmental regulation.
To be effective in this market, you need experts in the child care industry. Future In-Site Realty Associates, Inc., has a proven track record nationwide:
Future In-Site Realty understands the child care industry.
As a family business, we established a niche in the child care industry. My wife, Debbie, has operated both schools as the Business Manager and franchisee. With an average enrollment of 350 students, she knows the ins and outs of successfully running a child care business. We are experts at negotiating child care sales and working with buyers interested in a 1031 Tax Exchange from California to North Carolina through our national brokerage network. When you're in the market to buy, sell or renegotiate your child care facility in any State, we would like the opportunity to earn your business.
Enclosed find a list of comparable sales nationwide for large facilities averaging over 6000 sq. ft. If you have any questions or would like a broker price opinion for the property you're selling or thinking about buying, please reach out.
Sincerely,
Alan Stahl818-917-7723
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