Day Nursery Market Insight: Scotland

Image: Jörg Angeli for Unsplash

Appetite for Scottish day nurseries

Activity in the day nursery market in Scotland, so far this year, has been very strong, with a good mix of single assets, groups, vacant, freehold, and leasehold opportunities being sold.

General appetite has remained robust, with operators who have a well-established business or group generally being in a good position to expand and develop within the sector. Very soon after the pandemic began, we found that genuine buyers returned to activity quite quickly and existing operators were keen to grow their portfolios.

Corporate activity within the market, however, has historically been slightly quieter, with only larger group or trophy asset transactions taking place to a smaller pool of buyers compared with that seen in England, particularly the South East. That has recently changed, with the implementation of 1,140 hours of government-funded childcare having a significant impact on some businesses, and the desire for more groups to expand their portfolios and footprint outside of England, competitive bidding for a wide range of nursery opportunities has increased, and we are finding that values, as a result, are moving significantly forward.

Despite this demand, there continues to be a lack of stock on the market, which is resulting in competitive sales process and high prices being achieved. Geographically, interest is very much focused on the key, higher profile areas of Scotland such as Aberdeenshire, Fife, the Lothians, Glasgow and the central belt. However, we are finding that interest is secured on most sized leasehold and freehold opportunities throughout the country, if profitability and a good senior team are in place.

Challenges facing owners and operators

The day nursery market in Scotland has faced a high number of challenges over recent years – notwithstanding the restraints placed on the sector due to the pandemic. An added frustration during this period, for many private sector operators, was the inability to open their settings, even for key worker’s children, due to the restrictive position of local authority funding and local authority run provision.

In fact, this ‘in sector’ – private versus local authority – competition has long been a grievance in the private sector in Scotland, due to the general inability of private operators to be able to compete on either fees, wages, or working hours. Despite this, however, demand is still outstripping supply with multiple operators being able to better tackle the challenges the local authority-run settings have put upon the sector, and with the view that having multiple settings aids in the staffing issues many face due to being able to transfer and balance staffing teams across an entire group.

Market outlook

We expect the high level of buyer demand to remain throughout 2022 and into 2023, but the market strength will only be supported if these robust market conditions continue and owners find themselves in a position to progress their exit plans, many of which have been on hold since early 2020.

To find out more about the day nursery market in Scotland, or for a confidential chat about your business, contact Rosie Adlem: rosie.adlem@christie.com / +44 7764 241 309