A Fortec adaptive reuse project in Barrington, Illinois.
Courtesy of: Fortec
A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Register to receive future editions, straight to your inbox.
Growing parental demand for early education is causing a boom in a small but fast-growing subsector of commercial real estate. The sector is so undersupplied that it is becoming increasingly attractive to both developers and investors.
The U.S. child care market is currently valued at $65.2 billion and is expected to reach $109.9 billion by 2033, according to a report from brokerage firm CRE B+E, citing data from Grand View Research. This increase is driven by trends toward parents returning to the office, advances in educational technology, and increased government funding, particularly for single and working mothers.
And real estate plays a major role in this story.
Since the end of 2024, the number of preschool education properties available for sale has increased by 14%, reaching a total of 158, according to B+E, which specializes in net leasing. While some operators own their facilities, a significant number of centers, notably large national chains such as Child care and The Learning Experience use net lease structures, in which tenants are responsible for property expenses such as taxes, insurance and maintenance.
The number of available properties with leases remaining for more than 10 years increased by 12% in 2025, according to B+E.
“This is what banks love to lend on,” said Camille Renshaw, CEO of B+E. “It shows you that the vast majority of things coming to market are developers finally finding a new tenant. It’s coming to market for investors and it’s very exciting.”
During the pandemic, many families have moved to more rural areas, where there are fewer child care centers. Developers are looking to capitalize on these so-called child care 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 childhood education real estate fund.
“The first thing we want to do with this fund is to institutionalize this sector,” said Pablo Barreiro, president of Fortec. “A lot of people invest in triple net [a type of net lease]In a lot of real estate, they’ve never heard of it, and it’s a really good industry because you have really good tenants with good credit.”
Furthermore, there is a fundamental supply gap. Of the 14.7 million U.S. children under age 6 who need daily care, only 8.7 million are currently enrolled in formal programs, leaving a deficit of 6 million children, according to U.S. Census Bureau data. Waiting lists to enroll a child average six months, and 13% of families wait a year or more, according to the data. Even partial catch-up would significantly increase demand in the centers, despite a slight decline in the population of the under-6 cohort expected until 2030.
“Fifty-one percent of areas in America are what’s called a child care desert. A child care desert basically means that [there] That’s three times the demand for every available supply seat,” Barreiro said.
A Fortec adaptive reuse project in Barrington, Illinois.
Courtesy of: Fortec
Until now, early education real estate has largely been a local, fragmented business, much like single-family rental housing. Some REITs own properties for early education, but child care typically represents a very small portion of their total holdings. The category still needs to be defined as its own asset class and scaled.
This situation is very similar to that of retirement homes or medical offices before they were recognized as institutional real estate sectors, according to Fortec, which seeks to legitimize this sub-sector with its new fund.
Fortec has completed more than $230 million in transactions across 13 states over the past five years, and this fund expands that footprint. Equiturn leads fundraising and investor outreach.
Investor interest in early childhood has so far been strongest among single-family and multi-family offices, underscoring its economic resilience. A recent note from Aceana Group, a Florida-based single-family office, highlighted continued industry demand and strong unit economics, as well as the growing recognition of child care as essential infrastructure rather than a discretionary service.
“Large centers typically generate millions of dollars in annual revenue, with double-digit profit margins once occupancy levels stabilize,” Aceana’s note said. “Most operators lease their facilities under long-term triple net agreements with built-in annual escalators, which pass expenses to the tenant and provide bond-like revenue streams to owners.”
This provides protection against inflation, making them particularly attractive in the current environment. Institutional investors are starting to realize this.
“A lot of big institutions are investing in how preschool education works,” Barreiro said. “I’m starting to see some of these larger institutions starting to look at this now, but for them to invest, we need to create a product that also matches the numbers that they’re looking at and also the risk that they’re looking at.”