The property experts said that the number of offers made by buyers for each business had increased by 9% on 2019, despite the property sector being unable to transact normal business because of the pandemic.
And though there was a knock-on drop in transactions of about a third - around 90 taking place in 2020 compared with about 140 in 2019 - the slowdown was due to the time lag and not loss of interest, with the number of potential buyers registering interest in UK nurseries shooting up by 140% between April and June last year.
The surge in new buyer registrations came from a mix of UK and overseas investors, care home operators and first-time buyers and came shortly after the government announced the easing of restrictions in June.
In comparison, there was a 60% increase in buyer registrations for retail and pubs, which was from ‘people looking for the opportunity to buy distressed businesses. We are not seeing the same degree of distress in the nursery sector’ said Courteney Donaldson-Bourchier, managing director of child centric sectors. She added that while there had been ‘a few private equity calls coming in to try and do cheap deals’ during the first lockdown, the sector has not lost its reputation as a stable investment and ‘our clients are not selling at cheap prices.’
The Christie & Co Business Outlook report, out today, notes how many families recognised the value of the sector when the first lockdown hit and access was limited to vulnerable children and those of frontline workers.
Ms Donaldson-Bourchier added, ‘The profile of the early years sector has been raised. When you are told your child can’t attend nursery because you are not a key worker you suddenly realise the value of the sector.
‘The prices we have achieved are much in keeping with pre-Covid prices, [but] whether or not that will hold this year remains to be seen. We are still seeing a lot of competitive transactions and we don’t expect these to drop for the next six months’ she added.
But, she said, there is a ‘bit of a feeling that some nurseries that are keeping their heads above water because of the current funding once it ends that will change.’
Buyers look at nursery accounts which end with the financial year in March, so won’t yet show the impact of loss of occupancy or furlough and impact of other support.
Some operators have taken private bank finance to keep afloat, she added, small regional operators included.
In the future, there were early signs of a possible shift in parental habits, though much uncertainty remains over how work patterns will change long term.
The trend of more parents working from home, rather than commuting, has meant that ‘some providers are seeing that [demand for] early drops and after school clubs have slightly diminished’ particularly between 8-9am, Ms Donaldson-Bourchier said.
Moving nurseries to disused shop and office space in high streets, as facilitated by new planning rules, may be problematic for nursery proprietors, with concerns over traffic and safety, lack of outside space, undesirable neighbours and high business rates, she added, and it will be several years before we see the impact of these changes.
Meanwhile Brexit is not having a huge impact on the market following an initial 'exodus' from some parts of London after immigration changes impacted on recruitment, and caused less demand in some areas where European companies moved their headquarters out of the capital. ‘In the grand scheme of things it is very much London-focused’ Ms Donaldson-Bourchier adds.
- Nursery World and Christie & Co are hosting a free webinar, Review. Realign. Recover: Day Nursery Market Sentiment and Looking Ahead to 2021, on Thursday 28 January at 2-3pm. Join Courteney Donaldson and Nick Brown from Christie & Co, along with Sally Bonnar, chief operating officer, Midcounties Co-operative, Childcare Group and Aatif Hassan, founder and chairman of Dukes Education, to discuss the challenges faced by childcare business owners in 2020, how the marketplace has fared and how to prepare for 2021. Register at www.bigmarker.com/ma-education1/Christie_Co?show_live_page=true
