Demand among property developers for children’s social care real estate remains strong amid a critical shortfall in availability, according to a new report.

Specialist business property adviser, Christie & Co, has launched its Business Outlook 2025 report which reflects on the themes, activity, and challenges of 2024 and forecasts what 2025 might bring across the sectors in which Christie & Co operates, including in the children’s social care sector

Market overview

Throughout 2024, activity in the children’s social care market was moderate, with limited acquisition and business expansion opportunities available to buyers due to many operators holding onto their existing businesses and expanding them, where possible, to keep up with the increase in demand for children’s services.

Amid heightened demand for high-quality operational businesses and well-located vacant properties benefitting from C2 use and CLD, Christie & Co achieved 105% of the asking price on children’s social care transactions in 2024.
While there was a shortage of small-to-medium-sized businesses being presented for sale, the sector witnessed a handful of major transactions last year.

In May, Cap10 Partners partnered with the existing Compass management to acquire 100% of Compass Community Children’s Services (Compass) – a leading UK provider of therapeutic fostering, residential, and special education for children with high-acuity and complex needs – from the majority shareholder, Graphite Capital.

2024 was a somewhat-frustrating year for the children’s social care sector as so many buyers were looking to acquire and/or expand yet there simply weren’t enough suitable properties to satisfy this demand

This significant transaction spanned two key childcare and education markets, notably the children’s social care and SEND education sectors.

In the five months following the announcement of this transaction, Graphite Capital, in partnership with Storal, completed the notable acquisition of Children 1st Nurseries, thus further building its appetite and enthusiasm to support growth and investment in the UK’s childcare and education sectors.

Opportunities to acquire established, high-quality operational children’s services business, both single assets and portfolios, have been few and far between in recent years, thus leading to intense competition between buyers when new opportunities arise, a trend Christie & Co expects to continue into 2025.

Predictions

In 2025, Christie & Co expects:

• Increased merger and acquisition activity
• Continued buyer appetite for quality businesses with proven earnings, especially established businesses with experienced management teams
• Properties with the benefit of permitted C2 or C2a use will continue to command premiums over those sold on a vacant possession basis with C3 use
• With local authority funding shortfalls, Christie & Co fears that commissioning into services at lower cost points could result in children’s individual needs not being met
• Continued stagnation of the market in Wales in the short-term

Julie Kitson, director at Christie & Co, said: “2024 was a somewhat-frustrating year for the children’s social care sector as so many buyers were looking to acquire and/or expand yet there simply weren’t enough suitable properties to satisfy this demand.

“Settings continue to be sought after as demand for placements continues to increase and I see 2025 as the growth year for this sector with the emphasis on SEN and complex needs.”