New report reveals a need for properties suitable for use as children’s residential homes

The supply of suitable children’s social care properties is ‘critically low’ despite rising need, according to a report from real estate adviser, Christie & Co.

Its Business Outlook 2024 report reflects on the themes, activity, and challenges of 2023 and forecasts what 2024 might bring across key industries, including the children’s social care sector.

Last year Christie & Co reported a heightened demand from commissioners for children’s social care services and placements, resulting in an increased number of providers seeking suitable properties to increase their capacity and range of services.

Though the high inflationary environment led to rising operational costs, increased expenses associated with the cost of capital, and a national workforce crisis, demand from buyers did not soften, according to the report.

And Christie & Co continued to experience high levels of demand for properties suitable for use as children’s residential homes, alongside a heightened appetite from children’s services providers for properties with the potential for educational use.  

Supply and demand

Such demand led to a 9% increase in the number of children’s homes – from 2,642 to 2,880 – and a 7% increase in the number of places – to 10,818 – from 31 March 2022 to 31 March 2023, according to Ofsted.

But, despite this rising demand for services, and strong buyer appetite as a result, in the early months of this year the supply of operational children’s social care businesses available for sale remains low – a trend most apparent post-pandemic.

This is due to many owners with operational services opting to hold onto them and focus their efforts on increasing both the capacity and the breadth of services they provide in a bid to meet the increased needs of service users.

Pricing

The report states that an overall combination of economic shifts, funding challenges, cost pressures, margin erosion, and the increased cost of capital all contributed to a market reset in 2023, resulting in a 3.3% decrease in pricing across childcare and education businesses, which follows some aggressive positive index movements in prior years.

Market sentiment

As part of its annual sentiment survey, the company surveyed childcare and education professionals across the country to gather their views on the year ahead.

Encouragingly, 44% of people said they feel positive about the year ahead – an 11% rise on survey figures reported in the previous year – while just 14% feel negative.

When asked about their sale and acquisition plans in 2024, 71% said they are planning to buy and/or sell this year.

Finance

In 2023, Christie Finance witnessed a 26% rise in the number of childcare and education finance instructions, with a significant increase in leasehold operators seeking funding to purchase the freehold premises, ultimately increasing the value of the business that can be utilised as a springboard to aid future expansion.

And, in 2024, Christie & Co expects:

• Further expansion of provision with assets currently in alternative use seeking consent to be used as children’s homes and associated educational services
• Increased consolidation activities, with owners of long-established businesses exiting their services due to market conditions and the upcoming general election
• Further foster carer recruitment campaigns and potentially a shift back to foster care placements being local authorities’ preferred placement route as purse strings tighten
• Improved outcomes from better multi-agency collaboration in child protection

Courteney Donaldson

Courteney Donaldson, managing director of childcare and education at Christie & Co, said of the findings: “Throughout 2023, against a backdrop of heightened demand from commissioners for children’s social care placements and services, the post-pandemic surge of providers seeking suitable properties to increase their capacity and range of services continued unabated.

“We also saw an increase in multi-property portfolio disposals for corporate providers of assets, made available to market with vacant possession, in generally more semi-rural locations.

“During 2024, we predict we will see a steady increase in the number of regional operational businesses brought to the market as owners reignite their exit plans following a period of growth and consolidation.”