The Childcare Cap Rate Index

The quarterly series above starts in 2022 and shows expansion, then stabilization. Widening the lens to ten years changes the reading entirely: 2016–2019 averaged 7.48%, rates compressed to a 6.46% low in 2022, and today they sit at 7.07% — essentially back to the pre-pandemic norm.

Which means the anomalous year wasn't this one. It was 2022. An owner anchoring their price expectation to what a neighbor sold for in 2021 or 2022 is comparing against the lowest cap rates in a decade, not against a normal market.

Public net-lease REITs bought 26% of childcare sales between 2016 and 2019. For 2024–2026 that figure is 10%. Over the same period, private individual investors went from 47% to 64% of buyers.

When institutional capital pulls back, the marginal buyer becomes someone borrowing at higher cost who needs more current yield. That shift in the buyer pool — rather than any deterioration in childcare as a sector — is the simplest explanation for why cap rates returned to pre-2020 levels.

For an owner this is practical: your most likely buyer today is a private investor, often executing a 1031 exchange. That changes what matters in a sale — lease clarity and a clean, fast close count for more than portfolio scale.

On September 2, 2026, an entity tied to NRT — the private REIT backed by the Milken brothers — closed a $650 million loan from Goldman Sachs, refinancing a 2021 CMBS facility secured by 549 daycare properties totaling more than 4 million square feet across 37 states. The prior $642 million loan matured in August and was paid in full.

Coverage explains why it cleared: as of March 2026 the portfolio produced more than $85 million of net operating income against $42 million of debt service — roughly 2.0x. Three weeks earlier, KinderCare's stock had fallen about 50%, from $4.83 to $2.60.

For reading this index, that contrast matters. The 2023–2024 cap rate expansion was a change in the cost of capital and in the buyer pool, not a verdict on childcare as a use. When a lender underwrote 549 of these buildings, it underwrote rent and coverage — exactly what prices a single center.

Between early 2023 and late 2024, buyers of childcare real estate repriced risk. The median cap rate moved from 6.30% to 7.28% — nearly a full percentage point. For a center with $300,000 of NOI, that 98bp expansion took roughly $640,000 off the value.

Then it stopped. For 7 straight quarters the rolling median has sat between 7.28% and 7.35% — a seven-basis-point band — while sample sizes grew from 71 to 146 sales. Stability that holds as the sample grows is not noise; it is a market that found its level.

For owners, this changes the arithmetic of waiting. Through 2023 and 2024, waiting cost value every quarter. Today the cost of waiting is your own operating performance — tuition, occupancy, lease term — not the direction of the market.