Is Childcare and Early Education the Most Underrated NNN Sector in 2026?

Childcare and early education NNN properties have quietly outperformed investor expectations for years — offering durable income, recession-resistant demand, and cap rates that beat many of the sector’s more famous counterparts. Yet despite growing transaction volume and rising institutional interest, early education remains underallocated in most private portfolios. This article breaks down the investment case for childcare NNN in 2026: who the tenants are, what cap rates and lease structures actually look like, why demand fundamentals are accelerating, and how to evaluate deals with confidence before capital moves further into this space.

Why Childcare NNN Properties Outperform on Yield

Childcare NNN assets consistently trade at cap rates above most other single-tenant net lease categories, giving investors a structural yield advantage that is difficult to find in today’s compressed market. That premium exists because the sector has historically flown under the radar — and in 2026, that gap represents a genuine opportunity before broader adoption pushes pricing tighter.

Historically, early education assets have traded for higher cap rates on average than other single-tenant net lease retail properties like dollar stores, banks, and quick-service restaurants.

Currently averaging around 6.8%, with brand-new 15-year corporate-guaranteed opportunities ranging in the mid-to-high 5% range, childcare cap rates are typically more attractive than fast food, dollar stores, drug stores, and gas stations.

“Net-leased daycare assets provide investors with a higher yield than most other net-leased properties,” noted Alan Cafiero, senior managing director of investments at Marcus & Millichap.
That yield advantage is not a sign of weakness — it is a reflection of the sector’s slower institutionalization, which is now accelerating rapidly.

For context,
NNN REIT closed on $931.0 million of investments across its diversified portfolio in 2025 at an initial cash cap rate of 7.4% with a weighted average lease term of 17.6 years
— a benchmark that underscores just how competitive early education cap rates are within the broader single-tenant universe. To read more NNN analysis on the Triple Net Direct blog, including sector-by-sector cap rate comparisons, you’ll find childcare consistently punching above its weight.

The Demand Equation Behind Childcare NNN Investments

The structural demand driving childcare real estate is one of the most compelling stories in commercial real estate today. Affordable, quality childcare remains one of the most acutely undersupplied services in the United States, and that scarcity is what makes the underlying tenants — and their real estate — so durable.

The nation’s infant-toddler childcare crisis costs the U.S. an estimated $122 billion in lost earnings, productivity, and revenue every year, according to projections from advocacy group ReadyNation.
That figure reflects the depth of unmet demand — and the economic pressure pushing parents, employers, and investors alike toward institutionally operated childcare solutions.

Caregiving responsibilities, including the cost of childcare, was the No. 1 driving factor that led women to leave the workforce voluntarily in 2025, according to new data from Catalyst, with some 42% of women who quit citing caregiving concerns as a top reason.
Return-to-office mandates are sharpening that pressure further, making professionally operated, licensed childcare a non-discretionary priority for millions of dual-income households.

During the pandemic, many families moved to more rural areas where there are fewer childcare facilities, and developers are now looking to capitalize on these so-called childcare deserts.
That new-construction pipeline is translating directly into fresh NNN supply with long initial lease terms — exactly the kind of inventory accredited investors and 1031 exchange buyers need.

Supply Is Growing — and So Is Lease Quality

Since the end of 2024, the number of early education properties available for sale has grown by 14%, reaching a total of 158, according to B+E, which specializes in net leasing.
More significantly,
a significant number of centers — especially large national chains like KinderCare and The Learning Experience — use net lease structures in which tenants are responsible for property expenses like taxes, insurance, and maintenance; the number of available properties with more than 10 years remaining on their lease terms increased by 12% in 2025.

“This is the stuff that banks love to lend on,” said Camille Renshaw, CEO of B+E. “It shows you that the vast majority of stuff coming on the market is developers finally getting a new tenant. That is coming to the market for investors and is very exciting.”

Childcare NNN Tenant Profiles: Who Are You Actually Leasing To?

Understanding the tenant landscape is the starting point for any serious childcare NNN evaluation. The sector is dominated by a handful of large national operators — most with corporate lease guarantees — and a growing roster of franchise brands with rigorous franchisee vetting. The profile of who signs these leases matters enormously for credit underwriting and long-term hold strategy.

KinderCare Learning Companies, Inc. is a private provider of early childhood and school-age education and care, serving children ranging from six weeks to 12 years of age across a footprint of over 1,500 early childhood education centers with capacity for over 200,000 children, and approximately 1,000 before- and after-school sites located in 40 states and the District of Columbia.

Many investors are surprised to learn that KinderCare Learning Centers — the largest tenant in the childcare space with over 1,500 locations — offer full corporate guarantees on many of their schools. The second-largest operator, Learning Care Group with 900+ locations, offers similar corporate or subsidiary guarantees.

For investors seeking a higher rate of return, purchasing a center with a franchisee guaranty such as The Goddard School or Kiddie Academy — brands that stringently choose their franchisees based on financial solvency and operating experience — provides an alternative risk profile.

Childcare is commonly referred to as one of the more durable retail tenants because of the service-based nature of the business and the necessity of the facilities relative to other service providers such as nail salons or boutique gyms.
That essential-service characteristic is exactly what long-term NNN investors — particularly those completing 1031 exchanges — are seeking.

What Lease Structures Look Like on Childcare NNN Properties

Childcare NNN lease structures are among the most landlord-friendly in the single-tenant universe, with initial terms, rent escalation schedules, and landlord responsibility profiles that compare favorably to QSR and dollar store peers — while still delivering a yield premium.

Corporate-guaranteed childcare NNN leases typically run 15 to 20 years on initial term, with multiple renewal options. Rent escalations are commonly built in at fixed percentages — creating predictable income growth that passive investors can underwrite with confidence.
Tenants like KinderCare have demonstrated long-term site commitment, in some cases operating continuously at a single location for over 40 years; recent lease structures offer 5% rent increases at each option period.

Some KinderCare locations feature an absolute NNN lease structure with zero landlord responsibility, offering a truly passive investment.
For family offices and 1031 exchange buyers looking to minimize management obligations post-close, absolute NNN structures in the childcare sector represent a compelling combination of yield and passivity.

Institutional Capital Is Validating the Asset Class

Fortec, a national developer specializing in early childhood education projects, just announced a partnership with Equiturn, a global financial advisory firm, to launch a $100 million early education real estate fund.
That institutional conviction is a forward-looking signal: when development-side capital at that scale targets a niche, the downstream transaction market for stabilized NNN product deepens and secondary market liquidity improves.

Because childcare properties trade at higher cap rates and are viewed as recession-resistant, net lease investors are picking up more early childhood education properties.
That trend, which gained meaningful traction during prior market dislocations, is now a full conviction thesis as more institutional players formalize their positions.

How Cap Rates for Childcare NNN Properties Are Trending in 2026

Childcare NNN cap rates in 2026 reflect the same stabilization dynamics playing out across the broader single-tenant market — but with the added tailwind of rising institutional demand compressing pricing from above. Understanding where rates are settling helps investors calibrate acquisition targets and underwrite debt service more accurately.

Early education cap rates reached a historically low average of 6.44% in 2022 — some 71 basis points lower than the previous year’s average of 7.15%.
The rate expansion cycle of 2023–2025 pushed those numbers wider, creating re-entry opportunities that are increasingly attractive for accredited buyers.
Following three years of cap rate expansion, the net lease sector is now stabilizing
— a dynamic that typically precedes a new phase of pricing compression as deal volume accelerates.

Single-tenant net lease property supply declined 9.8% quarter-over-quarter in Q1 2026, driven by elevated transaction volume in Q4 2025 and continued deal activity in the first quarter, with retail bid-ask spreads narrowing to 23 basis points, according to The Boulder Group.

The net lease market remains bifurcated between investment-grade credit assets with long lease terms — which continue to attract institutional buyers, 1031 exchange capital, and private investors — and shorter-term or non-rated assets, which face wider spreads and more selective buyer engagement.
Childcare assets with corporate guarantees and 15+ year remaining terms sit squarely in the favored tier of that bifurcation.

If you want to evaluate live pricing across the current childcare and early education deal pipeline, take a look at some of the deals currently available in the Triple Net Direct marketplace.

Due Diligence Framework for Childcare and Early Education NNN

Childcare NNN due diligence differs in meaningful ways from evaluating a QSR or dollar store. Investors who understand the sector-specific variables make faster, more confident acquisition decisions — and avoid mispriced assets that look attractive on yield alone.

• Guarantee structure: Distinguish between full corporate guarantees (KinderCare, Learning Care Group brands) and franchisee guarantees (Goddard School, Kiddie Academy). Corporate guarantees command tighter pricing and are preferred by debt markets.
• Enrollment and licensing: A center operating at or near licensed capacity in a high-demand submarket has meaningfully lower re-tenanting risk than a center with chronic enrollment gaps.
• Building functionality: Childcare centers are purpose-built with specific room configurations, outdoor play areas, and licensing requirements. These specifications improve tenant stickiness — operators rarely relocate — but also affect re-use optionality if a lease ever does expire.
• Lease term remaining:
  Investment-grade credit assets with long lease terms continue to attract institutional buyers and 1031 exchange capital
  ; aim for 10+ years of remaining term for optimal debt coverage and exit optionality.
• Demographic alignment: Target suburban and suburban-rural markets with growing household formation, strong dual-income employment bases, and documented childcare supply gaps.
  “Strong investor interest in childcare assets is driven by below-replacement-cost pricing, high-performing locations, and tenancy by nationally recognized early education brands,” with income-tax-free environments and strong local demographics further enhancing the appeal.
• Rent-to-revenue ratio: Childcare operators function on tuition-based revenue models. Properties where rent represents a sustainable percentage of center-level revenue (typically below 15% of gross tuition) carry meaningfully lower rollover risk at lease expiration.

For investors completing a 1031 exchange, childcare NNN properties warrant serious attention.
A 1031 exchange allows investors to defer capital gains taxes by reinvesting proceeds from a property sale into a like-kind property; net lease properties are popular for 1031 exchanges due to their stable income and ease of management.
The longer lease terms and passive income profile of corporate-guaranteed childcare assets make them a particularly clean fit for exchange buyers seeking to avoid active management obligations post-close. Connect with a specialist advisor to discuss how childcare NNN fits within a 1031 exchange timeline and replacement property strategy.

Frequently Asked Questions

What cap rates can I expect on childcare NNN properties in 2026?

Childcare NNN cap rates in 2026 generally range from the mid-5% to high-6% range depending on tenant credit, lease term, and location. Corporate-guaranteed assets with 15+ years remaining trade at tighter pricing, while franchisee-operated centers offer higher yields. These rates typically exceed comparable QSR and dollar store NNN pricing, creating a meaningful yield premium for investors who understand the sector.

How long are typical lease terms on early education NNN properties?

Initial lease terms on childcare NNN properties commonly run 15 to 20 years, with multiple renewal options. Corporate-backed operators like KinderCare frequently sign leases of this duration, and many include fixed rent escalation clauses — typically 5% to 10% per option period — providing predictable income growth over the full hold period.

Are childcare NNN properties a good fit for a 1031 exchange?

Yes. Childcare NNN properties are well-suited for 1031 exchange buyers because of their long initial lease terms, passive income structure, and corporate tenant guarantees. The combination of above-market yields and minimal management obligations makes early education assets a compelling replacement property, particularly for investors exiting active or multi-tenant real estate.

What is the difference between corporate and franchisee guarantees in childcare NNN?

A corporate guarantee means the parent company — such as KinderCare or Learning Care Group — is directly on the hook for rent obligations, regardless of individual center performance. A franchisee guarantee means the individual franchise operator backs the lease. Corporate guarantees carry stronger credit, command tighter cap rates, and are generally preferred by institutional buyers and lenders.

Which national childcare operators are the largest NNN tenants?

KinderCare Learning Centers — with over 1,500 locations across 40 states — is the dominant corporate NNN tenant in early education. Learning Care Group, which operates brands including Tutor Time and La Petite Academy, is the second-largest with 900+ locations. Franchise brands such as The Goddard School and Kiddie Academy round out the investor-relevant tenant set.

What due diligence should I prioritize for a childcare NNN property?

Focus on lease guarantee type (corporate vs. franchisee), remaining lease term, enrollment levels relative to licensed capacity, local demographic strength, and rent-to-revenue sustainability. Purpose-built facilities with outdoor play areas and proper licensing configurations signal strong tenant stickiness and lower re-tenanting risk if the lease eventually expires.

Bottom Line

Childcare and early education NNN properties offer a rare combination in today’s market: above-market cap rates, long lease terms, corporate tenant guarantees, and demand fundamentals rooted in one of the most structurally undersupplied service categories in the U.S. As institutional capital formalizes its position and new supply enters the market with fresh 15- to 20-year leases, the window to acquire at current pricing may be narrower than most investors realize. To explore available inventory, view available NNN deals on Triple Net Direct and take the first step toward positioning early education in your net lease portfolio.

Sources

• Early Education Real Estate Is Luring Big Money for Small Kids’ Care — CNBC
• Marcus & Millichap Arranges Sale of Net-Leased Daycare Property in Northern New Jersey — Marcus & Millichap
• Marcus & Millichap Announces Sale of Net-Lease Childcare Facility in Keller, Texas — Marcus & Millichap
• Early Education Assets in High Demand by Net Lease Investors — GlobeSt.
• STNL Investors Flock to Day Care Assets — GlobeSt.
• Primed With Private Equity, Early Education Poised for Expansion Further Into Retail — Bisnow
• Net Lease Research — Q1 2026 — The Boulder Group
• NNN REIT, Inc. Announces 2025 Annual Results and Initial 2026 Guidance — NNN REIT
• The Covid-19 Pandemic Worsened a Child Care Crisis, and It’s Costing U.S. Businesses Billions — CNBC
• Catalyst Data: Caregiving Is No. 1 Reason Women Left Workforce in 2025 — CNBC