Why Price Per Square Foot Fails Childcare and How We Are Rebuilding the Market Around Business Fundamentals
For decades, commercial real estate has depended on a single, simple metric to define value: price per square foot. It works reasonably well for office, retail, and industrial buildings where tenant demand, visibility, and general market forces drive performance.
But in childcare real estate, price per square foot routinely misrepresents reality.
Childcare is not a typical real estate use. It is a regulated operating business where revenue is dictated by licensing, enrollment, tuition, staffing, and utilization. Two buildings of identical size can have completely different values depending on how the business inside them performs. Yet the market still tries to price and lease these facilities like generic commercial space.
That disconnect is one of the biggest reasons why lease renewals destabilize operators, why valuations vary wildly, and why transactions often stall or fail.
At The OFF MKT, we are rebuilding how childcare real estate is evaluated by tying every lease and every sale directly back to business fundamentals.
The Problem with Price Per Square Foot in Childcare
Price per square foot assumes that space itself creates value. In childcare, space only creates value if it can be licensed, staffed, and filled with enrolled children paying tuition.
A 7,000 square foot building licensed for 120 children at strong tuition rates can support far more rent than a 10,000 square foot building licensed for 70 children at modest tuition. Yet traditional pricing would often place a higher value on the larger building simply because of size.
When rent is set based on square footage instead of revenue capacity, the result is usually one of two outcomes:
• The business becomes over-leveraged and unstable
• Or the property becomes mispriced and difficult to finance at resale
Neither outcome leads to sustainable operations or consistent transaction volume.
Business Fundamentals Must Drive Real Estate Decisions
At its core, the value of a childcare facility is determined by:
• Licensed capacity
• Tuition by age group
• Stabilized occupancy
• Operating margin
• Staffing ratios and wage pressure
• Regulatory compliance
These fundamentals dictate how much rent a business can afford, how much debt it can support, and what a buyer can realistically pay at acquisition.
Across most stable childcare operations, sustainable rent generally falls within 10 to 15 percent of gross revenue, depending on market conditions. Higher-cost urban markets may tolerate slightly more. Secondary and suburban markets often require less.
When leases and purchase prices ignore this framework, operators lose predictability, lenders lose underwriting clarity, and transactions become fragile.
How The OFF MKT Is Structuring a More Reliable Market
The OFF MKT was built to move childcare real estate away from guesswork and toward measurable, repeatable financial structure.
Every lease and sale reviewed through the platform is evaluated against:
• Tuition-driven revenue potential
• Realistic stabilized enrollment
• A defined rent-to-revenue threshold
• A clear licensing and transition timeline
By anchoring transactions to these metrics, leases stop being abstract negotiations and become extensions of the operating business itself.
This alignment does something powerful. It allows transactions to be tracked consistently across the market using business-driven benchmarks instead of noisy, misleading square-foot averages.
Why Structured Transactions Create Better Market Data
Historically, childcare transaction data has been fragmented. Deals happen quietly. Lease terms are private. Business sale pricing is rarely standardized. This makes it nearly impossible for operators to understand true market value.
By structuring leases and sales around consistent business metrics, The OFF MKT creates something that has never truly existed in this industry:
Comparable data that actually reflects operating reality.
Over time, this allows us to track:
• Rent levels as a percentage of revenue
• Valuation relative to tuition and enrollment
• Regional affordability thresholds
• What actually makes transactions succeed or fail
That transparency does not just help buyers and sellers. It strengthens the entire industry by allowing operators to plan with confidence instead of uncertainty.
Why This Directly Supports Higher Transaction Volume
Markets with clarity transact more frequently. Markets with confusion stall.
When operators understand what their business can support, when lenders can size debt accurately, and when sellers know how buyers are underwriting, deals move forward with far less friction.
This is how mature asset classes function. Multifamily, healthcare, and hospitality all price based on income first. Childcare is finally moving in that direction.
The OFF MKT is not just facilitating off-market transactions. It is helping the industry transition into a data-driven, financeable, and scalable asset class.
Building Lasting Businesses, Not Just Closing Deals
Our goal is not simply to close the next transaction. It is to help operators build businesses that are:
• Financeable at resale
• Predictable at lease renewal
• Transferable at exit
• Attractive to lenders and buyers
• Stable for staff and families
That only happens when real estate decisions are grounded in business fundamentals, not arbitrary price-per-square-foot benchmarks.
That is the framework The OFF MKT is building.
Take the Next Step
If you are a licensed operator and want to better understand how rent, valuation, and transaction structure are being recalibrated around real operating performance, you can learn more at:
Registration is free for licensed operators and provides access to member-only research, statewide mapping, and structured marketplace activity once verified.