Early Education Commercial Real Estate Market Report: Washington DC Metro Area | January 1, 2020 – June 2025
By: Joe Serafin
Executive Summary
The Washington DC Metro area early education commercial real estate sector has undergone transformational shifts since 2020, shaped by pandemic-related disruptions, evolving family needs, and structural labor shortages. Despite initial closures and market contractions, strategic investors, operators, and developers have returned to the space, recognizing childcare’s role as essential infrastructure. Serafin Real Estate has played a market-leading role throughout this period, brokering approximately 90% of Loudoun County’s childcare-related transactions and a significant share across Fairfax and Prince William Counties.
National & Regional Market Context
Pandemic Impact (2020-2022)
Closures and Attrition: The pandemic forced widespread temporary and permanent closures of childcare centers nationally. Federal data and state-level licensing trends show a steep decline in provider numbers, with Northern Virginia echoing this pattern.
Government Stimulus: Federal CARES Act funding and state relief programs provided temporary lifelines, particularly to nonprofit and franchised providers.
Labor Shortages: Early education staffing became a national crisis as wages lagged behind retail and service sector growth, limiting operational capacity.
Demand Rebound: By late 2022, demand rebounded sharply, driven by parents returning to work and delayed school enrollments.
Licensing Trends
Loudoun County: 192 licensed centers pre-COVID; 172 by 2023; just 113 by mid-2025. This dramatic 41% net reduction is attributed to:
Rising operational costs (staffing, insurance, compliance)
Inability to compete with larger operators or franchised models
Lack of qualified labor and burnout among owner-operators
Changing work patterns (e.g., hybrid or remote work) reducing demand in certain submarkets
Redevelopment or repurposing of formerly licensed childcare facilities for residential or alternative commercial uses
Fairfax County: Dropped from 469 to 435; market remains more resilient due to larger operators and more institutional ownership.
Prince William County: Contrasts the trend, growing from 142 to 150, driven by new home growth corridors in Gainesville and Woodbridge.
Supply & Demand Dynamics
Inventory tightened due to closures, while demand returned, resulting in upward pressure on rental rates and property values.
New ground-up development remains limited due to high construction costs and zoning hurdles, especially in suburban infill sites.
Sales Market Analysis (2020-2025)
Source: CoStar Sales Comps Analytics & Serafin Real Estate Transactions
Year-Over-Year Sales Trends
Sales activity surged post-COVID, peaking in 2023 with investor confidence at a high. The 2024 dip reflects limited inventory rather than weakening demand, with high-quality centers often trading off-market.
Key Metrics
Average Sale Price/SF: $318/SF
Cap Rate Range: 5.5% – 8.0% (Avg: 6.7%)
Average Sale Price: $5.8M
Volume (DC Metro): $750M across 130 properties
Typical Months on Market: 12.7 months
By County
Owner-User vs. Investment Sale Comparison
Understanding price per square foot (PPSF) differences between owner-user and investment transactions is critical for accurate property valuation. Owner-user buyers typically pay a premium for functionality and location, while investors focus on cap rate returns and tenant stability.
Key Insight: In Northern Virginia, especially Loudoun and Fairfax counties, newer schools with 15-year NNN leases and high occupancy rates typically sell at cap rates of 5.5–6.5%, while vacant owner-user properties command a higher PPSF when marketed to top-tier operators in high-income areas.
Why Price Per SF and Cap Rates Vary
There can be significant variation in price per square foot and cap rates due to several key factors:
Lease Structure: Properties with long-term NNN leases to creditworthy tenants often trade at lower cap rates (i.e., higher valuations) due to reduced landlord risk and stable income.
Tenant Profile: Investment-grade operators (e.g., national brands like The Learning Experience or Primrose) yield stronger sale prices than independent schools.
Asset Condition: Properties with recent renovations, modern layouts, and outdoor play enhancements typically earn higher PPSF.
Licensing Capacity: Centers licensed for over 150 children often command a premium due to economies of scale and revenue potential.
Location Demographics: Schools located in affluent zip codes or areas with strong household growth (e.g., Ashburn, Fairfax, Gainesville) demand top-tier pricing.
Vacancy or Risk: Owner-user properties, especially those that are vacant at time of sale, may sell for more or less depending on how quickly they can be occupied and operated. Investment buyers factor risk and downtime heavily into pricing.
Market Conditions: Interest rates, inflation expectations, and financing availability all influence cap rate targets and investment thresholds.
The combination of these elements means similar buildings, even within the same submarket, can trade $100/SF apart or at 150–200 bps spread in cap rate depending on structure and strategy.
Trends Over Time
2020-2021: Depressed pricing and low sales activity; uncertainty dominated.
2022-2023: Recovery period; investor interest in NNN-leased schools accelerated.
2024-2025: Record pricing for institutional-grade properties; compressed cap rates for top-tier operators.
Case Highlight: 5003 Westone Plaza, Chantilly VA
Serafin secured a lease with Caritas Academy at $38/SF NNN in 2023. The property was later positioned as a premium NNN investment due to its 5-year term, trophy condition, and high enrollment area.
Lease Market Analysis (2020–2025)
Source: Lease Comps Dataset | 46 Deals
Year-Over-Year Leasing Trends (Total Transactions)
County-Level Breakdown of Leasing Activity (Volume & Price/SF)
Average Asking Rent Per SF by County (2020–2025)
Insights:
Loudoun County has seen consistent but modest leasing activity, largely due to limited supply and high demand for well-located centers. Rents are trending higher in Ashburn and Leesburg corridors.
Fairfax County leads in rental pricing and volume, driven by dense demographics and limited development opportunities.
Prince William County shows value-based growth potential. Lower rents continue to attract new operators, particularly in growth corridors like Gainesville and Woodbridge.
Loudoun County has seen consistent but modest leasing activity, largely due to limited supply and high demand for well-located centers.
Fairfax County consistently leads in volume, reflecting its denser population and more institutional operators.
Prince William County experienced growth in new leases from 2022 onward, aligning with residential development in Gainesville, Haymarket, and Woodbridge.
Year-Over-Year Leasing Trends
Leasing activity stabilized after 2021 with a consistent stream of transactions through 2025. The most active leasing years followed the market recovery as new operators reentered or expanded, with landlords offering fewer concessions amid tightening supply.
Lease Rate Trends
Average Asking Rent (NNN): $32.21/SF
Average Starting Rent (NNN): $31.22/SF
Effective Rent Range: Up to $50.62/SF (e.g., The Learning Experience, Aldie VA)
Market-wide Rent Growth: Asking rents for early education centers grew 11% from 2020 to 2025, with premium submarkets like Ashburn and Fairfax exceeding 15%.
Term & Concessions
Lease Term: 10–15 years is standard, with many franchises requiring 15-year commitments.
Tenant Improvement (TI) Allowances: Rare post-2022. Most deals from 2023 onward included either turnkey space or minimal TI due to strong demand.
Free Rent Concessions: Averaged just 2 months in 2023–2025 vs. 6+ months during 2020–2021.
Asking Rent Discounts: Tightened significantly—average discount dropped to just 1.0% vs. nearly 10% in early pandemic years.
Notable Patterns
High rents achieved in Ashburn, Aldie, and Fairfax due to household income levels and school-age demographics.
Longer vacancy for centers over 20,000 SF or those with significant deferred maintenance.
Serafin Real Estate: Regional Market Leader
Performance Metrics (2020–2025)
Average Sale Price Per SF (Serafin Transactions): $354/SF
Average Cap Rate (Serafin Transactions): 6.2%
Serafin’s transactions consistently outperform market averages, especially in Loudoun and Fairfax Counties, where strategic pricing and targeted buyer outreach have led to record-setting valuations and quick closings.
Serafin Real Estate has led the market in early education real estate, consistently outperforming regional competitors in:
Transaction volume and price per SF
Creative repositioning of legacy assets
Brokerage of 90% of Loudoun childcare sales
Signature Transactions
Fernbank Court, Sterling VA: $4.7M all-cash; marketed to niche operators.
Elk Lick Road, Chantilly VA: Set Loudoun PPSF record at $545.61/SF.
Westone Plaza, Chantilly VA: Transacted both lease and investment sale.
Forward-Looking Outlook (2025-2027)
For Buyers
Expect compressed cap rates on long-term NNN-leased schools.
Owner-users should act quickly amid limited inventory.
For Sellers
Premium pricing available for stabilized assets.
Demand remains strong for quality operators and trophy locations.
For Operators
Lease negotiations now favor landlords; early renewals advised.
Expansion via acquisition or franchise models likely to accelerate.
Macro Factors to Monitor
Interest rate trends
Zoning reform initiatives
Institutional consolidation in the childcare sector
For expert advisory services or off-market opportunities, contact Serafin Real Estate — Virginia’s most trusted brokerage for childcare, preschool, and early education real estate transactions.