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Childcare Tech Startups Are Helping Building Owners and Tenants Attract Skilled Talent

The number one amenity that more and more top tier corporate tenants are requesting might surprise you. It isn’t a gym, or a ramen restaurant or a sleeping pod. Its childcare.

Not surprisingly, child care also happens to be one of the largest driving forces for employee retention rates. This makes it one of the building amenities that occupiers are most willing to pay more for. Charles Bonello, CEO and co-founder of Vivvi, which provides employer-sponsored childcare to companies of all sizes explains the potential of this untapped market like this, “childcare is the final frontier of repositioning commercial real estate in a way that hasn’t been imagined yet.”

According to BOMA, childcare benefits are increasingly important to companies that seek top talent employees, “prompting some multi-tenant office building owners to put daycares high on their priority list of amenities.” Building owners and developers would do well to remember “this highly prized perk has risen to the level of other popular tenant-exclusive benefits like fitness centers and conference rooms.”  

When parents have reliable, affordable childcare that is easily accessible, they are more present and more productive at work. The average parent misses 24 days (both full and partial) of work per year due to unreliable childcare. Multiply that by every parent in an office, and you can see how it adds up. Corporate culture is shifting in a direction where work/life balance and creating a sense of purpose amone the workforce has become front and center. One of the biggest contributing factors to work/life balance, especially for new parents, is having easy access to childcare because of the freedom and flexibility it provides. 

Unfortunately, this is not the norm for most parents. According to Alessandra Lezama, CEO of Tootris (stylized as TOOTRiS), a childcare technology startup based out of San Diego, only one out of every nine children ages zero through five has access to quality childcare. There is a huge shortage of available inventory (or open slots) within childcare. Moreover, childcare costs create a huge financial burden for the average American family. 

For a healthy standard of living, it is recommended that families spend no more than seven percent of their net household income on childcare. The average American family with two working parents is spending at least twenty percent of their net household income on childcare. However, depending on the state of residence and actual net household income, this number can skyrocket to over 100 percent. In Washington D.C., for example, a single parent earning minimum wage (based on full-time work) would have to put forth over 100 percent of their annual earnings to meet the average yearly cost of childcare for an infant. Assuming there are two working parents, the most economical choice is often for one parent to stay home, which is why fifty percent of mothers leave their full-time careers after having their first child

Employers can spend up to 200 percent of an employee’s annual salary to replace them if they drop out of the workforce due to lack of child care.

Charles Bonello, CEO and Co-founder of Vivvi

For businesses, the costs associated with recruiting, training, and lost productivity when parents leave their jobs to raise children are astronomical. Lezama explains, “Employers can spend up to 200 percent of an employee’s annual salary to replace them if they drop out of the workforce due to lack of child care.” According to Bonello, employers who offer childcare benefits get 30 times ROI, even just by paying a portion of their employees’ childcare costs per month. 

So why don’t more buildings have on-site daycare? One reason is because building owners and their tenants don’t know where to begin. State and federal regulations can make opening a childcare center difficult to navigate for even those seasoned in the field. Some of these strict regulations (like background checks with fingerprinting) seem well within reasonable requirements for working with children, but they also drive costs up. Training childcare workers on these regulations (regardless of workers’ wages) is expensive, and turnover (due to low wages) is high.

Other regulations, like 75 square feet of outdoor space required per child in states like California and North Carolina, are currently prohibiting more business parks and retail conversions to include a space for childcare centers. Vacant retail spaces are often ideal in size and location, but they typically lack the outdoor space needed to be converted into a childcare center in states with these mandates. The State of California is exploring public-private partnerships to help alleviate the problems that are preventing more families from having access to childcare, with Kris Perry, Deputy Secretary and Senior Advisor to Governor Newsom at the California Health and Human Services Agency, leading the effort. Lezama explained that developers and owners are often worried about liability and having the proper insurance coverage when incorporating childcare centers into a build. Tootris proposes using technology to overcome some of these hurdles, like recordkeeping and reporting. They will also connect developers with turnkey childcare businesses that have been navigating California’s licensing for well over a decade. 

In New York City, one challenge is a regulation that stipulates childcare centers must be on the ground floor. Owners or developers often see more value in designating that space for retail, which typically gets more dollars per square foot. But in a time where retail vacancies are all too common, does it really make sense to add another shoe store to the bottom floor of a building? Instead, think of the value add to the offices in the building where parents can now drop off their child on the main level before heading up to work. People have always been willing to pay a premium for convenience, especially in New York City. 

Businesses also may not know how to implement a childcare benefits strategy. Companies like Vivvi are helping to make this process more of a turn key service, from helping an employer determine their benefit needs, to selecting their tuition contributions, to launching their benefits strategy, to even applying for government subsidies that reimburse employers for the majority of their tuition contributions. What exactly do these contributions buy employers? Fifty percent reduction in employee turnover, according to Bonello. 

On the opposite coast, Tootris’ is developing a software platform to connect parents with available childcare inventory that meets their financial and geographical needs in real time. Currently, 60 percent of California is a childcare desert, meaning there is only one open slot available for every three children. Maine has the lowest rate for childcare deserts at 22 percent, but the vast majority of the country is in need of licensed childcare centers. Considering the nation’s current network of childcare providers brings in $47.2 billion in annual revenue, there is quite a lot of money to be made. If for no other reason, childcare expansion in commercial properties should be prioritized because it is profitable, but it is also the right thing to do. “Both the public and private sectors must come together to help solve the childcare crisis in California as well as the rest of the nation,” says Lezama. 

For building owners and developers, partnering with a childcare provider early on for a project enables them to maximize this amenity by ensuring federal and state regulations are met. Landlords can attract the biggest top tier tenants that are specifically seeking properties offering this amenity. Childcare centers are becoming a prime way to add value when repurposing existing assets because they cater to a specific (often desirable) demographic—young parents established in the workforce. Adding childcare centers to buildings can expand portfolios by opening them up to new markets where zoning laws require space dedicated specifically to early childhood education. 

The benefits of accessible high quality childcare go beyond the real estate business case. Almost 85 percent of brain development occurs in the first three years of a child’s life, so children who receive early education from ages zero to five are significantly better prepared for school and for later stages of life. Children in early childhood education programs also often benefit from having the income of both parents when one doesn’t need to leave the workforce to care for them. Family stability improves due to less financial stress and more fulfilling careers for parents. At the risk of sounding cliche but pardoning herself anyway, Lezama chuckled as she quoted Whitney Houston in that, “The children really are our future.” But since she is one of the few individuals making the necessary strides to secure that future, we will most definitely give her a pass.

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