Get back to work with a Propmodo membership | Use code FALL20 for 20% off →

Why Child Care Makes Sense in Office Buildings—and Other Real Estate Too

Child care is an important issue these days for most office workers, and it’s easy to understand why: it’s expensive, hard to find, and it’s crucial for working parents. The pandemic took a crushing toll on the child care industry, creating a labor shortage and forcing many providers to close their doors. That’s left a lot of families without reliable care for children, and it’s led to women leaving the workforce in droves. Employers know how important child care is, but for office owners and developers, there’s an urgency these days to reevaluate including child care facilities in a property and asking an important question: is child care the ultimate office amenity?

Studies on child care paint a sobering picture. More than half of Americans live in areas considered to be “child care deserts,” where the ratio of children to slots at licensed care facilities is at least 3 to 1. The average cost of child care for one child is roughly $9,400 a year, according to a McKinsey & Company study. Using the metric set by the US Department of Health and Human Services, to be designated affordable, child care costs would not exceed 7 percent of a family’s household income. Based on that standard, the average cost for one child would be unaffordable for families making less than $130,000 a year. In 2020, the median household income was $67,521. 

A lack of childcare options was a widespread problem before the pandemic, and it has only gotten worse since. Workers in the generally low-paying industry left in droves, and they haven’t returned. Child care costs are so high that it’s led to one million fewer women in the workforce than before the pandemic. 

A family affair

Unsurprisingly, multiple studies have found that child care—and especially affordable child care–is a top concern for working parents. The McKinsey study found that 69 percent of women with kids aged 5 and under would be more likely to work for an employer that offered child care subsidies or provided on-site child care. As office building owners look to stay competitive in order to sign tenants and many employers look to bring workers back, it would seem that on-site child care and/or subsidized child care would be a no-brainer. But bringing in a childcare provider as a tenant can have its challenges. In dense urban areas like New York City, where millions of office workers take public transportation to work every day, bringing an infant or young child along for the ride isn’t a walk in the park—especially when buses and subways aren’t exactly accessible for strollers. 

The US General Services Administration (GSA) has long offered independently-run child care services for federal employees and non-federal employees in government buildings across the country, and major companies like clothing outfitter Patagonia, automaker Mercedes-Benz, and the biopharma company Bristol-Myers Squibb all have on-site child care at their headquarters campuses, which are located in more suburban areas outside of CBDs. Patagonia has been offering this to its employees since the early 1980s, and it’s a point of pride for the company, which even offers a hardcover book called “Family Business” about the company’s on-site child care for sale on its website. 

An outdoor space that is part of the childcare and early education center located within Bright Horizon’s headquarters in Newton, Mass. (Photo courtesy of Bright Horizons)

Regardless of whether an office building is urban, suburban, or somewhere in between, the idea of bringing in child care is something landlords are thinking about more. “There has definitely been more interest both in clients that own campuses and facilities and shared units,” said Priya Krishnan, senior vice president of client relations at Bright Horizons, one of the nation’s largest child care providers. Of the company’s more than 700 locations in the US and Canada, many are in buildings owned by well-known commercial real estate firms like Boston Properties and Jamestown Properties. 

Boston Properties’ Bryan Koop, executive vice president of the firm’s Boston region, spoke in a company meeting recently about how part of the company’s “secret sauce” that separates them from their competitors is “activity-based space” within their properties. Part of how Koop defined that space was akin to a studio space that companies can use to shoot quick videos to communicate with employees around the country. But he also talked about ABS being used to house child care centers like Bright Horizons. “This demographic is determining our future in terms of how things are consumed,” Koop said about parents of young children. He went on to say that quality child care and early education facilities add enormous value to an office building, and today’s workers will be drawn to them. “We’ve got to evaluate all our major projects. How do we get this activity base in a space?” he said. “In the future, talent will expect these things from the workplaces they go to, no doubt about it.” 

Making the connection

It’s not just office landlords that are looking more at adding daycares and early education centers, tenants are as well. Something out of the ordinary has been happening over the last year, as employers continued bringing employees back to the workplace, said Bright Horizons’ Krishnan. Owners of other types of buildings, like data centers, hospitals, and distribution facilities, are increasingly looking to partner with Bright Horizons to add child care centers for their employees. “It’s been half of our discussions in the last year and a half,” she said. At manufacturing plants, data centers, hospitals, and other healthcare centers, where many employees’ work requires them to be in the workplace, the need for child care has been “significantly” higher than normal. The healthcare industry, like child care, has been experiencing a depleting workforce. 

Carving out space to open child care centers could help retain employees by offering a crucial amenity. It’s something Krishnan is seeing in her own workplace at Bright Horizons’ headquarters in Newton, Mass. “Our employees tend to come in four to five days a week because, for them, continuity of care is really important,” she said. “You get a full day of work, your child has a social setting, structured curriculum and sees their friends four to five days a week.”

Massachusetts is a state that has experienced a severe lack of child care providers. In Boston, the pandemic further exacerbated the problem, leading to the number of child care providers falling 21 percent between 2017 and 2021. Boston Mayor Michelle Wu is looking to tackle the issue by putting more pressure on office development projects to include these much-needed facilities. Wu recently issued an executive order that more strongly enforces a decades-old rule requiring developers of large projects to include child care centers or invest in creating off-site programs. 

Other cities and states are also looking at how to tackle the child care problem through engaging with existing and planned real estate projects. Earlier this year, San Diego city officials said they were considering converting dozens of city-owned properties to child care facilities in order to tackle the lack of affordable options in San Diego County. Among the properties considered, 12 were office buildings. And in Colorado, Governor Jared Polis has proposed converting unused space in state buildings into child care centers through public-private partnerships.

There are challenges to signing on child care tenants to a building’s ground-floor retail or other space within the property. Some jurisdictions require outdoor space to be available for daycare facilities, which can sometimes be a challenge in existing office buildings, especially in urban areas. Finding appropriate ground-floor space with the right kinds of exits is a common issue as well. Another factor to consider is a parental preference when it comes to location. In cities where workers rely on public transit, many prefer the ease of child care close to home to avoid enduring long commutes with young children in tow. Fit outs of space can take time too. Krishnan said the average build-out for Bright Horizons facilities, including necessary licensing, can take between 16 to 18 months, something she said is typical for retail operations.

Whether companies embrace remote and hybrid work or want employees back in the office 5 days a week, child care is essential for working parents. And while there are efforts on many levels to help providers open more locations, bring on more staff, and subsidize costs, issues around affordability and availability still persist. Bringing in a child care provider as a tenant may not make sense for every office building, but for many properties, especially in suburban areas, it could be a huge benefit for tenants and their employees. And for office landlords looking to beef up amenities and offerings to stay competitive, perhaps on-site child care could be the game-changer they’re looking for.

Image - Design