Lease Considerations for Childcare Facilities

Childcare centers operate under a regulatory framework that significantly affects their real estate needs. From licensing requirements to parent traffic patterns, these facilities have considerations that don't apply to typical commercial tenants—and lease terms should reflect that reality.

Why Childcare Leases Are Different

A childcare facility isn't just a business occupying commercial space—it's a licensed operation serving vulnerable populations under state regulatory oversight. The physical space must satisfy licensing requirements, and operational needs like outdoor play areas, parent drop-off, and health and safety compliance directly affect what space works and how the lease should be structured.

For operators, signing a lease for space that can't be licensed—or that creates ongoing operational friction—is an expensive mistake. For landlords, understanding these requirements helps attract and retain quality childcare tenants, who tend to sign longer leases and invest significantly in their spaces.

Zoning and Licensing

Before any lease is signed, both parties should confirm the space can legally operate as a childcare facility. This involves two separate but related questions: local zoning approval and state licensing eligibility.

Zoning Verification

Is childcare a permitted use in this zoning district?

Childcare facilities are often permitted in commercial zones but may require conditional use permits in some areas. Verify with the local planning department before committing to a space.

Are there occupancy or size limitations?

Some jurisdictions limit childcare capacity based on zoning classification or lot size. Understand these limits before planning enrollment projections.

What about home-based vs. center-based classification?

Regulations differ significantly. Center-based facilities in commercial spaces face different requirements than home-based programs.

State Licensing Requirements

In Washington, childcare facilities are licensed by the Department of Children, Youth, and Families (DCYF). Licensing requirements address indoor square footage per child, outdoor play space, bathroom ratios, kitchen facilities, and numerous health and safety standards.

Does the space meet minimum square footage requirements?

Washington requires 35 square feet of usable indoor space per child, excluding hallways, bathrooms, and storage. This directly determines your licensed capacity.

Is there adequate outdoor space, or access to it?

Outdoor play space is required—typically 75 square feet per child using the area at one time. If the property lacks outdoor space, determine whether a nearby park qualifies under licensing rules.

What building modifications will licensing require?

Common requirements include child-height sinks, specific bathroom configurations, commercial kitchen equipment, fencing, and safety modifications. Identify these before negotiating TI allowances.

Site and Building Considerations

Beyond licensing minimums, certain site characteristics significantly affect a childcare facility's operational success.

Drop-Off and Pick-Up

Is there adequate parking for parent traffic?

Childcare generates concentrated traffic at predictable times. Insufficient parking creates safety issues, neighbor complaints, and parent frustration. Evaluate whether the parking ratio accounts for peak drop-off periods.

Can parents safely access the entrance with children?

The path from parking to entrance matters. Parents carrying infants or walking with toddlers need safe, direct access—ideally without crossing vehicle traffic lanes.

Is there a covered area for weather protection?

In the Pacific Northwest, covered drop-off areas significantly improve the parent experience. This may be an existing feature or a potential improvement to negotiate.

Visibility and Security

Can staff monitor entry points?

Childcare facilities need controlled access. Evaluate whether the layout allows staff to monitor who enters and exits, and whether security improvements are feasible.

Is the outdoor play area visible and securable?

Play areas should be fenced, visible to staff, and ideally not directly adjacent to public sidewalks or parking areas. Site layout affects both licensing approval and ongoing operations.

Neighboring Uses

What businesses operate nearby?

Licensing may restrict proximity to certain uses. Beyond legal requirements, consider whether neighboring businesses are compatible with a childcare environment—noise, traffic patterns, and hours of operation all matter.

Are there shared common areas?

In multi-tenant buildings, understand how common areas work. Shared lobbies, restrooms, or outdoor spaces can create complications for a childcare operation.

Lease Terms to Address

Several lease provisions deserve particular attention in childcare facility agreements.

Permitted Use

The permitted use clause should specifically authorize operation of a licensed childcare facility. Vague language like "general office use" may create problems with licensing agencies or future lease enforcement.

Term and Renewal

Childcare operators typically prefer longer lease terms. They invest significantly in tenant improvements, build enrollment over time, and rely on location stability for family retention. Five to ten year initial terms with renewal options are common.

Are renewal options clearly defined?

Renewal terms, notice periods, and rent adjustment mechanisms should be spelled out. Ambiguous renewal language creates uncertainty for operators planning long-term and landlords evaluating property value.

Licensing Contingency

For new locations, consider whether the lease should be contingent on obtaining licensing approval. This protects operators from committing to space they can't legally use, and protects landlords from tenants who can't fulfill their obligations.

What happens if licensing is denied or delayed?

Address this explicitly. Options include lease termination rights, rent abatement during the approval process, or extended buildout periods.

Hours of Operation

Childcare facilities typically operate early morning through early evening, Monday through Friday. Confirm the lease permits these hours and that HVAC and building access accommodate the schedule.

Does the building's HVAC schedule align with childcare hours?

Many office buildings have limited HVAC during early morning or evening hours. Childcare facilities opening at 6:30 AM need climate control before standard building hours begin.

Outdoor Space

If the lease includes outdoor play area, clarify boundaries, maintenance responsibilities, exclusive vs. shared use, and any restrictions on fencing or equipment installation.

Who maintains the outdoor space?

Playground equipment, fencing, surfacing, and landscaping all require maintenance. Clearly assign responsibility—and budget accordingly.

Can the operator install permanent improvements?

Play structures, shade covers, and fencing are typically necessary. Confirm the lease permits these installations and address what happens to them at lease end.

Signage

Visibility matters for childcare enrollment. Review signage rights carefully—monument signs, building-mounted signs, and directional signage for parent navigation.

Tenant Improvements

Childcare buildouts are often substantial. Converting a vanilla shell or previous retail/office space into a licensed childcare facility typically requires significant investment.

Common Improvement Needs

Typical childcare buildouts include: child-height fixtures and sinks, multiple bathrooms with specific configurations, commercial kitchen or warming kitchen, classroom partitioning, infant sleep rooms, reception and check-in areas, staff spaces, storage, and extensive safety modifications including outlet covers, cabinet locks, and rounded corners.

Outdoor improvements often include fencing (typically 4-6 feet depending on licensing), impact-absorbing surfacing under play equipment, shade structures, and age-appropriate play equipment.

TI Allowance Considerations

Is the allowance sufficient for licensing requirements?

Get contractor estimates for required improvements before finalizing lease terms. Childcare buildouts often cost more than standard office improvements, and operators need realistic budgets.

What happens to improvements at lease end?

Child-specific improvements have limited value to other tenants. Address whether improvements remain, must be removed, or can be negotiated at lease end. This affects both parties' economics.

Insurance and Liability

Childcare operations carry specific liability considerations that affect insurance requirements.

What liability coverage does the lease require?

Standard commercial general liability requirements may need adjustment for childcare operations. Operators should confirm required coverage is available and affordable before signing.

Is the landlord named as additional insured?

This is standard practice but particularly important given the liability profile of childcare operations.

What about abuse and molestation coverage?

This specialized coverage is typically required for childcare operations. Verify the lease's insurance requirements account for this coverage type.

Getting the Lease Right

Childcare facility leases require attention to details that don't arise in typical commercial transactions. For operators, the right space with appropriate lease terms enables a sustainable business. For landlords, childcare tenants often represent stable, long-term occupancy with tenants who invest substantially in their spaces.

Both parties benefit from addressing the unique aspects of childcare operations upfront—zoning and licensing verification, site suitability, appropriate lease terms, and realistic improvement budgets. Taking time to get these details right prevents problems that are far more expensive to solve after the lease is signed.