Is diversification a viable strategy for struggling private schools?

In CoStar, Real Estate Partner, Sophie Henwood explores how private schools are responding to mounting financial pressures, with a particular focus on diversification as a potential, but complex, route to sustaining operations.

Sophie outlines how recent changes, including the introduction of VAT on school fees, have reduced affordability for many families and led to declining pupil numbers. Against a backdrop of largely fixed operating costs, schools are unable to scale down expenditure in line with falling enrolment. This imbalance is prompting schools to explore alternatives to traditional operating models, with some pursuing mergers or consolidation, while others reassess how their property portfolios can be used more strategically to support ongoing educational use.

The article places strong emphasis on the practical realities of using school estates to generate income. While many schools have valuable facilities that could support commercial activity, Sophie highlights that operational considerations, particularly safeguarding obligations, are central to determining viability. Any proposed use must ensure complete separation between pupils and third parties, which may limit how and where diversification can take place across a site.

Sophie also draws attention to the layered regulatory and legal framework that underpins any change in use. Lease terms, planning controls, lender requirements and site-specific constraints all play a role in shaping what is achievable. She notes that diversification can support resilience where conditions allow, but it requires careful alignment of operational practicality, demand and regulatory approval rather than being relied upon as a standalone solution.

The full article was published by CoStar in June 2026 (paywall).