Childcare centres red hot as one agency sells 11 in 10 days

One of the 11 childcare centres sold within 10 days.
One of the 11 childcare centres sold within 10 days.

Has the already raging childcare property market gone to yet another level?

Commercial agency Burgess Rawson believes it has, after selling 11 childcare centres in 10 days for a combined $43 million.

Auction clearance rates for childcare assets continue to sit above 90%, according to the agency, with their long leases – many to established operators – continuing to appeal to investors.

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The 11 sales included a centre in Mickleham, Victoria, which sold for $5.9 million on a 5.9% yield, another in Port Macquarie in New South Wales, which traded for $4.17 million on a 6.4% yield, and one in Strathpine, Queensland for $2.85 million on a 5.85% yield.

Burgess Rawson associate director Adam Thomas says demand for childcare continues to far outstrip supply, driving prices up and yields down.

“Supply is simply not meeting the demand as yields continue to compress,” Thomas says.

Port Macquarie childcare

The childcare centre at Port Macquarie sold for $4.17 million.

“More than 1000 enquires were received for the 11 sales portfolio, from local investors and Asian markets. The standout sale was Strathpine which sold for $6 million.”

Thomas says South Australian centres are particularly sought after in the current market, due to the more attractive yields on offer.

“The childcare market in South Australia is an emerging market and is attracting wide spread attention, particularly from Melbourne investors looking for sharper yields. The yields for the sales in Murray Bridge and Hahndorf are eclipsing other states averaging over 6%.”

“South Australia is also the only state that will introduce zero stamp duty for commercial property assets from 1 July, 2018. Investors have recognised this opportunity and are actively seeking low yield commercial assets to add to their portfolio.”

Recent childcare centre sales

Shepparton VIC ($3.212 million, yield 5.98%)
Doreen VIC ($4.88 million, yield 5.46%)
Empire Bay NSW ($3.2 million, yield 6.12%)
Caroline Springs VIC ($4.91 million, yield 5.43%)
Port Macquarie NSW ($4.17 million, yield 6.4%)
Southport QLD ($2.85 million, yield 5.85%)
Strathpine QLD ($6 million, yield 5.90%)
Oxenford QLD ($3.551 million, yield NA)
Murray Bridge SA ($1.53 million, yield 6.71%)
Hahndorf SA ($2.87 million, yield 6.19%)