Childcare showing no signs of slowing: report
Childcare investors are rushing to snap up centres in Australia, with the booming sector continuing to star in the commercial property market.
Burgess Rawson’s 2018 Childcare Report says the family-focused assets are still one of the fastest growing real estate investment classes in the country.
It comes after scores of childcare sites have changed hands during the past 18 months, with long-term tenants and high yields on offer.
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The trend is being fuelled by skyrocketing demand for childcare spaces from working families, coupled with the Federal Government’s recent overhaul of the childcare rebate.
From July the annual $7613 cap has been removed, allowing Australians to access more days of care without impacting the hip pocket.
The number of children enrolled in a facility is considered by investors, with some operators in blue chip areas reporting wait lists of up to two years.
Burgess Rawson associate director Adam Thomas says government support has had ongoing positive impact, with the asset class continuing to shine year-on-year.
“The sector has been through a revolution since 2009 and the sheer volume of profit has attracted major players, and investors alike, who are contributing to the ever-changing and growing landscape,” he says.
“The industry is underpinned by bipartisan Government support, which has provided stability to operators.”
Long-term leases are considered a major drawcard for landlords.
The latest report also highlights the industry’s resistance to digital disruption as an added bonus.
Overall, appetite for childcare sites has pushed average yields to between 5.5% and 6% and demand from investors is expected to continue.
Earlier this year buyers snapped up 11 childcare properties across Australia in just 10 days for a combined $43 million.
Burgess Rawson, which handles a large volume of the sector’s transactions, reports selling 112 sites for dating back to 2017.
Most facilties are run by mum and dad operators but larger groups such as Goodstart, G8 Education, Affinity Education, KU Children’s Services and Guardian Early Learning are expanding their footprint in the industry.
Burgess Rawson childcare specialist Michael Vanstone says the larger operators have only cornered 17.6% of the market, and flags plenty of future potential for a range of players.
“The industry fragmentation makes for a particularly interesting landscape; not only for childcare operators, but for investors as well,” Vanstone says.
“This will lead to further consolidation opportunities by the larger players.
“On the flip side, the market fragmentation also allows for smaller operators to grow their holdings, and for new brands to enter the market.”
Entry level investors can purchase a regional 30-place centre starting at around $670,000, while inner city Sydney centres with more than 200 spots can command prices of more than $20 million.
Most centres are located on the eastern seaboard, however new facilities located across the country are in the pipeline.