Investors flock to childcare centres in $87m portfolio sales

Childcare centres remain in strong demand as commercial property investors target essential services sectors during the coronavirus pandemic, with seven centres among $87 million worth of properties sold in the first big portfolio auctions of the year.

Only four of the 31 properties were passed in at the two Burgess Rawson auctions, which saw childcare centres, medical facilities, food businesses including Sydney’s Bistecca Restaurant and petrol stations change hands amid strong investor interest in essential services.

All six childcare centre investments for sale in the Melbourne auction and an early learning facility offered in the Sydney auction sold under the hammer.

About 3000 people attended the Burgess Rawson Melbourne portfolio auction at Crown Melbourne on Wednesday. Picture: Burgess Rawson

Burgess Rawson Sydney director Darren Beehag said the Harrington Park centre, which sold for $3,105,000, was sought-after by investors.

“A credit to its safe and secure income, the asset was a highly sought-after property with locality in a growth area of Sydney,” he said.

The highest disclosed result among the childcare offerings was a new centre in the Canberra suburb of Throsby, which sold for $7.25 million.

A new childcare facility at Mt Martha on Melbourne’s Mornington Peninsula sold for $6.3 million on a yield of 4.86%, which Burgess Rawson agents said was the lowest yield for a new childcare centre in the past two years.

Childcare centres are popular with investors as they are seen as a more stable source of income. Picture: realcommercial.com.au/sold

Childcare assets have been strong performers for a while now with good income streams and low vacancy risk, according to REA Group economic analyst Anne Flaherty.

“The quality of the tenants when they are childcare centres are really high, they have a strong demand for their services, their businesses are usually quite robust and strong so from a landlord’s perspective they’re a great tenant to have,” Ms Flaherty said.

The economic uncertainty created by the COVID-19 pandemic made childcare centres even more attractive to those investing in these mid-range commercial properties, Ms Flaherty said.

“What’s happening at the moment is that commercial property has become more risky over the last 12 months because of COVID-19. Office and retail in particular as the vacancy risk is higher and rents are falling.

“In contrast, childcare is a much lower risk and there’s really strong demand for childcare assets. Some investors are probably reweighting their portfolio away from more risky commercial asset classes towards more predictable income streams such as childcare.”

Bidders for the portfolio auction properties came from around Australia and overseas including India, New Zealand, China, the United States, Singapore and Hong Kong.

The notable properties included the Bistecca restaurant, which sold for $6.5 million with a 10-year lease and option to extend until 2035.

Bistecca restaurant has sold for $6.5 million. Picture: Burgess Rawson

“Recently we’ve seen great interest in food and beverage, medical and dental assets,” Mr Beehag said. “The ongoing demand and necessity through the pandemic has made these properties highly attractive for investors.”

Mr Beehag said there were more than 150 enquiries from domestic and international investors for Sydney dental clinic My Smile Dental in Eastwood, which sold for $3,115,000.

Burgess Rawson Melbourne director Raoul Holderhead said there was strong interest in the Melbourne portfolio and enquiry levels were triple the same time last year, with buyer demand greatly outweighing supply.

There were 105 bids for a Viva Energy petrol station in the seaside Victorian town of Torquay before it sold for $8,355,000 on a yield of 4.89%.

The lowest yield in the two auctions was 4.24% for a Wattyl paint store in Port Adelaide that sold for $2.36 million.