The childcare sector looks set to remain a strong investor favourite with new figures showing more than a third of Australians live in childcare ‘deserts’ – places where there are more than three children on the waiting list per available spot.
About 35% of the population, or nine million Australians in metropolitan and regional areas live in places with less than 0.333 places per child aged four or under according to the first study of its kind into the availability of childcare across the country.
The findings from Victoria University’s Mitchell Institute study signals “huge opportunities” for development and commercial investment in the childcare sector well into the future said, Adam Thomas, Head of Agency for Burgess Rawson.
“Even with the recent interest rate rises and increases in the cost of capital, childcare centres remain as sought after as ever,” Mr Thomas said.
Three childcare centres were taken off the market within minutes at Burgess Rawson’s monthly Sydney Portfolio Auction yesterday (May10) while several more centres to go under the hammer in Melbourne and Brisbane later this week.
Five bidders competed for the longest established childcare centre in Cowra, four hours west of Sydney in central NSW. The 90-place facility at 2 Binni Creek Road leased to Australia’s largest early education provider Goodstart Early Learning till 2030 was situated on a 3638 sqm site with dual street frontage amid a residential area. It sold for $3.83 million, representing a 4.99% yield.
In Albion Park a two-hour drive south of Sydney, a property billed as a rare ‘entry level childcare investment’ in a growth location sold for $1.6 million, representing a 4.2% yield. Five bidders competed for the centre, located in the Shellharbour region which is popular with young families and where the population is forecast to soar more than 29% by 2041. The Albion Park centre was leased till 2025 with an option to 2030 to an experienced operator who already ran two other centres in the local area.
The third childcare facility to go under the hammer was the Petit Early Learning Journey centre in the NSW North Coast town of Coffs Harbour. Offering 100% occupancy, a long wait list for its 84 places and a 15-year net lease, the property sold for $4.45 million, delivering a yield of 5.4%. The centre was located on a substantial 2227 sqm landholding and had parking for 21 vehicles. Coffs Harbour is on track to grow by another 26% to 100,000 residents by 2041.
Investors are continuing to be drawn by the essential nature of the sector Mr Thomas said. “That was no more evident than during covid when many parents especially here in the southern states were forced to work from home,” he said. “These centres were clearly essential if companies were to maintain workplace productivity. Childcare centres were basically a key service that kept the economy going.”
A slowdown the sector experienced during the last year had also passed. “The last 18 months towards the middle to end of 2019 and then for the past 18 months the sector probably did come off the boil a little,” Mr Thomas said. “There was isolated talk about pockets of oversupply. But that messaging has really fallen by the wayside because certainly through Q2 and Q3 in 2020 up until now it’s remained as strong as ever.
“We’ve seen a replenishment of old stock and an influx of more efficient and up to date centres offering superior services and early education curriculum.”
Mr Thomas said indicators were strong for the continued development and high demand for childcare centres given both the Mitchell Institute findings and the fact parents were returning to work following the lifting of covid restrictions. In its report “Deserts and oases: How accessible is childcare in Australia?”, Mitchell Institute researchers found parts of capital cities were just as likely to suffer a lack of, or poor access to, childcare centres as some regional places.
In Sydney, the densely populated south-west and western suburbs of Auburn, Guildford and Merrylands did not have enough facilities to meet demand, while Melbourne’s north was among the worst childcare deserts in Victoria according to the study.
The report focussed on centre-based day care centres, the most popular childcare facilities used by parents and often referred to as simply day care or childcare centres, as well as subsidised by the federal government’s Commonwealth Child Care Subsidy. The recent 2021-2022 Federal Budget saw an additional $1.7 billion added to the already $10.3 billion childcare and early education budget for the year.
- To view the Victoria University’s Mitchell Institute report and locations of Australia’s childcare deserts see:
Deserts and Oases: How Accessible is Childcare in Australia (vu.edu.au)
Childcare deserts & oases: interactive maps | Victoria University (vu.edu.au)