Prime Site: Childcare sector top of the property class

CHILDCARE places are at a premium in Queensland, with competition between parents remaining high. But there’s a far more lacerative side of this “service”, new figures show.

CHILDCARE centres remain the fastest and best performing property class in Queensland underpinned by changing social needs which has led to increased supply, high investor demand and ongoing government support.

Burgess Rawson’s latest Childcare Property Investment Report found the childcare property market has seen a record increase in supply with unparalleled yield compression, and demand is expected to continue.

Burgess Rawson childcare centre specialist Jamie Dewe said the sector “has been going great guns”.

“It’s become the flavour of the month and more people are realising these are quality long-term investments, and there’s not a lot you need to do with them once you hold them,” he said.

Since 2011 the total number of children attending care across Australia has grown by 29.8 per cent, while the number of Long Day Care childcare centres has increased by only 15.8 per cent.

“There are a lot of DAs around and these things are being built left right and centre at the moment but the demand for them is still there.”

Since February Burgess Rawson has chalked up 18 childcare centre sales in Queensland worth $41 million.

In the past three months, the agency has sold eight properties with a combined total value of $18.7 million and an average yield of 5.89 per cent.

Mr Dewe said he expected yields to stabilise but there was the potential in the future for quality assets in Queensland to follow the southern states and break the 5 per cent yield barrier.

He said ongoing government support was underpinning the sector while legislation was ensuring operators’ transparency.

“Although it’s very important to get the right tenant, it’s very much a passive investment for many buyers because of the long leases and terms favourable to landlords who are buying in a low interest rate environment,” he said.

“Also, a broader range of buyers can get their heads around the investment because they’ve used child care over the years.”

A childcare centre at 224 Queen St, Southport, that was sold by Burgess Rawson.

According to the report, since 2011 the total number of children attending care across Australia has grown by 29.8 per cent, while the number of Long Day Care childcare centres has increased by only 15.8 per cent.

This gap demonstrates the demand across the industry; and with Government funding increasing by 65 per cent over the same period to allow more women back into the workforce, the incentive for childcare operators to meet the demand is obvious.

Currently the childcare industry comprises over 10,400 businesses in what is currently a highly and uniquely fragmented market.

The five standout operators by size account for less than 15 per cent of the market, leaving 85 per cent in the hands of smaller chains and “mums and dads”.

Which according to the report makes for a “particularly interesting landscape; not only for childcare operators, but for property investors as well.”

Mr Dewe said: “There are a few institutions looking to buy but it’s still very much dominated by private investors or small syndicates.”