Multi-million dollar sale of Redland Bay childcare site

SOLD: The early learning centre at Redland Bay that was sold for $3.3 million.
SOLD: The early learning centre at Redland Bay that was sold for $3.3 million.

THE sale of a Redland Bay childcare site for $3.3 million has highlighted investor interest in childcare properties, according to property consultants Burgess Rawson.

The property, tenanted by Little Scholars Early Learning Centre, has a 10-year lease to 2026, with an option to extent to 2046.

Burgess Rawson childcare specialist Jamie Dewe said childcare had been one of the most consistent and impressive year-on-year performers in the commercial property market, despite concerns of oversupply.

“The childcare industry continues to outperform all expectations,” Mr Dewe said.

“The industry is underpinned by bipartisan government support which has provided stability to operators.

“In turn, investors have entered the market to cash in on long-term leases with favourable terms.”

Mr Dewe said a revolution in the sector since 2009 had attracted major players and investors who were contributing to the changing landscape.

The Redland Bay site on Tathra Court is 2080 square metres and has 82 places for children.

Mr Dewe said the outlook for Australia’s childcare sector was optimistic, with sales history showing that despite increased supply, compressed yields and greater price volumes, investor demand continued.

“Since 2011 the number of children attending all forms of care across Australia has risen 31.6 per cent, yet the number of long day care centres has only increased 18.7 per cent – the gap demonstrates the enormous demand still present across the industry,” Mr Dewe said.

He said average yields of between 5.5 per cent and 6 per cent continued to represent exceptional value for properties, with many also offering landlord friendly leases.

“We are seeing premium yield pricing to national tenants in high demand areas where occupancy rates remain at reasonable levels for operators.

“Properties with solid fundamentals such as lease covenants underpinned by established operators, tenure and favourable locations.”

Mr Dewe said the Australian childcare market was highly fragmented with 75 per cent of the market in the hands of small groups and “mum-and-dad” operators.

PROPERTY: Property consultants Burgess Rawson say investors have an interest in childcare properties like this one at Redland Bay.

PROPERTY: Property consultants Burgess Rawson say investors have an interest in childcare properties like this one at Redland Bay.

“The industry fragmentation makes for a particularly interesting landscape, not only for childcare operators, but for investors as well,” Mr Dewe said.

“The five biggest operators by size – Goodstart, G8 Education, Affinity Education, KU Children’s Services and Guardian Early Learning – only account for 17.6 per cent of the market.

“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.

“Unlike other forms of investment properties, the rentals of childcare centres are commonly rationalised by the number of permitted places rather than on the building area bases.

Burgess Rawson sold more than 112 childcare properties over the last 18 months and more than half of all childcare investments in Australia this year.