A new Federal Government subsidy is driving demand for childcare assets, according to Burgess Rawson, which has facilitated more than $149 million in transactions in the sector since November.
The agency said greater access and financial benefit for low and middle-income families had driven demand from investors attracted to the long term lease covenants.
Burgess Rawson’s Jamie Dewe said childcare has been one of the most consistent and impressive year-on-year performers in the commercial property market, despite the concerns of oversupply.
“The childcare industry continues to outperform all expectations,” he 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.
“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.”
Burgess Rawson Queensland principal Pat Kelly said the average yields of between 5.5 – 6 per cent continues 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,” he said.
“Properties with solid fundamentals such as lease covenants underpinned by established operators, tenure and favourable locations.”
Unlike other industries, the Australian childcare market is highly and uniquely fragmented with 75 per cent of the market in the hands of smaller operators.
“The industry fragmentation makes for a particularly interesting landscape; not only for childcare operators, but for investors as well,” Mr Kelly 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.
For more information, download the 2018 Childcare Investment Property Report.
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Originally written by Larry Schlesinger, Australian Financial Review