Burgess Rawson has cemented its leading position in childcare centre sales this year, with a clearance rate averaging 90 per cent.
The agency has sold 10 childcare assets in the past 10 days for $39.5 million in what it described as a frenzy.
Burgess Rawson director Adam Thomas said there was strong interest from Victorian investors for South Australian centres in particular.
“The childcare market in that state is an emerging one and is attracting widespread attention, particularly from Melbourne investors looking for sharper yields,” Mr Thomas said.
“South Australia is also the only state that will introduce zero stamp duty for commercial property assets from July 1.
“Investors have recognised this opportunity and are actively seeking low-yield commercial assets to add to their portfolio.”
Burgess Rawson has consistently dominated the sector and last year accounted for 76 per cent of all childcare centre sales, according to its latest investment report.
“The sales history shows that despite increased supply, compressed yields and greater price volumes that demand continues,” the report says.
“We see this trajectory continuing into the foreseeable future.”
In good news for vendors, the report shows that in the five years since 2012, yields have compressed from just over 8.5 per cent to between 5.5 per cent and 6 per cent.
Lower yields represent stronger prices.
Despite supply of centres on the market growing more than six-fold since 2012, demand has also boomed.
Five years ago, fewer than 10 childcare centres were offered, compared with about 65 last year.
The asset’s appeal is driven by substantial federal government subsidies paid to operators for each childcare place.
Coupled with landlord-friendly, long-term leases and strong lease covenants underwritten by large, established operators, the centres now rank among the most sought-after of commercial investments.
Burgess Rawson says much of the demand has been fuelled by investors frustrated with low returns on cash and bonds.
“Investors have focused on childcare assets for their renowned low volatility and stable long-term income,” the report says.
“Income security and capital preservation remain at an absolute premium.
“Risk-averse buyers are therefore competing strongly for limited opportunities to acquire triple-A-grade assets.”
Childcare offers an entry into the commercial property market with access to listed and premium tenants at a typically lower price point than the traditional “safe investments”, such as supermarkets.
They have a wide-ranging price point, from as low as $1 million up to $20 million.
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Written by Olga Galacho