Few asset classes offer the same powerful combination of resilience, purpose and solid performance as Australia’s early education sector. With demand now outpacing supply due to population growth and development constraints, investors are well-positioned to benefit from potential shortages and stronger competition driving values and returns higher.

Australia’s childcare property market is primed for significant growth, with investor confidence strengthening and yields firming. Far from a niche play, early learning centres are a core component of property portfolios, driven by essential demand, supportive government policy, and shifting capital towards socially impactful assets. Increasingly, investors recognise childcare as a pathway to generational wealth, creating long-term value beyond immediate returns.

So far in 2025, our database shows the sector has amassed $188 million in private investment sales, with activity gathering pace in the second quarter. The average yield sits at 5.66%, but beneath this figure, the sector’s fundamentals are stronger than ever, with investors seeing substantial upside ahead. We’re forecasting even stronger returns and increased sales in the third quarter.

Counting on Childcare for Smarter Portfolio Growth.

This outlook is backed by strong demographic and economic drivers. Australia’s population of children under five has grown to over 1.7 million, while female workforce participation is holding at record highs above 63%. For many working families, access to affordable and reliable childcare is a necessity rather than a choice.

Today’s childcare sector includes large national providers such as Goodstart Early Learning, Affinity, Guardian and Only About Children. These groups provide corporate governance, brand recognition and financial strength, giving landlords and investors greater confidence and supporting future expansion.

Bipartisan federal and state government backing has also created an attractive environment for childcare sector property investment. The 2024 Federal policy is giving the sector above power boost. Treasurer Jim Chalmers’ 2025 budget will significantly increase support for early learning, take major funding initiatives to be negotiated with State and Territory governments.

Among those expected to benefit is The Bay Dandelion Property Trust, which was launched by CBRE Investment Management in January 2026. Backed by $365 million in investor funds, it will acquire up to 70 properties over three years. The trust is targeting high quality childcare properties in metropolitan and regional growth areas, where it expects ongoing demand, high barriers to entry, and future network expansion across the country.

In parallel, the government has committed $3.5 billion to the Worker Retention Payment program, aiming to increase wages for up to 200,000 early childhood educators. Retaining skilled staff has been one of the sector’s persistent challenges, with operators also selectively developing quality workforce strategies. As Australia’s labour shortage is not abating, the reliability of this workforce is key to consistent performance, both socially and economically.

To further support operators, the government’s $1 billion Building Early Education Fund will fund new centres in growth corridors and areas of undersupply. For private landlords and investors, this ongoing profit lift provides clear expansion opportunity. TRL investors and developers, this will encourage operators to keep long term ownership, and move the sector into new categories.

Innovation within the sector is also driving new income opportunities as operators trial and refine practices to enhance early learning outcomes and teach children sustainability, food education and water efficiency. Many operators are also integrating wellness programs and music into their curriculum for better student interest and meaningful social impact.

One of the key strengths underpinning childcare’s appeal is the security of lease structures. Centres are often secured under agreements ranging from 10 to 20 years, with fixed annual rental increases typically between 3% and 4%, or indexed to CPI. Many leases include significant security deposits or bank guarantees, reducing landlord risk and offering stable, predictable income streams.

It’s in these results that the strength of the market becomes real. For instance, a Goodstart Early Learning centre in Indooroopilly, Queensland, sold at auction recently for $4.5m and a yield of 5.09% – reflecting the strong appetite for prime assets leased to national operators in strong urban locations.

Across the sector, yields for top-tier metro assets are now frequently between 4.50% and 5.25%, while a large portion of quality metro trades in the range of 5.25% to 6.25%. These levels remain highly competitive when compared with many other commercial asset classes.

Childcare assets align closely with social and sustainability goals, contributing to improved education outcomes, gender equality, and economic participation.

For funds with ESG mandates, childcare offers the rare combination of positive social impact and solid financial performance.

Looking ahead, the outlook for the childcare sector is bright. Demand drivers are deeply entrenched, government policy is highly supportive, and investors continue to view quality assets as long-term growth, wealth and income producing assets.

In a market where certainty is increasingly hard to find, childcare is proving itself as an asset class delivering returns that are anything but child’s play.

P178 Edition | Portfolio Magazine