Childcare centre investment: Investors cash in at Victorian commercial property auctions

Cheap money and government policy are driving investors to cash in on Victorian toddlers.

A growing recognition of early learning centres as “essential services” helped a handful of them to big sales in a recent auction event.

Burgess Rawson’s Investment Portfolio auctions this week included four Victorian centres sold for a combined total just under $24m.

Director Adam Thomas said demand for childcare investments had been building since October last year, but boiled over in the recent auctions where they attracted up to 12 registered bidders and all sold for prices that would have the investors make a less than 5 per cent return on their multimillion-dollar purchases.

Many investors were aware federal government support during last year’s national lockdown effectively guaranteed revenue for owners and kept the centres open for the children of essential workers at all times.

A budget announcement this year will see parents subsidised for putting a second child into care — adding “further fuel to the fire” for investor demand.

“They are certainly essential services,” he said.

One, a Belmont (Geelong) property tied to a Bean Squeeze coffee shop, sold for $7.6m to an investment group with backers in Sydney and Hong Kong.

In Ocean Grove, the G8 Education centre snared $3.3m, while a Sunbury centre earned $6.11m and Evolve Early Education in Glen Waverley made $6.905m.

“What we have really seen is a real resurgence in confidence in childcare assets,” Mr Thomas said.

“All the Victorian childcare centres sold for below 5 per cent yields.”

But the busiest auction was for a Foodworks supermarket in Sunbury, with 16 bidders registered and a $1.925m sale.

The Investment Portfolio auctions sold 41 properties around the country, 14 of them in Victoria.

Mr Thomas said the Victorian listings achieved an average 11 per cent above their reserve price due to “pent-up demand”, and Reserve Bank of Australia commentary suggesting interest rates would remain at record lows for years.

He estimated a 1.5-2 per cent reduction in commercial property yields compared to this time last year as a result.