Strata Childcare Sale Signals Shift in Market

When Melbourne-based developers Jameson Capital first planned the East Brunswick project comprising 97 one-, two- and three-bedroom apartments, the ground floor was given over to seven shops with six car parking spaces.

A shortage of affordable space for childcare facilities in Australia’s major cities changed all that.

“We are witnessing a real evolution of design and creative outcomes within the childcare and essential services development market,” said Mark Stafford.

“Modern childcare has traditionally been stand-alone facilities of 1500 to 2000 square metres. This premise is radically different.

“Add to that childcare groups have been priced out of Brunswick East. Certainly, it is difficult to find suitable space for stand-alone facilities.”

Natalie Couper, a healthcare and childcare specialist with Burgess Rawson agreed.

“The problem for childcare centres is the underlying land values are so high, particularly metropolitan or inner-city sites,” she said.

“And then the lots have a much smaller footprint.”

“If you’re going to dig out a basement you might be looking at a million dollars to begin with.”

“We see hundreds of sites come across our table but are you going to take a risk on development costs for a childcare centre?”

Stafford said there had already been interest from occupants in the apartments above the new centre. The balance of enrolments will be filled from other areas of Brunswick East, which, he said, was an undersupplied childcare area.

“Tenants play a big part in deciding where these facilities go,” Couper said.

“There are a lot of considerations, it’s a very sophisticated business and tenants want a say.

“And remember that once you have a child in a centre, they could be there eight years. It becomes a very personal, long-term relationship.”

In March last year, Assembly Funds Management, in partnership with Harrington Property Funds Management, spent more than $40 million buying six childcare centres north-west of Sydney.

And Australia’s newest government is banking on that continuing.

Going into the weekend’s election, the Labor Party promised a $5.4-billion plan to lift the maximum childcare subsidy rate to 90 per cent for the first child in care, keep higher subsidy rates for every family for the second and additional children in care, and extend the increased subsidy to outside school hours care.

Couper says whatever political party is in government they will always promise money to childcare.

“From an investment point of view there is a huge appetite for childcare,” she said.

“It is an essential service. There is always money for childcare. It plays a very important role in the economic cycle.”