This article is from the Australian Property Journal archive
HEIGHTENED competition for childcare centres has seen yields drop 42 basis points over the second half of 2024, with many investors keen to benefit from a reliable income stream while securing land in high-growth and established neighbourhoods.
The latest analysis from Burgess Rawson shows yields firmed from 5.69% in the first half of 2024 to an average of 5.27% in the second half. NSW in particular saw yields tighten, with some recent sales reflecting returns closer to 4.0%.
“We’ve seen robust activity across the nation, highlighting the appeal of early education assets. Investors are recognising their stability and growth potential,” said Burgess Rawson’s Michael Vanstone.
“Investors are increasingly adopting land banking as a strategic approach within the early education sector. By acquiring land in high-growth areas and more recently established residential neighbourhoods with strong value appreciation, they position themselves to benefit from the long-term reliable income stream into the future.” he said.
Key transactions in NSW have included the $7.4 million sale of the Advanced Early Learning Centre in Merrylands, at a sharp yield of 4.33%, and the Woongarrah Early Learning Centre, which fetched $7.46 million. The Affinity Education site in Budgewoi sold for $3.2 million at a 4.74% yield.
Those deals were concluded by Burgess Rawson.
Adam Thomas of Burgess Rawson said yields have firmed even further in the past two months as several transactions achieved sub-5% yields.
“This underscores the strength of the sector and the confidence investors have in these assets as stable, long-term investments,” he said.
In Melbourne’s bayside region, a Brighton East Only About Children facility recently sold for $16.5 million, on a yield of 4.9%, through CBRE, which also sold an inner city Cremorne centre for $18.5 million, at 4.69%, on behalf of property giant Charter Hall.
Also recently, Stonebridge Property Group sold a portfolio of three Victorian childcare centres for $35 million. That included an Imagine Childcare centre in Doncaster selling for $15.5 million, on a 6.05% yield; a brand new Heathmont facility for $12,016,668, at 5.83%; and an Avondale Heights Nido Early School for $8 million, at 5.79%.
Queensland centres have also traded at the sub-5% level. The Chatterbox Centre Dutton Park changed hands for $5.38 million, at a yield of 4.84%, and Goodstart Early Learning Centres in Highland Park and Beaudesert sold on yields of 4.16% and 4.34% respectively.
Those sold through Burgess Rawson, as did an Edge Early Learning centre in Cannon Hill, for $8.7 million.
Thomas said assets backed by nationally recognised operators are particularly sought after, as they offer long-term security and reliable income streams for investors.
“With interest rates forecast to decline in the coming months, we expect to see even more investor confidence in the early education sector, which would likely result in further tightening of yields and increased demand for these types of assets.”
Ahead of the upcoming federal election, the Albanese government is promising a $1 billion fund to address the country’s childcare deserts, and build or expand more than 160 new childcare and early learning centres.
The government has also committed to ditching the childcare subsidy activity test, replacing it with guaranteed access to at least three days of subsidised childcare a week for every household with an income below $530,000 per year.
