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Childcare assets are seeing a surge in demand as investors grow increasingly attuned to the strength of the investment class.
Melbourne-based investment fund, Hume Partners, recently purchased an Avondale Heights childcare centre in a deal brokered by CBRE for roughly $8 million, beating out a number of other interested parties keen on securing a property with a stable 20-year lease.
Home to Nido Early Learning at 5-7 Clarendon Street, the 1,414-square-metre purpose-built facility has an annual income of $428,400.
Following that deal, CBRE is expecting strong buyer demand for another nearby facility at 63-67 Canning Street, Moonee Valley, which is being sold on behalf of private developer Nescon.
Currently tenanted by Avondale Heights Child Learning on a 20-year lease, the 2,028-square-metre property currently brings in $596,711 per annum. CBRE is projecting the sale to reach somewhere in the neighbourhood of $10 million.
Sandro Peluso, part of CBRE’s healthcare and social infrastructure team that is managing the sale, commented that the shortage of childcare facilities in Melbourne’s northwest is contributing to making these assets so stable, and therefore highly sought after.
“Avondale Heights Child Learning has been successfully running since 2009, a testament to their operational strength and the scarcity of both existing and forthcoming competing centres in the catchment.”
“There is a clear appetite for investment in the area and with numerous underbidders missing out on the Clarendon Street transaction, we are expecting interest in Canning Street to be high,” Mr Peluso said.
With childcare facing a similar undersupply in communities across the country, and facilities never empty, it’s unsurprising that buyer demand is fierce.
Late last quarter, Ray White Commercial Western Sydney managing director, Peter Vines, commented on REB that the nature of childcare facilities made them among the best commercial investments around.
“When it comes to commercial investments right now, there are some asset classes that are a more favourable choice in this market. Childcare, for example, is an asset class that currently has 100 per cent occupancy because there is a strong demand for purpose-built assets,” he said.
In Burgess Rawson’s upcoming September sale, demand is expected to be hot for the 14 childcare facilities the firm is preparing to take to auction in locations across the country, from Dardanup, Western Australia to Kepnock, Queensland.
Assets in that sale include an entry-level facility in Rowville, Victoria, leased to the country’s largest childcare provider, Goodstart.
A 1,465-square-metre site, the 26-year old property comes with a five-year net lease that extends through 2027 with two further five-year options to 2037, with 4 per cent annual rent increases.
On the other end of the spectrum, a new purpose-built facility in metro Melbourne sitting on a 2,202-square-metre site is expected to attract big spenders looking for long-term security, with the site holding a 23-year lease with two 10-year renewal options, seeing it through to 2060.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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