The Urban Developer
AdvertiseEventsWebinarsUrbanity
Industry Excellence
Urban Leader
Sign In
Membership
Latest
Menu
Location
Sector
Category
Content
Type
Newsletters
Urban Leader Awards Logos RGB White
NOMINATIONS CLOSE SEPTEMBER 12 RECOGNISING THE INDIVIDUALS BEHIND THE PROJECTS
NOMINATIONS CLOSING SEPTEMBER 12 URBAN LEADER AWARDS
LEARN MOREDETAILS
TheUrbanDeveloper
Follow
About
About Us
Membership
Awards
Events
Webinars
Listings
Resources
Terms & Conditions
Commenting Policy
Privacy Policy
Republishing Guidelines
Editorial Charter
Complaints Handling Policy
Contact
General Enquiries
Advertise
Contribution Enquiry
Project Submission
Membership Enquiry
Newsletter
Stay up to date and with the latest news, projects, deals and features.
Subscribe
OtherRalph NicholsonTue 24 May 22

[+] Strata Childcare Sale Signals Shift in Market

TUD+ MEMBER CONTENT
Childcare RN hero
SHARE
12
print
Print

Brokers say they expect yields of 6 per cent on a state-of-the-art childcare centre fresh to the market in East Brunswick as developers look for alternatives to traditional strata retail.

The 802sq m facility, on the ground floor of an eight-storey residential building in Brunswick Road, has been leased for 10 years to HEI Schools—a boutique national childcare provider—for $230,000 a year.

Mark Stafford, a childcare specialist with JLL, agreed that at 6 per cent yield, they’ll be looking for a selling price of about $3.85 million.

“Obviously the vendor is after the best price he can get,” Stafford said, “but he is a motivated seller, and that price is about where the interest is.”

When Melbourne-based developers Jameson Capital first planned the 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 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.

The building's childcare centre has been leased for 10 years to HEI Schools.
▲ The building's childcare centre has been leased for 10 years to HEI Schools.

“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.”

The facility, to be known as HEI Schools Brunswick East, has a permit for 50 children. Government service approval for the facility is expected soon.

Stafford concedes how investment markets will respond to the new product remains to be seen. Until now the only strata childcare centres to market have been in located in industrial areas and involved much bigger investments.

The childcare centre’s shopfront
▲ The childcare centre’s shopfront in the East Brunswick development.

In September 2020, Kids Planet Child Care in North Ryde, New South Wales—an area of about 1100sq m within an 85-place centre—was sold for $4.65 million, representing a yield of about 6.3 per cent.

“Our JLL research highlight that the average yield in Victoria has fallen from 6.01 per cent in 2020, 103 basis points, to 5.07 per cent in 2021, and 4.98 per cent year to date in 2022,” Stafford said

“We have all seen with residential developments where the commercial element remains half empty. So childcare services are certainly something developers are looking at. It gives them another option.”

Childcare in Australia remains a growing business.

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.”



You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

TUD + Banner
ResidentialAustraliado not useMelbourneSector
AUTHOR
Ralph Nicholson
More articles by this author
ADVERTISEMENT
TOP STORIES
Stockland bumps up its apartment pipeline in melbourne and sydney
Exclusive

Stockland Re-Enters Density in $5bn Apartment Play

Renee McKeown
4 Min
Woolloongabba Precinct Vulture St
Exclusive

Brisbane Developer in Cross River Rail Compensation Tussle

Clare Burnett
4 Min
The Mondrian Gold Coast hotel's food and beverage is driving profits
Exclusive

Touch, Taste, Theatre: What’s Driving Mondrian’s Success

Renee McKeown
6 Min
Fortis’ display suites are designed as brand environments first, with tactile details and curated design to build buyer confidence before project specifics.
Exclusive

Relevant or Redundant: Will Tech Kill Display Suites?

Vanessa Croll
7 Min
Exclusive

Missing Heart: Why The Gold Coast Needs a CBD

Phil Bartsch
7 Min
View All >
South Melbourne social housing precinct
Affordable & Social Housing

South Melbourne Housing Precinct Revamp Takes Next Step

Leon Della Bosca
The Adelaide purpose built student accommodation market is about to increase by 1058 beds with the State Commission Assessment Panel supporting two towers in the making.
Student Housing

Highrise Approvals Add 1000-Plus PBSA Beds in Adelaide

Renee McKeown
JQZ Parramatta EDM
Residential

JQZ Plots 10-Storey Addition to Parramatta ‘Auto Alley’ Plans

Clare Burnett
The Sydney developer is pushing ahead with a project it picked up following the collapse of Dyldam in 2020....
LATEST
South Melbourne social housing precinct
Affordable & Social Housing

South Melbourne Housing Precinct Revamp Takes Next Step

Leon Della Bosca
2 Min
The Adelaide purpose built student accommodation market is about to increase by 1058 beds with the State Commission Assessment Panel supporting two towers in the making.
Student Housing

Highrise Approvals Add 1000-Plus PBSA Beds in Adelaide

Renee McKeown
3 Min
JQZ Parramatta EDM
Residential

JQZ Plots 10-Storey Addition to Parramatta ‘Auto Alley’ Plans

Clare Burnett
3 Min
Aerial view of Caboolture and Bruce highway to Brisbane with Bribie Island Road crossing, Queensland, Australia
Policy

Queensland’s $2bn Push Opens New Housing Front

Vanessa Croll
2 Min
View All >
ADVERTISEMENT
Article originally posted at: https://www.theurbandeveloper.com/articles/strata-childcare-sale-signals-shift-in-market