• Mollard Property Group

Childcare centres have proven themselves to be highly resistant to economic downturns

Despite a global pandemic, childcare centres have proven themselves to be highly resistant to economic downturn and outside factors. After a difficult past two years, landlords and investors in other property assets have been cautious, however, the childcare sector has continued to surprise many. This asset class has gained momentum and proven its strength and durability as a highly favourable secure asset for investors. This is proven by the amount of new investment dollars flowing from ASX, private investors and steady occupancy rates.

The childcare sector is essential to growing the productivity of our country through its dependence demanded from working families. Marcello Caspani-Muto, of CBRE’s Australian Healthcare and Social infrastructure team noted that “The priority government funding for childcare during the pandemic underscored the importance of the asset class and the domino effect their access has on the economy”. Sandro Peluso, also of this team adds: “Pre-COVID-19 there was a perception by some in the market that there was an oversupply of childcare centres, yet demand continues to rise. A high-profile centre that evidences the heavy investment by operators is Little Lane Early Learning Centre in South Melbourne, where a prime site was purchased for $61.8M in 2019 with construction now underway for a futuristic $100M centre”.

Looking at it from an operators perspective, an important element is that childcare tenants invest heavily in the fit-outs of their childcare centre. This in-turn results in fewer relocations, longer term leases and higher levels of income stability.

Adrian Fonseca, Managing and Founder of Oxanda Education – a national operator of childcare centres notes: “Childcare is an essential service and funded on that basis by Government”. He adds “Notwithstanding COVID challenges, occupancy for Oxanda remained strong throughout 2020 and particularly in dual-income high-demand areas in metro cities. We found that whether parents were working from home or had physical roles that required their own personal attendance, parents treated childcare as essential for them and essential for their children. Importantly for operators, families and the industry, bipartisan support exists regarding childcare’s essentiality and its role in the community, particularly with respect to the participation rate. This has childcare well positioned on a go forward basis”.

Investment in essential services are becoming increasingly attractive for investors. Childcare centres sit within the broad asset class. If you have been thinking of investing in the childcare sector, now may be the perfect time.

Source: Australian Healthcare and Social Infrastructure - CBRE – The Childcare Report Edition #2

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