Investors are poised to pounce on childcare centres across Perth, with increased Federal Government support to heighten interest in defensive assets with strong and stable incomes.

Earlier this year, the Albanese Labor Government delivered its election policy to increase childcare subsidies for families earning less than $530,000 a year, formally including it in its October Budget.

The policy comes at an ongoing cost of at least $1.7 billion a year to taxpayers.

LJ Hooker Commercial Perth executive Jake Wallman said the agency had managed over $60 million in childcare centre sales in the past 20 months in Western Australia, with investors lured by long lease terms, attractive yields and centres’ status of being required social infrastructure.

Mr Wallman said there was a structural shortage of childcare places in WA, exacerbated by government subsidies and strong competition for land for new centres to be developed.

Newly developed centres were the most highly sought-after by investors, typically sold by a developer with an operator already installed on a 15 to 20-year lease.

Mr Wallman said developers generally preferred to sell a centre upon completion and commencement of a lease, although some retained ownership for the first year or two of operation.

Operators, which run the centres under a lease based on the number of child places accommodated, commonly prefer a centre that can cater for at least 75 to 95 places, which can require land of around 1,850sqm to 2,750sqm.

Despite planning regulations generally being supportive of new childcare centres many of WA’s growth locations remain largely undersupplied, with the construction of new accommodation and infrastructure not keeping pace with population growth.

Sites suitable for childcare centre development are generally located close to primary schools for convenience to working couples with more than one child, in proximity to shopping centres, and in areas where there is a high proportion of young families.

While available sites are rare, buyer interest in childcare centres has surged, with typical yields on sales tightening over 100 basis points in some instances since the start of the pandemic. And as yields have fallen, the asset class has attracted more sophisticated buyers willing to take a longer-term view.

“The buyer profile has varied a bit as the asset class has gathered support,” Mr Wallman said.

“We have seen many local and national syndicators entering the market in recent months and also institutional funds as they increase weightings to more defensive assets.

“There is a social value of childcare to the community so there is always going to be a demand. We see that demand growing due to confidence that the asset class will perform well through the cycle. The federal government has indicated it will continue to support the sector strongly through reforms and increasing subsidies.

“We expect childcare to remain a popular asset class in WA, with our market offering a strong value proposition compared with other states due to the affordability of land.”

For further information about the Childcare real estate market please contact LJ Hooker Commercial Perth executive Jake Wallman via the below contact details: 

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