There is no doubt the Childcare sector has experienced exponential growth over the years. From 2008-2018 there was a 140% increase in government expenditure in the sector¹ and now, with a 44% population growth projection by 20502, urban sprawl and more dual income households, the need for child care will continue to inevitably follow suit. As such, this sector together with other essential services, are some of the most stable in the market and it is experts in the field, such as Director of Dorado Property Mr. David Giles, that know it.
“Dorado believe the early learning sector has a number of sustainable, structural tailwinds that will continue to make it an attractive asset class to own, including strong bipartisan political support, a social drive towards workplace gender equality, and higher workforce participation rates in women. We are looking forward to adding further assets to the fund in due course.” Mr. Giles states.
In a deal that was agreed in September last year, Dorado purchased an off-market portfolio of 4 childcare centres at varying stages of construction from Jarra Property - a Perth based, commercial property investment business with a track record in the Early Learning sector. The Kalgoorlie YMCA settled in December of 2021, with the three remaining assets; Harrisdale Nido Early School, YMCA Brabham & Piara Waters Greenleaves, each due to settle over the next 5 months.The purchase price of $18.409 million represents a blended yield of 6.1% with each one tenanted by leading operators.
“This transaction demonstrates the ongoing interest in high quality, well located Childcare assets, presenting an attractive opportunity for the Buyer to acquire four brand new centres with diversification in geography and tenant” states selling agent Mr. Jake Wallman of LJ Hooker Commercial in Perth.
Whilst, like many sectors, Childcare experienced its own set of challenges during the pandemic; by August 2020 it bounced back with resilience, as attendance returned to 100% of pre-COVID levels. Further, the Australian Government has now granted the sector a $2.6 billion COVID-19 Response Package to ensure child care facilities remain open to essential workers. This all reinforces the stability and resilience of the sector and why key players such as Dorado are jumping on Childcare investment opportunities.
“Dorado is excited to seed our newly established early learning fund with 4 high quality assets in Western Australia, leased to established tenants in carefully selected locations that are currently under-serviced by childcare. The objective of the fund is to provide secure, consistent and predictable returns to our investors over the long-term”. Manager of Dorado Direct Investments, Mr. James Khng states.
And that it will. Child care centres typically have long term leases with options, high tenant retention and strong occupancy rates. They are generally immune to most external economic conditions as the majority of families with working parents need care for their children. The risk of the tenant vacating or relocating is much lower in comparison to an office or a warehouse and this, collectively with other factors demonstrates an underlying strength and future prosperity in the sector.
“As a commercial property investment specialist, we cannot be more excited about this transaction” states Mike Cameron, vendors and Director of Jarra Property. “Not only (in) continuing to deliver such high-quality investments, but equally, to introduce some unique and industry-leading facilities to a growing and evolving sector.”
2 https://treasury.gov.au/sites/default/files/2019-03/IGR_2010_Overview.pdf
