Australia’s childcare centre market is poised for growth in 2023, with increased government investment, growth in the nation’s younger population and expected industry consolidation. 

New Cushman & Wakefield research expects investment into childcare centres to continue strongly through 2023 with a number of centres expected to hit the market in the first half of 2023.  

This followed $520 million in centres traded in 2022, 30% above the pre-covid averages of approximately $400 million.  

Cushman & Wakefield Research Manager, Queensland, Jake McKinnon, said we were seeing strong tailwinds across the national market for childcare centre investment.  

“Investors see favourable fundamentals and can benefit from new subsidies and $4.7 billion in government funding to boost access as demand rises,” McKinnon said.   

Cushman & Wakefield Head of National Investment Sales Daniel Cullinane said we had seen investment settle well above long-term averages after a bumper year in 2021.  

“However, the drivers are shifting with investors targeting these asset’s recession-proof qualities like stable long-term leases, rather than the hunt for yield that dominated the past few years,” Cullinane said.   

Childcare transaction volumes

The research showed strong demand for childcare services amid sustained population growth, and competition for quality locations had led to rents rising 47% on average nationally over the last decade.  

Demand from high net worth, institutional, and foreign investors had also contributed to ongoing yield compression.  

Yields for city-based centres continued their long-term decline, falling from 6.8% in 2014 to 4.9% in 2022.  

For centres located outside of cities, average yields had fallen from 7.2% in 2014 to 5.3% in 2022.  

“In 2022, the majority of assets nationally traded on sub-5% yields, and we’re expecting assets to continue trading on sharper yields. One factor driving the outlook is the consolidation of assets in a fragmented market, as operators seek to meet demand through acquisition and development activity,” McKinnon said.  

Goodstart Early Learning has the largest share among the major operators, with 10.3% of the market.  

Meanwhile, G8 Education has expanded rapidly, growing from 17 to 448 centres since 2007, representing 6.4% of the market.  

In contrast, the research shows that 72% of the market is held by minor or independent operators, creating favourable conditions for M&A activity.