A childcare centre in a coastal southern Adelaide suburb has sold for $6.01 million, as investors seek out defensive assets amid the uncertain economic outlook.
A private Melbourne-based investor bought the purpose-built childcare centre at 601-607 Brighton Road property in Seacliff, about 15 kilometres from the Adelaide CBD.
The asset had a 15-year net lease to Australia’s largest listed childcare provider G8 Education, generating an annual net income of $319,678, with annual CPI plus 1% reviews.
“Childcare investments are an excellent ‘defensive’ option, being less affected by economic cycles than other property sectors and cannot be replicated or replaced by internet outsourcing,” said Knight Frank’s Jack Dyson, who ran the sales campaign with Oliver Totani and Burgess Rawson’s Adam Thomas and Natalie Couper.
The centre, which was licensed for 84 places, had five educational rooms with direct access to external play areas.
It was built on a 2,161 sqm main road site, with exposure to 40,000-plus passing vehicles daily.
Dyson said essential service assets were holding their value and continued to be in strong demand in the current market.
“They have strong underlying fundamentals and are prominently located and supported by complementary infrastructure, such as schools, non-discretionary retail, community services and transport links,” Dyson said.
“Changes to the Federal Government Child Care Subsidy, with many families set to receive a higher subsidy, has led to even more demand for these types of assets from investors.”
Knight Frank’s Totani said the strong result for the property reaffirmed A-grade childcare centres were still on the agenda for astute investors.
“It is situated in a significant schooling precinct and is in a city bound position only 850 metres from Brighton Central Shopping Centre, as well as being within close proximity to Westfield Marion, the largest shopping centre in South Australia,” Totani said.
“With much uncertainty as to the topping out of interest rates, investors are keen to find certainty across covenant, tenure and income growth, and this G8 centre met all these key criteria and more.”
The deal follows Charter Hall Social Infrastructure REIT’s purchase of two childcare portfolios across Western Australia and Victoria totalling $134.3 million in January.
Want to learn more about childcare property? Read our Childcare through the lens of a valuer 2022 deep dive.