Five childcare development sites snapped up as demand skyrockets

Five childcare development sites have sold in just 30 days in Sydney’s western suburbs, to a total of $14.265 million.

Located at Rooty HillBankstownGuildfordAuburn and Toongabbie, all five sites were sold by Ray White Commercial Western Sydney director Joseph Assaf, senior sales executive Jai Sethi and sales associate Andrew Sacco.

All the sites were acquired by various childcare owner operators with a combined total number of approved 421 places and each site offering a range of 58 to 120 places.

“Owner operators are keen to cut out the development approval and pay a premium for already approved sites that can start straight away,” Mr Assaf said.

“Demand has been very strong, and that led to competitive bidding in the case of the Auburn and Toongabbie sites which were sold at auction, with multiple offers received for Rooty Hill, Guildford, and Bankstown including short settlement terms to secure the sites.

Mr Sethi said demand for childcare services had remained robust.

“Driven by the government’s strong support for the childcare sector, and the upcoming increase in subsidies up to 90 per cent from July 2023, childcare operators are aggressively expanding their businesses to capitalise on the sustained demand,” he said.

Historically, the Ray White Commercial Western Sydney team has transacted over $74 million worth of property within the childcare sector alone.

Ray White head of research Vanessa Rader said childcare remained an attractive asset class despite the changing market fundamentals.

“The strong government subsidies on offer have ensured that occupancy levels remain elevated and rental growth built into most lease structures is attractive,” Ms Rader said.

“With changing expectations surrounding yields, volumes are expected to remain low in 2023 as owners hold onto assets.

“While transaction volumes for established assets are down, there has been an uptick in development assets coming to market this year.

“A combination of higher financing costs together with elevated building rates has put pressure on some developers/vendors, causing them to reconsider their future development plans.

“Encouragingly, however, is the ongoing demand to occupy these assets.

“The strong population growth experienced across the country has resulted in many of these developments able to secure pre-commitment tenants and leasing activity has seen improvement.”

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