Cushman & Wakefield: strong childcare centre interest drives firm’s last 2021 auction

A stunning $15.9 million sale price for a carbon-neutral Sydney childcare centre reflects the strength of investor interest in childcare and other essential assets, a leading analyst says.

The Orchard Early Learning Centre in St Ives on the Upper North Shore went under the hammer with Sydney firm Cushman & Wakefield on Thursday.

It sold for $15.9 million, with a yield of 4%, though other centres have been sold on a 4% yield  or lower this year.  The sale price is one of the highest record for any Australian childcare centre sold at auction. Just 16 months earlier, the same centre sold for $9.5 million.

This Camperdown childcare property sold for $10.5 million on a 3.98% yield. Picture: realcommercial.com.au/sold

It was one of four childcare centres auctioned by Cushman & Wakefield in Sydney in a portfolio of 12 properties, achieving a 100% clearance. A childcare centre and another property sold prior to auction.

The childcare centres achieved total sales of $49 million out of a total of $85 million in sales and included:

• a Burleigh Heads early learning centre opposite a Stockland shopping complex that sold after 24 bids for a Queensland auction record of $9.275 million on a Queensland record 4.21% yield
• a centre in Camperdown in Sydney’s inner west, sold with a 15-year lease returning more than $410,000 a year ($10.5 million, 3.98% yield), and
• another in Newcastle with a 12-year lease that sold for $5.5 million with a yield of 5.44%.

A fifth centre, in Brisbane’s Sherwood, sold before auction.

‘Vote of confidence’ in childcare assets

Cushman & Wakefield national investment sales director, Michael Collins, said he was surprised by the performance of the childcare centres in particular in an impressive final 2021 auction for his firm.

“I am surprised, but it’s being driven by the lowest interest rate environment we’ve witnessed in modern times in Australia. The low cost of capital and lack of alternative investments are driving it,” he said.

“People are looking to commercial property as a safe haven, particularly for industries [that] proven resilient during the pandemic. It’s another strong vote of confidence for the childcare sector.”

REA Group economist Anne Flaherty said strong interest in childcare centres showed investors’ thirst for steady income streams that weather economic fluctuations.

“Investors are increasingly look for assets that are pandemic-proof, recession-proof, and that are performing strongly,” she said.

“We’re seeing a real surge in buyers on realcommercial.com.au searching specifically for childcare centres to invest in. When childcare centres come onto the market, we’re seeing incredibly high numbers of investors competing to get them.”

JLL Capital Markets (NSW) Director, Gordon McFadyen said sales volumes and yield compression to 4% and under this year, showed there is plenty of investor interest in childcare centres.

“The sector is very resilient and has become a highly desirable asset class as investors pursue secure, long-leased assets to quality tenant covenants,” he said.

“Childcare centres are a perennially in-demand asset class, which is especially true for centres located in metropolitan areas. We are seeing sustained demand for metropolitan childcare centres with approximately 65% of transactions since 2019 occurring in metropolitan locations.”

Regional NSW properties performed well

Retail properties in regional NSW also proved popular at the Cushman & Wakefield auction, reflecting growth opportunities as people move from the capitals.

A shopping centre with an IGA, bottle shop, post office and a Pure Zest Health shop at Pottsville on the NSW Northern Rivers sold for $10.2 million with a 4.58% yield, while an Armidale Fantastic Furniture store fetched $3.8 million.

Closer to Sydney, an Ampol service station and convenience store at Woy Woy attracted $5.365 million (4.57%), a complex at Dapto in the Illawarra with an IGA, a BWS and a newsagency sold for $4.48 million, and a Newcastle CBD Ray White office sold for $3.8 million on a 4.31% yield.

A café in Sydney’s Freshwater achieved a sale price of $1.4 million.

Queensland results were particularly strong

In Queensland, a National Dental Care centre in Brisbane’s Algester was snapped up for $2.63 million on a 4.42% yield, while a Townsville Bridgestone tyre outlet achieved $2.52 million with a 5.12% yield.

A Mount Isa NAB branch sold before auction.

Mr Collins said he expected the commercial property to remain strong in 2022.

“This is one of the strongest years I have ever experienced in commercial real estate,” he said.