_Development-approved childcare centre sites currently one of the strongest sectors in Sydney

• Buyer demand for development-approved childcare centre sites in Sydney is heating up, with recent sales showing there have been record high sales rates – or close to
• This sector is bucking the trend of the cooling commercial property market
• During the heat of the commercial market in 2020 and 2021, DA-approved childcare development sites in Western Sydney were typically trading for around $40,000 per place, but recent sales are at or above this level, despite price falls in almost all other sectors
• Increased government subsidies and a push for return to work has seen demand for childcare places continue to increase, which has in turn led to growing demand for development approved sites

Sydney, Australia – BUYER demand for development-approved childcare centre sites is heating up, making the sector currently one of the strongest in Sydney’s commercial property market, according to Knight Frank.

Knight Frank Director and Joint Head of South Sydney Anthony Pirrottina said the demand for DA-approved childcare development sites was bucking the trend of the cooling commercial property market.

He said there had been a number of recent sales across metropolitan Sydney totalling nearly $9 million and achieving record high sales rates - or close to - for their markets.

Recent sales by the Knight Frank team of 131 Excelsior Street, Merrylands, which sold for $2.52 million to Educ8te Pty Ltd, a local operator/ developer, and 60 Park Street, Peakhurst, which sold for $2.95 million to a private operator have seen fierce competition from operators seeking to increase their presence across metropolitan Sydney.

Other notable sales include a site approved for a 52-place centre in Toongabbie, which was sold for $1.9 million and a site approved for a 50-place centre in Guildford which achieved $1.51 million.

All four development sites traded within the last month.

“During the heat of the commercial market in 2020 and 2021, DA-approved childcare development sites in Western Sydney were typically trading for around $40,000 per place,” said Mr Pirrottina.

“These recent sales are at or above this level, showing that this market has held or increased in spite of other sectors experiencing notable declines in pricing.

“While the general commercial market has seen clearance rates as low as 50 per cent and transaction volumes down by a similar amount, the childcare market continues to go from strength to strength.

“Increased government subsidies and a push for return to work has seen demand for childcare places continue to increase, which has seen operators hoovering up any development approved site which comes to the market.

“In addition, developers selling these sites are seeing the increased upside in having approval for a childcare centre, as generally these properties would otherwise be sold as freestanding houses, which have fallen in value by as much as 10 to 15 per cent in some parts of Sydney.”

Rents that operators are willing to pay for centres have also skyrocketed, increasing by as much as 20 per cent in some parts of Sydney providing strong returns for owners, said Mr Pirrottina.

“A typical purpose-built centre 15 to 20 kilometres from the Sydney CBD would previously generate around $4,000 per place per annum for the landlord, however we are now seeing that same centre achieve $5,000 per place per annum.

“Tenants are able to cover this increase thanks to next-to-no vacancy, increasing day rates and a squeeze as operators scramble to enter into new markets.”

What remains to be seen is where the value for the finished childcare investments will sit, said Mr Pirrottina.

“The cost of debt continues to rise due to interest rate hikes, and as such investors will need higher yields to cover rising mortgage repayments, thus reducing how much they would be willing to pay for new investments.”

For further information, please contact:

Vanessa De Groot – Marketing & Communications, Knight Frank

Vanessa.degroot@au.knightfrank.com +61 410 460211

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Notes to Editors

Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank has more than 16,000 people operating from 384 offices across 51 territories. The Group advises clients ranging from individual owners and buyers to major developers, investors and corporate tenants. For further information about the firm, please visit knightfrank.com.